Oatly shuts Singapore facility to streamline operations, profitability

SWEDEN – Swedish oat milk giant Oatly has announced the closure of its US$22 million production facility in Singapore as part of its efforts to streamline operations and achieve profitability.

The decision, which will see 59 workers laid off, highlights the company’s ongoing shift toward an “asset-light strategy” to improve operational efficiency and cost structure.

According to reports, the facility, which was located in Senoko and operated in partnership with local food producer Yeo Hiap Seng (Yeo’s), had the capacity to produce 60 million litres of oat milk annually.

However, its closure marks another step in Oatly’s global restructuring efforts following significant financial challenges in recent years.

The oat milk producer recorded US$417 million in losses last year, a 6% increase from 2022, attributed to higher manufacturing costs, post-pandemic supply chain disruptions, and the broader economic impact of Russia’s invasion of Ukraine.

The termination of its partnership with Yeo’s will result in a compensation package worth US$23 million to the Singaporean company, payable in instalments through January 2027.

The closure is also expected to incur non-cash impairment charges of US$20-US$25 million in the fourth quarter of 2024, alongside restructuring and exit costs of US$25-US$30 million, impacting net cash outflows through 2027.

Despite these financial setbacks, Oatly insists the move will enhance future cost efficiency and capital expenditure management while increasing capacity utilisation at its European facilities.

Oatly CEO Jean-Christophe Flatin noted that the company’s supply chain improvements over the past two years have led to better utilisation, efficiency, and reliability, enabling the business to consolidate its production processes.

“We expect that the action we are announcing today will capitalise on those collective improvements and further strengthen our ability to ensure that we have the right amount of capacity, when we need it, while being efficient with our capital and costs,” Flatin stated.

The closure comes amid a broader restructuring of Oatly’s Asia operations, with the company having already separated its Greater China business into a distinct segment earlier this year.

Moving production out of Singapore allows Oatly to focus on its facility in Ma’anshan, China, which boasts a significantly larger annual production capacity of 150 million litres.

Oatly’s renewed emphasis on the Chinese market aligns with the country’s projected dairy alternatives market growth, which is expected to reach US$42 billion next year.

Recently, the oat milk giant has been navigating a competitive Chinese market dominated by local brands such as Yangyuan, Coconut Palm, Viee, and Yinlu.

However, Oatly’s strategic focus on foodservice partnerships, such as collaborations with KFC China and hotpot chain Haidilao, has bolstered its position.

Greater China now accounts for 93% of Oatly’s Asian revenue, which declined by 19% last year.

Nevertheless, the segment has shown significant recovery, with year-on-year sales increasing by 14% in Q3 to reach US$29 million.

Despite the positive outlook in China, the Singapore plant’s closure underscores the human impact of Oatly’s restructuring efforts.

A company spokesperson confirmed the layoffs would follow a phased approach over the coming months.

“We are committed to supporting all impacted employees and ensuring they are treated with respect and care in line with the company’s values; this includes offering outplacement assistance and training,” the spokesperson said.

Flatin expressed gratitude to the Singapore team, stating: “On behalf of the entire Oatly team, I want to express my deep gratitude to the team at the Singapore plant for the work they have done over the years.”

Oatly’s latest financial results suggest the restructuring efforts may be yielding improvements, with an 11% revenue growth recorded in the most recent quarter compared to the previous year.