The Marketing Strategy of Oatly

- Note: Neither Oatly's IPO (20th of May) nor the withdrawal of AM 171 (24th of May) were taken into
account in the preparation of this paper. -

Founded in the 1990s by a Swedish research team, Oatly is today one of the world's most popular brands of oat-based dairy alternatives. With the relaunch in 2014, the brand has taken up the cause of consumers' and the planet's well-being, heralding the transformation from a food production company to a purpose- driven lifestyle brand. From the original oat drink, the company has diversified into several categories and in more than 30 countries.

Oatly's moral philosophy that revolves around the core values of sustainability, responsibility, and transparency resonates well with its main targets, i.e. consumers that seek dairy-free alternatives for health or ethical reasons. At the same time, refusing to be a niche brand, Oatly emphasizes its products' taste and usability to make them appeal to the broad masses that are necessary to bring about the desired macrosocial shift. In fact, the brand's purpose isnot only to optimize its own resource efficiency butto drive a fundamental change in the global food system and society that goes beyond the own business. To this end, Oatly positions itself as an activist that aims to mobilize a debate around the cause of the planet's health. These objectives are founded on the shared commitment of employees and suppliers which complete the four main strategic goals set by Oatly (fig. 1).

This image has been removed for copyright reasons.

Figure 1: Oatly's four strategic goals: Upgraded Society, Super Suppliers, Resource Efficiency, Committed Coworkers (source: oatly.com)

Q1

In light of its purpose-based goals, the 2020 investment deal with the Blackstone Group - which has been criticized for unethical practices - caused resentment and challenged the Oatly's integrity. In the same vein, there were earlier indications that compliance with the own moral standards is becoming more difficult as the company grows.[1] For example, transport distances between factories are becoming longer and precisely tracking the products' carbon footprints is becoming increasingly complex. The related strategic goal is therefore to keep all activities aligned with the purpose to maintain the brand's authenticity.

Another pressing challenge for Oatly is the European amendment 171 (AM 171; fig. 2) which prohibits plant-based food to reference dairy, e.g. through similar packaging or labels such as ‘dairy free'.By preventing to compete inthe dairy category, the law hinders to attract traditional milk consumers and hence the attained societal change. As it challenges the brand's positioning as a dairy alternative, the goal will be to navigate potential redesigns in a way that preserves the brand personality and recognition.

To cope with these challenges, the brand will play a central role wherefore the subsequent management suggestions will subsequently be examined from a brand equity (BE) perspective.

This image has been removed for copyright reasons.

Figure 2: Oatly promotes to petition against AM 171 which will make it harder to identify and objectively compare plant-based substitutes with dairy products (source: oatly.com)

Despite their intangible and conditional nature, brands are nowadays recognized as one of the most important assets of a company and have become integral to corporate strategies.[2] Nonetheless, there is no consensus on the exact definition of a brand and thus various approaches to measuring BE, a concept used to capture brand strength and indicate brand performance (BP).[3]

A general distinction can be made between the financial perspective that focuses on the economic value of the brand for the company in terms of attributable cash flows, and the customer perspective that seeks to capture the value of the brand relationship as perceived by the customer.[4] It is therefore useful to consider the underlying motivation, whether it is to derive the value of a brand more precisely or strategically motivated by branding purposes.[7] In tackling the outlined challenges, it will be crucial for Oatly to monitor how consumers relate to the brand, wherefore the customer-based perspective will be focused on.

To this spirit, Aaker defines BE as a set of assets and liabilities linked to the brand's name and symbol - i.e. brand loyalty, awareness, associations, perceived quality, and other proprietary assets -that add or subtract value to products and services.[5](p.[28]) In this sense, BEis regarded as the additional benefit of a branded compared to a non-branded product.[6] On the same note, drawing upon the associative network memory model, Keller defines customer-based BE as“the differential effect of brand knowledge on consumer response to the marketing of the brand”.[7](p.[2])

As ultimately articulated by Ambler, these cognition-focused concepts share the idea that BE residesin consumers' minds.[8] Following up on this,the concept of brand knowledge - initially presented as consisting of brand awareness ( recall and recognition ) and brand image ( attributes, benefits, and attitudes ) -was later extended by the dimensions of feelings and experiences.[6] Accounting for the fact that BE not only resides in mental associations but also in consumers' hearts,it illustrateshowthebrand's influence emanates from emotional brand relationships.[2] The brand knowledge embedded thereinis revealed as the origin ofthe differential consumer response to the brand's marketing mix.

Furthermore, scholars havedrawn attention tothe internal aspects ofBE, such as employee commitment which can have a relevant impact on consumers' perceptions.[8]-[10] Taking a broader perspective, the official Marketing Science definition emphasizes that channel members like suppliers influence BE too.[2] This makes clear why a high level of internal brand identification and strong supplier relations play a key strategic role for Oatly, both in the short and long term.[11]

Many definitions build on Aaker and Keller, incorporating the same BE components and proposing corresponding measurements:parallels existfor example between Interbrand's factors distinctiveness and affinity andthe assets of awareness and loyalty. Still, more recent concepts also reflect the evolution of brand approaches asthey considersocial and cultural aspects such as a brand's participatory nature or the moderating role of CSR.[11],[12]

Having said this, different BE approaches can also be classified according to the underlying paradigm, positivistic or constructivist.[13] Given the construct's complexity, a definition first requires grasping the brand's understanding of itself, i.e. the brand reality.

Creative director Schoolcraft description of Oatly as“a group of people helping other people to make a few changes in their lives”[14] underlines the purpose-driven positioning and conception as a business-to- human-brand.[15] It clarifies the brand's identity as a participant in society ( culture) that also takes the role of a relationship partner. Oatly represents a commitment to a set of values andis enacted as an activist that aspires to mobilize a public debate anda like-minded community.[2] The underlying interpretative paradigm implies that BE is meaning-based and emerges in the culture's interaction which forms the rationale for managing the brand's challenges.[13]

In line with this, Schoolcraft states that living up to this role and delivering on the purpose is more important than pursuing profits which links to the view that “customer equity is the preamble of financial equity”. [2](p.[7]) By presenting the latter as “the profit potential of the brand assets, mediated by brand market strength”, Kapferer relates the customer-based and financial perspective via the concept of goodwill, i.e. the difference between the acquisition price of a company and its book value.[2](p.[15]) It enables him to transform the subjective brand value perceived by the customer into an objective, monetary value which addresses the financial school of thought's call for a measurable valuation of BE.[16] In consequence, Kapferer suggests measuring BE by means of the brand assets that include brand awareness, reputation, and image, associated emotions,and brand personality. The power of these assets lies in their acting “as a shortcut to brand meaning” which explains why BE can be defined as the origin of a brand's power to influence customer behavior.[17] In line with brand value chain, BE results in and can be assessed, at a given point in time, through the BP in terms of behavioral manifestations ( brand strength ) or attributable cashflows ( brand value or financial equity ).[9],[18] Ultimately, however, BE encompasses an ungraspable horizon and reflects so to speak “a brand's likelihood to generate demand and unlock value in the future”.[11](p.[23])

In capturing BE,it is therefore central to understand the process by which it is acquired.[2] In Oatly's case, it is hence relevant to consider the dimensions proposed byNam et al.: physical quality, staff behavior, brand identification, lifesty le and ideal self-congruence, satisfaction, and loyalty.[19] As consumption isno longer based purely on functional criteria but also linked to psychological and self-fulfillment needs, the brand's influence also depends on whether consumers' self-ideals coincide with the brand image and whether they aspire to be part of the brand community. In a sense, BE can therefore also be viewed as the relationship strength and depth with key constituents, making an empathic approach that fosters brand engagement essential.[2],[11]

Finally, because people are nowadays aware of the impact brands have on society and the planet, BE equally results from their competence to provide meaning and to act as anchor point that gives clear direction. [11]

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