Dive Brief:
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Oatly will sell two of its production facilities as part of a hybrid manufacturing partnership with Ya YA Foods Corporation, the companies announced on Tuesday.
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Ya YA Foods will take over most assets, including equipment, at the plant-based food manufacturer’s Utah and Texas facilities as part of the $98.1 million sale, according to a Jan. 3 Securities and Exchange Commission filing. The co-packer will take over construction of the Fort Worth facility, which Oatly previously publicized would open this year, as well as the lease at the Ogden, Utah site.
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Sweden-based Oatly will retain full ownership and operation of its oat-based production at both facilities, as the company looks to cut costs and focus on its technology and products.
Dive Insight:
The Ya YA Foods deal comes weeks after Oatly announced it was pivoting to a hybrid manufacturing model in an attempt to cut expenses.
In November, Oatly announced it was seeking manufacturing partners for its facilities in Fort Worth and Peterborough, U.K. CEO Toni Petersson said at the time that the partnerships would be the result of a greater availability of co-packers, giving the company “more qualified partners to work with in terms of food safety, quality and security of supply.”
As part of the deal, Oatly and Ya YA Foods entered into a 10-year manufacturing agreement in which the plant-based food producer will continue to make its oat-based products at the Ogden and Fort Worth sites, according to the release. From there, the products will transfer to Ya YA Foods’ on-site locations, where the latter will package the items.
By passing more manufacturing responsibility to new partners, Petersson said the company will be able to focus on the strength of its product.
“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,” Petersson said in a statement.
The new partnership will be the Ontario-based Ya YA Foods’ debut in the U.S. manufacturing market, according to the press release. Ya YA Foods CEO Yahya Abbas said the company expects the deal will help the company grow and strengthen its production 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,” Abbas said in a statement.
In August, Oatly said it was prioritizing U.S. production amid plateauing sales in Europe as it became more challenging to convert new consumers from dairy to plant-based milk in Europe. The company instead focused on expanding its facility in Millville, New Jersey.
