Crisis PR Insights: the reputation risks of growth explored

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Crisis PR Insights: from challenger brand to corporate giant – how do you bring your early adopters with you?

Swedish alt-milk brand Oatly started life in 1994 as a bold challenger startup, developing a cult-like following and leveraging quirky, self-deprecating Out Of Home marketing to make a big statement and push boundaries as they took on the dairy industry.

When the brand began, they were taking on the dairy giants, trying to create a market that didn’t exist. But since the boom in veganism and plant-based lifestyles, they have become a market leader. 

At first, they skipped supermarkets and instead focused on coffee shops, turning baristas into their brand ambassadors. Two years after its 2016 US launch, Oatly was so popular that there were shortages and the brand had to build a new 20,000 square foot oat milk factory in New Jersey just to keep up. At the time, a 12-pack of Oatly Barista Blend Oat Milk was being sold on Amazon by one seller for $226.12.

In May 2021 Oatly went public, seeking a value of $10B, after three consecutive years of triple-digit annual growth (including a staggering 212% year on year in 2020). (The plant-based milk market is set to see a CAGR of over 11% between 2020 and 2026).

Michael Lee, Creative Director since 2017, describes Oatly as having a “courageous naivete”. It does everything to further its mission to have the world drinking dairy alternatives – and if that gets it into trouble, then so be it. He said “It’s always been part of our DNA to be fearless. If you have a mission to change the food system, you can’t do that without stepping on some people’s toes and being provocative. And I think a lot of our strength comes from not overthinking things. If we did think things through, we probably wouldn’t do them. The first ones over the trench always get shot. We get shot a lot, which only means we hire a lot of lawyers.” 

While the brand have always been happy to lean into their anti-establishment identity and shake things up, their actions as they’ve grown haven’t always been popular with the early adopters who first championed their mission to challenge the status quo.

In July 2020, Oatly sold a 10% stake ($200m) to a group of high-profile investors, including American private equity firm Blackstone, to fund their global expansion. Blackstone has reportedly been linked to deforestation in the Amazon rainforest, and despite denying these claims, there was a significant backlash against Oatly’s decision to take this investment, which their core eco-audiences viewed as unsustainable, unethical and not aligned with Oatly’s values.

Oatly’s Chief Executive responded that getting a major investor like Blackstone involved is a sign that the world is moving in a “new, more sustainable direction”, and Oatly defended their choice of investors on Twitter and with a statement on their website – saying that this is a way of ‘steering capital into sustainability’, which will help plant based alternatives become even more mainstream:

“Our bet is that when Blackstone’s investment in our oat-based sustainability movement brings them larger returns than they would have been able to get elsewhere (like, say, from the meat and dairy industry which are one of the major causes of the deforestation in the Amazon today) a powerful message will be sent to the global private equity markets, one written in the only language our critics claim they will listen to: profit.”

But the choice of investors was controversial, and calls for a boycott went viral on social media.

The brand found themselves slipping even further away from their “good guy” challenger status in 2021, and suffered even more public backlash when Oatly brought legal action against Glebe Farm Foods, claiming the Cambridgeshire company’s ‘PureOaty’ product took “unfair advantage” of its brand’s positioning and accusing it of trying to “pass off” its products as Oatly’s.

The judge dismissed any similarities in brands and concluded there was no risk posed to behemoth Oatly from the challenger brand. But what has proven to be a greater risk to Oatly was the very act of taking on a startup in this way.

According to social listening data provided to The Drum by Synthesio, 39% of the social conversations linked to Oatly since the judgement have been negative compared with 13% that have been positive. In the three months prior to the lawsuit, just 13% were negative.

It’s a trend also noted by HypeAuditor, which found that prior to the lawsuit hitting headlines reactions to its social media posts were overwhelmingly positive but have since turned sour.

Oatly’s audience has accused it of being anti-competitive and, having built its brand on being a plucky upstart, hypocritical in its attempts to crush smaller companies perceived as a threat to its margin share. It was, after all, the brand that was sued by the Swedish dairy industry for a campaign telling people Oatly is ‘like milk, but made for humans’.

In this episode of the Ethical Marketing Podcast, we discuss growth from a crisis PR perspective, exploring how hard it can be for brands, especially when they’re values-driven, to bring their early adopter audiences with them as they grow and go more mainstream.

If you like this episode, you may also be interested in reading our advice on how to bring your audiences with you as you go through change.