Oatly Group AB (NASDAQ:OTLY) Q3 2022 Earnings Call Transcript

Erica Eiler: Okay. Great. And then just given the macro impacts on your business, I mean you’ve talked about some of the slower conversion to plant base that you’ve seen in recent quarters. I mean can you maybe just give us an update in terms of what you’re seeing there in terms of consumer behavior and kind of the slower conversion that you’ve been seeing and kind of how that looks lately?

Toni Petersson : Thanks, Erica. This is Toni. So just want to make sure that it’s clear that the guiding down has nothing to do with the brand or demand the underlying demand for our product is still strong. We start to see signs of growth in Europe that Daniel will — can double-click on. In Asia, we are building our positioning stronger despite COVID-19 in terms of adding doors and partnerships in foodservice and in retail channels. And in U.S., we still have the highest velocities in the dairy universe. And Daniel, maybe you can put some cost to that.

Daniel Ordonez: Of course. Thank you, Toni, and thank you for the question. It is indeed, let me acknowledge that this is a pretty extraordinary environment and why we are experiencing. However, what we observed is that our velocities remain very strong, and the penetration levels continue to be very stable. So we don’t see any wavering on that. And we also see specifically related to the last earnings call and that we improved execution in our part, we see that the ability to start changing the dynamics of the category. So we have seen some volume growth restoring in the countries in EMEA, The Netherlands, Germany, where we are growing ahead of private label and also the U.K. So with improved execution, the path is to converting dairy consumers into plant based, and we see that intact. As you know very well, better than me in the U.S., it’s all about capacity, supply meet the service levels, which are improving.

Operator: Our next question comes from the line of Brian Holland from Cowen & Company.

Brian Holland: Yes, thanks, good morning. I wanted to follow up on Andrew Lazar’s question at the top. I think you mentioned, Toni, during your prepared remarks, you called out Texas, in particular, when discussing the pivot to a more hybrid production network. I just wanted to try to get a little more color around that. So is the Texas facility under construction yet? And what could a manufacturing partnership look like? Would that be a leaseback? I think Andrew was asking about how this sort of evolves given some of these facilities are under construction. So just trying to get a sense of the capacity situation sort of shifts from Oatly to co-manufacturers or, in essence, taking capacity out or if you’re still building all these plants and maybe just working with partners from there?

Toni Petersson : Hi, there. So that’s a good question. Thank you. First of all, what we do here is to protect growth, and we’re balancing and calibrating growth and cost here. And first of all, it will not have an impact on volumes going forward or the growth rate going forward. In terms of Texas, yes, we are building there. But what we are now thinking about is to — or very actively pursuing is to turn Fort Worth into hybrid model, like we had in listing and as we had in Singapore, and that also goes for Peterborough. Now JC, maybe you want add a little bit?