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Oatly was a pioneer in the oat milk category. In 2023, it is looking to usher in an alternative manufacturing model through a new partnership.
The news: Oatly signed a new partnership with contract food and beverage manufacturer Ya YA Foods that will create a new hybrid model for production. Through the $98.1 million deal, which is expected to close this quarter, Oatly is looking to shift its manufacturing to an “asset-light” model.
Here are the details:
- Ya YA Foods will assume the lease at Oatly’s manufacturing facilities in Ogden, Utah, and Fort Worth, Texas, while finishing construction in Fort Worth.
- Ya YA Foods will also acquire a majority of the assets in Ogden, including mixing and filling equipment.
- Oatly will still have operations in both locations, while retaining ownership of its proprietary oat base production lines.
- Oatly will receive $72 million, plus credits toward future use of shared assets in Ogden and for production in Fort Worth.
- The bottom line: Ya YA will take over a substantial portion of Oatly’s manufacturing, and the brand will no longer control and build these US production facilities.
Key quote: “We believe an increased focus on our oat base technology, innovation, branding and commercial execution will better position Oatly to drive profitable growth, while reducing the capital intensity of our future facilities, and ultimately convert more consumers to plant-based and create more products that are healthy for people and the planet,” said Oatly CEO Toni Petersson, in a statement.
What it means for Oatly: Oatly’s category creation and knack for eye-catching brand-building propelled runaway popularity since its 2017 US debut, and it now accounts for 22% of the plant-based milk market in the country. But there was a downside: The brand was among many that faced a mismatch of supply and demand over the last two years, leading to product shortages. Correcting those issues appears to be the subtext of this deal. Ya YA CEO Yahya Abbas told Bloomberg that Oatly “will never again miss demand.”
What it means for Ya YA Foods: The Toronto-based company is moving into the US for the first time. This deal will expand the footprint and raise the profile for Ya YA, which is a co-manufacturer that is also making a name in protein beverages, fruit juices, sports drinks and broths. “The two properties we are acquiring will increase our geographic profile and scale, allowing us to serve the vast majority of the United States and Canada,” Abbas said in a statement. Owning the facilities could unlock potential to make products for other customers at those locations, as well.
What it says about the supply chain:
The worst shortages are over, but brands still need long-term solutions. While the container ship backups we've heard so much about in recent years are easing up, supply chain challenges are going to continue to be present going forward. After all, raw material shortages, rising costs and climate change are still with us in 2023. This agreement shows that brands have a choice of whether they want to own production facilities or work with others. Oatly is splitting the difference: It chose to partner and transfer some of its operations, even as it will retain some operations that make it unique.
Partnership can bring production close to home. Another supply chain choice is where production will take place. While proximity is likely key for a beverage like oat milk, it’s still worth noting that Oatly is keeping domestic operations in place through this agreement. We may see more such decisionmaking in 2023 with the growth of nearshoring, in which brands and retailers move supply networks closer. According to a recent survey from Capterra, 88% of small and medium-sized businesses surveyed said they planned to or already had switched at least some of their suppliers closer to the US in 2023.
Owning less can bring more growth. While it won’t have US facilities in its portfolio, Oatly’s asset-light model could free it up for other kinds of expansion. As Petersson suggests, it can redirect investment into innovation and go-to-market activities that will help it reach new customers, which is especially important for a category-creating brand. In the end, all functions are customer-facing. Shoring up production also stands to increase consumer confidence that the brand's products will always be available in the dairy case.
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Shipt is launching a new accelerator program designed to provide ecommerce tools for local retailers.Called LadderUp, the program is centered on equity. Target-owned delivery owned Shipt said conversations with business owners have revealed that local entrepreneurs face “gaps” in technology, but they also want to participate in ecommerce platforms. The COVID-19 pandemic was especially difficult for Black business owners, who saw earnings drop between 11-28% in 2019-2020, as compared to the earnings decrease of 5-17% for the rest of the population.
With the new program, the company’s goal is to reach at least 50% LGBTQ+ and BIPOC participation in the program.
Shipt is aiming to serve businesses in Atlanta, Birmingham, Alabama, Detroit, Houston and Washington, D.C.
Target categories include: grocery/beverage, health, beauty, and floral/gifts retailers.
“Working with small businesses to build up their capabilities is a key part of our commitment to help create healthier, more resilient and equitable communities,” said CEO Kamau Witherspoon. “We recognize the unique role that we can play in both combating hunger in under-resourced communities and boosting small, local retailers that are so vital to communities across our country.”
What will entrepreneurs receive?
Education: Business owners who are selected will receive an 8-week course with industry leaders that covers business-building topics including finances, efficiency, marketing, ecommerce 101, the basics of using Shipt, and legal knowledge.
Funding: Upon completion, retailers will provide $5,000 for businesses to invest in ecommerce.
Shopify access: Shopify, which is partnering with Shipt, is also providing to its access for a limited amount of time to help business owners build an online storefront and manage inventory. The program will also provide technical assistance.Applications are open Feb. 6- March 6.