What do they do—Milk, quite literally. Emerging demands of the gluten-free and avocado-toast generation (read millennials) has elevated several DTC brands as credible alternatives to traditional products of the previous generations, and Oatly leads the charge on replacing whole milk cartons in shopping mart isles.
Here’s how the business did for 2020:
- $420 million in revenue, up more than 100%
- $60 million in losses
- Sells to 60,000+ supermarkets, 30,000+ coffee shops
- Raised money from everyone including Jay Z, Oprah, and Starbucks’ Howard Schultz
Last year, the plant based dairy industry made about $18 billion in total sales, forming about 3% of the total dairy industry, so demand definitely does exist.
But the losses are making investors squeamish—typical of a popular DTC product that achieves scale by burning cash on forceful marketing. But then, defending market share, at scale, amidst shareholder pressure for profitability, or even worse, when a larger dairy company comes out with its own line up? Can that possibly work?
Why care—so far there’s little evidence that DTC companies can scale profitably, or as promised, expand into adjacent products meaningfully. Remember the plant-based meat giants, or the mattress companies?
With the DTC game heating up in India too, investors will be drawing parallels with the Oatlys and the Caspers to determine valuation and to judge if the model can ever work out.