Why Oatly’s lawsuit loss is a Goliath wake-up call
Oatly recently lost a legal battle with a family-run farm it accused of trademark infringement. It also lost in the court of public opinion.
Oatly has been accused of being anti-competitive and hypocritical
Oatly, a giant in the alternative milk category, brought legal action against Glebe Farm Foods earlier this year, claiming the Cambridgeshire company’s PureOaty product took “unfair advantage” of its brand’s positioning and accusing it of trying to “pass off” its products as Oatly’s.
The judge, however, dismissed any similarities in brands and concluded there was no risk posed to behemoth Oatly from the challenger brand.
What has proven to be greater risk to Oatly, however, was the very act of taking on a startup.
According to social listening data provided to The Drum by Synthesio, 39% of the social conversations linked to Oatly since the judgement have been negative compared with 13% that have been positive. In the three months prior to the lawsuit, just 13% were negative.
It’s a trend also noted by HypeAuditor, which found that prior to the lawsuit hitting headlines reactions to its social media posts were overwhelmingly positive but have since turned sour.
For example, on its most recent Instagram post, dated August 4 and inviting people to apply for its ‘Je Ne Sais Quoi‘ fund, 63% of the random comments analyzed were negative. Just 2% were positive.
“Genuinely perplexed as to how you thought it was OK to try to sue a small business. Your products literally look nothing alike!” wrote one user. “Oh a skeleton... reminds me of your brand! CORPORATE CAN GET IN THE BIN! Boycotted for life for neglecting an ethical community and their commitment to do good,” said another. Others called for a boycott.
It has been accused of being anti-competitive and – having built its brand on being a plucky upstart ready to take on the giants of the traditional dairy industry – hypocritical in its attempts to crush smaller companies perceived as a threat to its margin share.
It was, after all, the brand that was sued by the Swedish dairy industry for a campaign telling people Oatly is ‘like milk, but made for humans’ – the same campaign it dropped nearly £1m to bring to the UK in anticipation of an equally divisive response.
And earlier this year it faced backlash for an ad campaign that many accused of ageism, with its “snarky” efforts to highlight the damaging environmental impact of the dairy sector. The campaign may be challenging, it said, but it refused to apologize for doing what it needs to get the point across. “This is really about the big picture, we are in a climate emergency. We are talking about how people can look at plant-based milks as part of a way to drive down their personal figures.”
But standing up to Swedish dairy conglomerates and being bolshy with comms to tackle climate change is one thing. Trying to limit the livelihoods of a brother-sister farming family is another.
“The outcome is what the court of public opinion expected,” says Shann Biglione, co-founder and head of product at Kelp.
“Very few people were agreeing with Oatly. It was entirely its right, prerogative and fiduciary obligation to make sure it has those lawsuits. But it doesn’t make it look good. It makes it look aggressive and that’s very off brand.”
Max Ottingnon is co-founder at Ragged Edge, a brand consultancy that has helped establish startups including Mindful Chef and Bulb. He agrees with Biglione, adding that criticism may also be fueled by the fact the brand similarities it was claiming were virtually undetectable to a regular shopper.
“I was expecting to see something like when BrewDog sued Aldi and you could really see it was visually similar,” he explains. “But Oatly/Oaty wasn’t at all. It was difficult to have sympathy for what seemed an instance of overreach from the legal team.
“Oatly has set out to be a force for good right from the beginning. So the problem is not that it was protecting its trademark – which all big companies have to do – but more that it seemed utterly absurd.”
‘If BP can survive an Oil spill…’
For all the criticism of Oatly and the questions (largely from the marketing sector) around what it means for the future of the brand, the impact on sales is likely to be non-existent.
According to Nielsen, the oat milk category was worth over $260m in US retail sales in 2020 and Oatly is the highest-selling oat milk brand. It doubled global revenue to $420m last year.
Even when it was slammed for ‘selling out’ to private equity firm Blackstone Capital – a company later accused of contributing to deforestation in the Amazon – it didn’t put a dink in the growth momentum.
“Even though it seems like it’s hugely important, the reality is that for normal people it won’t have really registered,” says Ottingnon. “All the people paying attention will be up in arms that it is counter to Oatly’s brand values, but the reality is that for the people walking down the supermarket aisle, it won’t make a difference.”
Biglione agrees: “If BP can survive and oil spill and Volkswagen an emissions scandal, then Oatly will survive this. This will not be problematic. People will forgive – it has built that with its marketing so far. Sales won’t see an impact.”
However, the public’s indifference to such lawsuits may not last forever – especially for its core group of consumers that have bought into the brand’s narrative.
“It now has to be mindful that it has introduced a narrative to the brand and has moved from being the small guy with the cool, funky product to being Blackrock-owned and going after small farms,” says Biglione.“That’s the narrative you’ll see popping up – that it is not the company it is portraying itself as. There’s a dissonance that now exists and that’s probably being discussed within Oatly right now.”
Mark Caddle, partner and trademark attorney at European intellectual property firm Withers & Rogers, anticipates we will see more and more cases of trademark claims in the fast-growing category.
“Although Oatly is a well-established brand, the case demonstrates that brands should be careful in selecting which trademark claims to pursue,” he says. “In fast-growing markets such as plant-based products, brands are often racing to get their products to market so they can grab as much market share as they can ahead of their competitors. Once they have secured some market share, they are keen to defend it by bringing infringement claims where necessary.”
Oatly, then, needs much clearer alignment from the top to the bottom on how it acts and how it wants to portray itself. It is no longer David and the time may have come for it to embrace being Goliath – and all that that means for its startup mentality marketing.
“The marketing team isn’t in charge of the brands it has lawsuits against,” continues Biglione. “The company reputation is not a communications problem. Ultimately, it’s the entire corporation’s actions. So, it needs to think about how it goes about things when there’s a very big gulf between the size of it and the size of companies it goes after.
“Any time Oatly goes after a big guy, it’ll be fine. It can still play the underdog. But going after smaller businesses or a farm or a family business, it becomes the Goliath. And so, it needs to set some rules on how it operates and guidelines on how it wants to handle its engagements and litigations with small businesses in a more coordinated way.”