China-backed Oatly pursues US IPO

China Resources and Verlinvest, an investment firm established by the founding families of the Anheuser-Busch InBev brewing empire, formed China Resources Verlinvest Health Investments in 2016. It targets health and consumer products and healthcare services for the elderly. An investment was made in Oatly in 2016 with a view to taking the company into markets like China and the US.

The JV owns 60% of Oatly, and China Resources has a 50% interest in the JV. The prospectus refers to a “material adverse effect” of regulatory action in the US that might limit China Resource’s ability to appoint directors and share information with affiliates or force the state-owned company do divest its interest in Oatly. These are generally seen as potential outcomes if the Committee on Foreign Investment in the US (CFIUS) detects unresolved national security concerns in an investment.

Should Oatly’s status as a US-listed company result in a material adverse effect, an additional listing would be pursued on the Hong Kong Stock Exchange. Moreover, if the Asia Pacific share of Oatly’s revenue exceeds 25% for two consecutive quarters at any point after the second anniversary of the US IPO, a Hong Kong listing process could be triggered at the request of China Resources.

Asia is an increasingly important part of Oatly’s business. The region accounted for $54 million – or 13% - of the company’s $421 million in revenue for 2020, up from 1.7% in 2018 and 4.9% in 2019. Europe, the Middle East and Africa (EMEA) remains the largest market, contributing 64% of sales last year, although the Americas share has more than doubled to 24% over the past two years.

Meanwhile, Oatly’s overall revenue has more than doubled in the past 12 months, rising from $204 million in 2019. The company’s net loss also widened from $35.6 million to $60.4 million.

Oatly claims to be the world’s original and largest oat milk company with a product portfolio that includes milks, ice cream, yogurt, cooking creams, spreads, and on-the-go drinks. As of year-end 2020, its distribution network comprised 60,000 retail outlets and 32,200 coffee shops.

The company entered China in 2018 through the specialty coffee and tea channel. It achieved rapid scale through an e-commerce partnership with Alibaba Group and an exclusive branded partnership with Starbucks in China. There are now 9,500 food service and retail points of sale in the country, including 4,700 Starbucks locations.

Oatly was established in Sweden by a group of scientists at Lund University who were exploring the mechanisms and effects of lactose intolerance. This led to the development of its core oat technology and the launch of the first oat milk product in 2001.

Global plant-based dairy industry retail sales were $18 billion in 2020, according to Euromonitor International, representing 3% of the global dairy industry. Nielsen estimates that oat milk sales in the US rose 203% in 2020, establishing it as the second-largest dairy alternative after almond milk. In the UK, oat milk took top spot, following a 98% jump in sales.

Last year, a consortium led by The Blackstone Group invested $200 million in Oatly at a valuation of $2 billion. Other participants in the deal included Oprah Winfrey, Natalie Portman, an entertainment company founded by Jay-Z, and former Starbucks CEO Howard Schultz. Chinese private equity firm CPE also invested in the company in 2020.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Europe
• Consumer
• IPO
• China
• Verlinvest
• Citic Private Equity
• The Blackstone Group