Latest / Building Brands with Fexingo: Identity, Reputation, and Long-Term Business Equity / How Oatly Built a Brand on Provocative Transparency
Transcript
- Lucas: So there's this moment in 2014 when Oatly is on the verge of bankruptcy. They're a Swedish oat drink company, founded in the 1990s, and they've been quietly selling to people with lactose intolerance. But the production facility is struggling, they're losing money, and the board is basically ready to shut it down. And then they bring in this new CEO, Toni Petersson, who decides to do something almost nobody in the food industry was doing at the time: he makes the brand radically, uncomfortably transparent. Luna: Transparent about what, exactly? I mean, food companies have been slapping 'natural' and 'sustainable' on packaging for decades. Lucas: Right, but Oatly didn't just claim it. They published their actual carbon footprint numbers on every carton. They put a chart showing the emissions of oat milk versus cow's milk, and the difference is stark. Cow's milk produces around 1.2 kilograms of carbon dioxide equivalent per liter, while oat milk is around 0.3. That's a quarter of the emissions. And they put that right on the package, in plain sight. They even listed the ingredients in a way that highlighted the 'oat' and the water, but then added a line that said 'no, seriously, that's it.' Luna: That's a bold move, especially in 2014. Most brands were terrified of saying anything that could be seen as attacking dairy, because it's such a powerful industry. Lucas: Exactly. And that's the provocative part. They didn't just talk about their own product; they directly compared it to dairy, which is essentially calling out an entire category. Their tagline was 'It's like milk, but made for humans.' That's a direct jab. And they went further with their advertising. They had this ad campaign in Sweden where they used a spokesperson who was a former dairy farmer who switched to growing oats. And the ads were these long, awkward monologues where he talks about the environmental cost of dairy. They were so odd that people either loved them or hated them, but they talked about them. Luna: So the transparency wasn't just about being honest, it was about creating controversy. Lucas: Precisely. And the numbers support that. From 2014 to 2020, Oatly's revenue grew at a compound annual growth rate of over 50 percent. That's not a niche health product anymore; that's a cultural movement. And the most striking example of the controversy working came in 2019 in the UK. They launched a TV ad that showed the oat drink being made in a factory, with a voiceover saying things like 'We're not saying we're better than milk, but we are.' The UK's advertising standards authority banned it because they said it denigrated dairy products. And what happened? Within a month, sales in the UK jumped by over 300 percent. The ban became the story. Luna: It's almost like the ban was the best marketing they could have asked for. But I wonder, is there a line between provocative and just alienating? Because some people really hate the brand. Lucas: Oh, absolutely. And that's part of the strategy. They've said that they want people to take a stance. They'd rather have a customer who loves them and tells their friends than a customer who is vaguely neutral. That's the 'love it or hate it' brand archetype. And it works, but it also has a shelf life. The danger is when the provocation becomes the only thing people associate with you, and you never evolve the story. Luna: That's a good point. We've seen brands like that burn out. But before we get into that, I'm curious about the practical side. How do you actually implement a transparency strategy like that? It's not just about putting numbers on a carton. Lucas: Well, and that's the thing. It has to be real. If you're going to put your carbon footprint on the package, you have to actually measure it. Oatly worked with the Carbon Trust, which is a third-party certification body, to verify their numbers. That's not cheap. And they had to make their supply chain more sustainable than the typical oat milk maker. They switched to renewable energy in their factories, they worked on water usage, they even changed the shape of their cartons to reduce waste. So it's a whole-company commitment, not just a marketing tagline. Luna: And they also had to deal with the fact that they were being accused of greenwashing, right? I remember there were some critics who said Oatly's claims were exaggerated. Lucas: Yeah, there was a backlash. The company was accused of using a 'carbon footprint' label that wasn't standardized, and of cherry-picking data. But they responded by being even more transparent, which is the classic move. They published their full life-cycle assessment, the entire research report, on their website. So when people questioned them, they doubled down on the transparency. That's what separates them from brands that just use a sustainability slogan. They were willing to open up their books. Luna: It's almost like they built their brand on being an open book, and then when people tried to poke holes, they just opened more pages. Lucas: Yeah, exactly. And that's a really strong position to be in, because it's hard to attack a company that's willing to show you everything. But it also creates a huge amount of pressure to live up to that promise. If you say you're transparent, you have to be transparent about the bad stuff too. Like, they had a problem with their packaging for a while, which was not fully recyclable. And they had to admit that publicly, even though it was an embarrassment. But they did, and they said they were working on it. That kind of honesty builds a lot of trust. Luna: So it's not just about being provocative, it's about being accountable. Lucas: Right. And I think that's a lesson that goes beyond food and beverage. Any brand that wants to build long-term equity has to be willing to show its work. That's the core of Oatly's brand equity. It's not just the taste of the product, it's the sense that you're buying something from a company that's trying to be honest with you, even when it's uncomfortable. Luna: It's interesting, because we've talked a lot about brands that are built on a promise or a story, but Oatly is built on a transparency practice. It's a different kind of foundation. Lucas: Absolutely. And that's what makes it so durable, I think. A story can be challenged. A story can be outed as a lie. But a practice, a habit of transparency, is much harder to fake. And it also attracts a certain kind of customer, the kind who is willing to pay a premium for that trust. Oatly's products are often priced at a premium compared to conventional milk, and people pay it because they believe in the brand. Luna: That's a good point. And it's also about making the customer feel like they're part of something. When you buy Oatly, you're not just buying oat milk, you're buying a statement about sustainability. It's almost like a badge. Lucas: It is. And that's a powerful emotional connection. But it also creates a risk, because if the brand ever stumbles, if they're caught doing something that contradicts their values, that trust can be shattered very quickly. We saw that in 2022, when a short-seller, Spruce Point Capital, released a report accusing Oatly of misrepresenting its financials and its environmental practices. The stock, which had already been falling post ipo, took another hit. And even though Oatly denied the claims and some of them were later debunked, the damage to the brand was real. People started questioning whether the company was as transparent as it claimed to be. Luna: So how do you recover from something like that, when your entire brand is built on transparency and someone says you're not being transparent? Lucas: It's a tough one, and I think Oatly is still working through it. They've released more information, they've hired outside auditors to verify their sustainability claims, and they've been more careful with their language. But the brand has been tarnished. It's a reminder that a transparency strategy only works if it's absolutely true, and even then, it's not bulletproof. Because once you've positioned yourself as the open book, every mistake is magnified. Luna: That's a really important lesson. And it also makes me think about the scale challenge. Oatly started as a niche Swedish brand, but now it's a global company with products in, I don't know, over 20 countries. How do you maintain that radical transparency when you're that big? Lucas: That's the million-dollar question. And it's one that I don't think anyone has fully answered yet. Oatly has tried to scale by partnering with large distributors, by building factories in different regions, and by standardizing their messaging. But there's a natural tension between the kind of indie, rebellious transparency they built their name on, and the corporate machine they've become. They've tried to keep the tone consistent, using the same quirky voice in their packaging and ads everywhere. But as they've grown, they've had to make compromises. They've had to deal with supply chain issues, which led to stockouts in some markets, and that can frustrate customers. They've also had to navigate different regulatory environments, which sometimes forces them to tone down their claims. Luna: So it's a constant struggle to stay true to your roots while you're expanding. Lucas: Yeah. And I think that's the real challenge for any brand that builds itself on a provocative or countercultural identity. It works when you're the underdog, but when you become the establishment, you have to find a new way to keep that edge. Oatly is still trying to figure that out. They've launched new products, like oat milk ice cream and yogurt, and they've continued to push the sustainability angle. But they're also facing more competition now, from other oat milk brands like Oatly's Swedish rival, Oatly, and from big dairy companies that have started making their own plant-based lines. Luna: So what can other brands learn from Oatly? I mean, we've talked about the transparency, the controversy, the scale challenges. What's the takeaway for a smaller brand listening to this? Lucas: I think the biggest takeaway is that radical transparency can be a powerful differentiator, but it's not a marketing trick. It has to be baked into your operations, your culture, and your leadership. And you have to be willing to accept that it will make some people uncomfortable, even angry. That's part of the deal. If you're going to call out your industry, you better be ready to take the heat. But if you can pull it off, you create a brand that people genuinely trust, and that trust is worth a lot. Just look at the numbers: Oatly's revenue went from essentially nothing in 2014 to over $600 million by 2021. That's not just a fad. That's a brand with real equity. Luna: And one that's still learning, it seems. It's a work in progress. Lucas: Absolutely. And that's the thing about brands, they're never finished. Oatly's story is still being written. The question is whether they can maintain their transparency as they mature, and whether they can keep earning the trust of their customers. I think they can, but it's going to require a lot of discipline. Luna: It's almost like a test of their own values. They've built their brand on being honest, so now they have to be honest about the challenges of being a big company. Lucas: Exactly. And that's the final lesson: if you build your brand on a promise, you have to live up to it, even when it's hard. That's what builds long-term equity. It's not about being perfect, it's about being accountable. Luna: I think that's a great place to end. Thanks for this conversation, Lucas. Lucas: Thanks, Luna. And to our listeners, if you enjoyed this episode, and if these conversations have moved your work forward in some small way, you can support us at buy me a coffee dot com slash fexingo. It's the smallest ask we can make, and it keeps this show going. We'll be back next week with another story of a brand that dared to be different.