Oatly and Toronto’s Ya YA Foods enter hybrid manufacturing partnership in North America

Malmö, Sweden, and Toronto – Oatly Group AB and Ya YA Foods Corporation have entered a long-term strategic partnership in North America. Oatly will continue to produce its proprietary oat base at its Ogden, Utah, and Fort Worth, Texas, facilities, which will then be transferred to Ya YA Foods to be co-packed into Oatly products on site at each location.

As part of the agreement, Ya YA Foods will acquire a majority of the assets (including mixing and filling equipment) used in the operation and assume the property lease at Oatly’s production facility in Ogden, and assume responsibility for the completion of construction of the production facility and the lease in Fort Worth. Oatly will retain full ownership and operation of proprietary oat base production lines in each facility.

Oatly will receive approximately $72 million, plus an additional credit amount towards future use of shared assets related to the Ogden facility. Oatly will also receive an additional credit towards ongoing construction at the Fort Worth location. The transaction is expected to close in the first quarter of 2023.

The move is part of Oatly’s shift towards an asset-light supply chain strategy to expand its hybrid production network globally to better support its growth, capacity needs and product and format innovations. The company expects this hybrid partnership to result in future capital expenditures savings and have a net positive effect on its cash flow outlook, Oatly said in a news release.

“We are excited to partner with Ya YA Foods, a leading food and beverage manufacturer who brings deep production expertise and shares our commitment to meeting the highest quality product and safety standards,” said Toni Petersson, Oatly’s chief executive officer. “We believe an increased focus on our oat base technology, innovation, branding and commercial execution will better position Oatly to drive profitable growth, while reducing the capital intensity of our future facilities, and ultimately convert more consumers to plant-based and create more products that are healthy for people and the planet.”

The partnership also marks Ya YA Foods’ entry into the U.S. manufacturing market. Founded in 2008, Ya YA Foods, an Entrepreneurial Equity Partners portfolio company, is one of the largest co-packers in North America and an industry leader in aseptic food and beverage production, including plant-based and high protein beverages, fruit juices, sports drinks, and broths.

Yahya Abbas, CEO of Ya YA Foods, said, “We are pleased that Oatly recognizes our top-tier food safety track record and unique capabilities and has confidence in our ability to meet their high standards. We expect this transaction to enhance our growth and further strengthen our capabilities: the two properties we are acquiring will increase our geographic profile and scale, allowing us to serve the vast majority of the United States and Canada.”

Oatly pioneered the oatmilk category and sparked the wave of consumer adoption that’s taken place in the U.S. market since first launching in the region in 2017. Oatmilk now accounts for 22 per cent of the plant-based milk category in the U.S., according to Nielsen Total US xAOC, week ending Nov. 5, 2022.