This is an English adaptation of a FoodBud historical article originally published on December 4, 2023.
Health has been one of the clearest consumer trends of recent years, and plant-based food and beverage brands were among its biggest early beneficiaries. Capital markets once treated the category as a major replacement story: Oatly rose 60% within half a month of listing, while Beyond Meat jumped 163% on its first trading day and was up more than eightfold two months later.
By 2023, that story had weakened sharply. Beyond Meat had already posted negative growth in 2022. Oatly held up longer, but by the third quarter of 2023 it had also stalled: revenue grew only 2.5% year on year, and fell 1% on a constant-currency basis.
For operators, the takeaway is direct: plant-based milk and meat may still serve niche occasions, but the category has not yet proven it can replace dairy, meat, or eggs at mass scale.
Oatly once positioned itself as a disruptor of a RMB 3 trillion milk market. For a period, it did create visible consumer momentum. According to Tmall Innovation's 2020 Plant Protein Beverage Innovation Trend report, plant milk sales value grew 965%, sales volume grew 1,810%, and buyer numbers increased ninefold. Oatly frequently sold out, and some sellers on Amazon reportedly marked up oat milk to nearly five times its normal price.
Capital markets rewarded the story. On May 20, 2021, Oatly rose 18% on its first day of trading and 60% within half a month. With revenue of just over USD 400 million, its market capitalization approached USD 20 billion.
The reversal was severe. In just over two years after listing, Oatly's share price fell more than 95%. The business had reached a ceiling while still generating only about USD 700 million in annual revenue.
The slowdown is clear in the revenue trend:
During the same period, Oatly's marketing expense ratio rose by nearly 24 percentage points. Inventory pressure also increased: inventory turnover days rose from 41.9 days in 2020 to 58.9 days in 2022.
The issue was not limited to Oatly. Vitasoy International, another plant-milk-related company in China, reported a 6.9% revenue decline in its latest financial report, while listed A-share beverage companies grew revenue by 3.9% in the first three quarters of 2023.
Oatly built much of its early visibility through concept marketing. Its message centered on plant milk as more environmentally friendly, wellness-oriented, and healthier than conventional dairy. In one well-known example, Oatly declared that milk was for calves rather than humans, drawing a lawsuit from dairy companies. Oatly lost the case, but gained attention, and its local sales in Sweden rose 45% afterward.
Plant milk does have some product attributes that support a health position, such as low cholesterol and high dietary fiber. But its nutritional comparison with dairy is less favorable.
A U.S. report cited in the article found that, on average, every 240 ml of plant milk contains only 2 grams of protein, with large variation between products. By contrast, skim, semi-skim, and whole dairy milk each contain 8 grams of protein per 240 ml.
The article also compares Oatly with dairy milk and notes that, per 100 ml, Oatly's protein content is only about one-third that of milk, while its carbohydrate content is much higher. To obtain similar nutritional value from plant milk, a consumer would need to consume significantly more carbohydrates. The article also notes 7 grams of added sugar on Oatly packaging, which conflicts with a low-fat, low-sugar positioning.
Price adds another barrier. In China, Oatly sells for about RMB 9.8 per 250 ml, compared with an average of RMB 3.5 for milk of the same size. That makes plant milk roughly three times the price of regular dairy milk.
Discounting did not solve the problem. In 2022, Oatly used frequent promotions to clear inventory, and gross margin fell by 10 percentage points. Revenue growth still slowed sharply. From 2020 to 2022, frequent advertising and promotions expanded Oatly's losses by 40 percentage points. In 2022, its marketing expense ratio exceeded 57%, making high pricing difficult to avoid.
Plant milk is only one part of the plant-based category, which uses plant proteins as alternative proteins in food and beverage products such as plant meat, plant milk, and plant eggs.
The original promise was large: plant-based products were positioned as potential substitutes for trillion-scale markets in dairy, meat, and eggs. Oatly rose 60% within half a month of listing. Beyond Meat rose 163% on its first trading day, setting a record not seen since the internet bubble peak nearly 20 years earlier, and its share price was up more than eightfold two months later.
By 2023, the category had clearly cooled. Beyond Meat posted negative revenue growth in 2022, and its share price had fallen more than 96% from its high.
The article argues that the deeper problem is demand quality. New categories need clear usage occasions, and plant-based products have not yet shown strong substitutability for traditional foods. In plant meat, for example, the article says taste, price, and health attributes all lag conventional meat.
It cites Dingmang Research Institute's evaluation that plant meat is not currently healthier than animal meat. In food additives, plant-based meat products such as plant-protein dumplings had more complex additive profiles than ordinary frozen dumplings, while plant-based sausages had fewer of the restricted additive components that are tightly regulated in meat sausages.
Without replacing the original product, plant-based brands have struggled to define broad consumption occasions. Oatly Asia president Zhang Chun previously told media that Oatly spent a long time unclear about its product positioning: whether it belonged in milk, beverage, breakfast, or food sections.
That uncertainty pushed plant-based products into accessory roles. Oatly initially tied itself closely to coffee shops, and its top-selling product in its Tmall flagship store was the Barista Edition oat drink. This can create adoption, but the addressable space is narrower if the product is mainly an add-on to coffee. Similarly, once Oatly had expanded across coffee shops, and Beyond Meat across burger restaurants, growth slowed.
In retail, without a clear standalone occasion, many plant-based purchases remained trial-driven rather than repeat-driven. The article notes that Heytea's collaboration with Starfield on plant-based meat products sold reasonably well early on, but had largely been discontinued in stores by the time of writing.
The category began with a story about replacing massive incumbent markets. By 2023, the evidence suggested a more limited role: useful for selected occasions and audiences, but not yet a broad substitute for dairy, meat, or eggs.
Note: IPO, share-price, market-capitalization, and revenue figures are historical references from the original December 4, 2023 article.