So I'm walking into my kitchen doing my morning routine. I'm gonna make some coffee, and I come in here and here's my lovely wife. What are you doing, honey, I'm making shy, you're making chi? What are you putting in your chi? I'm gonna put some oat milk. And what compelled you to put toatally in your chi instead of say, soy milk, which we've had around, or almond milk or skim milk, which we also have. Why are you putting totally in there? Well, I don't like cow milk, and almond milk was too watery, and I needed something that made my chie creamy but wasn't too sweet. And you sound like a pretty finicky and hard to sell to consumer. To me, I am very picky, and I think if you have things that you really enjoy, they should be the way you like them. Okay, I'm going to pour some coffee into a cup and add a little bit of totally to it. That is not a complex process, although totally is a complex proposition in a lot of ways. It's a interesting light blue carton with black and white market lingo all over it. This oat milk has a mission statement on the side. The reckless pursuit of profits without any consideration for the well being of the planet and the humans that live here should be considered a crime. Companies have as much responsibility as politicians for building a society. The rest of the world can admire Bigfoot, the legendary Sasquatch is real. Okay, blah blah blah. That is quite a mission statement and not something I'm used to seeing on the side of any products. But now I'm curious. I want to know more about this company. I want to know about this little oatally that is claiming to change the world with a carton and some liquid and an outlook that is uncompromising and inclusive. And I think maybe this podcast has to do some digging into the history of otly, So let's get started. Welcome to Crash Course, a podcast about business, political, and social disruption and what we can learn from it. I'm Tim O'Brien. This week's collision totally versus Big Milk. It's hard for little companies to take on huge competitors, especially in industry like Big Milk, which has a longstanding grip on consumers, diets and lifestyles. It takes attitude to consider yourself a revolutionary force rather than just a carton of milk. It takes courage and vision to create a whole new food category, and yet Totally is one of those companies. It's a pioneer, but it is struggled with growth and competition recently. Totally Story will make you think about what food you put in your body, how big Milk markets it's wares, and whether Totally can live up to its promises. To begin trying to understand Totally Story, I went right to the top to Tony Peterson, the company CEO, and everybody Hey Tony. Tony is an engaging suite who had no experience in the milk industry when he decided a decade ago that Totally was going to take on the world. I had two lengthy conversations with Tony over the last year. When we chatted most recently, I had at least survival on my mind, and I asked Tony to think about both the companies and his own legacies. We are addressing one of the humanity's greatest challenges right which is to feed a growing population over time within the planetary boundaries, and we are a part of that solution, which means that you know, we are at pride a solution to that, to change that food system totally. Like other hot startups, has been burdened by its own success. It created a new food category, oat milk, that invited big competitors onto its turf. Its popularity also meant it had trouble keeping up with demand, disappointing consumers who found themselves staring at empty store shelves. The company's stock and it's standing took hits, so how long can it really keep fighting? Every small business, no matter how bright it's prospects, needs great management. That was true of Otely, which ran through a series of CEOs as it built its business in Sweden. In two thousand and twelve, it decided it needed something more, somebody who could shake things up. That guy turned out to be Tony Peterson. He was definitely an out of the box pick. When I was a teenager, I thought I was going to be a pulp star sort of. So we met my friend when I was eighteen and we ended high school. The first thing we did was to buy this music studio. Um by no means a musician, but I love making music, so I thought I was going to do that. So you're super bowlad. So I know you're not a musician. Yeah right, so you so no, but Naivey, you had like hopes. Right. You may not know who Tony is, but I'm sure you remember his ad. It's like milk paid for You loves Tony popped up on tens of millions of TV screens sitting at a synthesizer in the middle of an oat field with a cart and of oatly singing really badly during the Super Bowl Well don't come, no No. Everyone seemed to hate that ad, just as the company expected. It had printed up T shirts and advanced saying I totally hated that only commercial. I mean, who does that? Odally does that? And Tony and his married band of pranx ers had burm ideas about why lots of people who work for totally consider themselves rule breakers, including Tony. Oldly was Tony's first corporate job. In other words, his first corporate job was as a CEO. How often does that happen? Prior to that, he was an entrepreneur running successful restaurants and retail businesses. You start to question the life you're living, right, and you want to achieve things in life besides just work. Tony was looking for a calling when someone came calling. A head hunter firm called me. I met them in Malma. I went to their office and actually had a company there. It was black and white and it was the picture of a factory and it said Oatley. I had no clue what that was. I just knew that I didn't want to run a factory for an American serial company, which I thought it was back then. He found out was actually Swedish. That was good, so he kept meeting with them. He didn't really want the job at first, then suddenly he did. The more I learned about it, I just realized that, hey, I mean, this is something that the whole world needs. You know. It is something that's probably relevant to night and nine percent of the population, but yet unknown to the nine of the population. Totally started in of all places, a Swedish lab run by a quiet food scientist named Ricard. As day. Ricard doesn't like to talk to journalists, but his brother Bjorne, a successful software entrepreneur, popped onto a zoom with me. He describes Ricard as a determined perfectionist, the kind of guy who winds up inventing an alternative to milk in a country that didn't really need an alternative to milk, at least not until people realized an alternative existed. And I would say the number one design criteria, over reaching everything else, was that it had to taste well. I mean, if it doesn't taste great, forget it right. And the Aussies were close knit family, so as Ricard was iterating trial and horror as they gathered at their family cabine in northern Sweden and kept experimenting with their recipe until it tasted just right, and then they took it to market. After their oat milk started selling, the Aussees formed a partnership with the known a Titan of the food and beverage industry, but that quickly soured due to what Ricard describes as the nun's infatuation with consumer testing and an aversion to risk. If you ever go out and ask consumers what they want, but you're already behind right, you're that's not a leadership position. If you want to be a leader, you don't ask consumers what they want. You surprised them. You give him something they didn't know they wanted. Yours a wise man. What he said smacks of an apocryphal Henry Ford quote. If I had asked people what they wanted, they would have said faster horses or even steve jobs. Customers don't know what they want until we've shown them. This all rings true to me. Great entrepreneurs chart their own courses, and that's exactly what totally would go on to do all the way to an initial public offering in the US. I didn't go into this thinking, you know, we're gonna do with them villion dollar i p O and in a few years and far from it. It was Tony Peterson who paved the road to that i p O. When he met Bjorn re Garden board members during his job interview. Growth was all they cared about, and Tony still didn't really know how to deliver growth honest, like, Hey, I have no clue. I gotta think I have an idea, and but I will like I'm a consumer, I've never been the food industry. But I have some ideas of how how he can do that, and I do believe it's achievable somehow, you know, but just give me some time. Can you believe that this company is asking this guy to deliver growth, and he's saying, I'm not sure how I'll do that. I'll give Tony props for raw honesty, but this must have been kind of a weird interview. Even Bjorn, who was rooting for Tony new Tony was a tough candidate to pitch. I could not present his restume to the board right. He was literally unsellable to the board. Tony had no idea how the food industry worked, and that, as it turned out, made him a great candidate and manager. He already knew how to sell things, and his lack of experience actually made him fearless. You don't really worry about sprinting past the big milk geezers if you don't know much about their business. Anyway, Bjorne convinced at least directors to take a chance and hire Tony precisely because he wasn't out of the box candidate, and Tony quickly went about reframing the board's expectations. Instead of saying he would hit growth targets in three years, he promised to do it in four. The board said fine, but had caveats. One was you can only operate in the Europe. At the other you can never go against cow's milk. Those were their restrictions. In short order, Tony went about blowing off these restrictions. I'll come back to that later. To help shake up things that totally, Tony recruited an old friend, John Schoolcraft, a veteran marketer. He made John's chief creative officer. John was just as unusual a newcomer to Oatly as Tony. John told me he didn't like working in house for companies and says he still doesn't trust most corporations. And here he was working in house for a corporation. But he was in on the joke. He renamed Otle marketing team. I kid you not the Department of Mind Control. How can you not love these guys. I think some people actually have taken that really seriously. What do they think they're doing? But it's just like, you know, us fucking around with with what we're what we're given. John was nobody's fool. He was completely serious about his marketing philosophy, being as human as possible. That meant making a lot of their marketing decisions around what they thought was funny. It also meant shredding bureaucratic layers, moving quickly and breaking things like one of the two rules the board had given them, the one that said, don't this big milk and its lovable cows lo and behold. When Tony and John Overhauled's website, they proclaimed their drink was milk but made for humans. We went out big, and I don't know, three four weeks later we got seved by the dairy industry. The lawsuit alleged that Oatly had sullied the entire Swedish milk industry by suggesting that there were healthier and greener alternatives to the stuff they were peddling, and the dairy giants pointed out what only was selling wasn't actually even milk. Tony and John were in Tony's office when the Bible sized lawsuit landed with a thunk on a desk. I started laughing. I just started laughing. I thought it was the funniest thing ever. I looked at It's like, what, it's a hundred and seventy four pages. It was. It was pretty think and John started to laugh and I was like, oh my god. All right, okay, let's see what that's going to take us. The lawyer came in and said, John, I want you to go through this entire lawsuit, and I want you to write me explanations to every line they object to, because I need to know what you were thinking, how you were thinking, how you wrote it, et cetera. And it become very less funny after that. I think they understood were aware of their weaknesses in the concept of Chw's milk, for sure, and they've always been aware of it, and they wanted to kill things at early stage. And usually when those things happened, companies back down because that industry is so big. The difference here was that we didn't back down. What they did is they forced us to become what I think we've become very good at, is any kind of adversity, we take it on as a new brief. So it was like they sued us, Fine, we'll take the lawsuit, we'll put it on the internet so everyone can read it, and we'll take out full page ads in all the morning papers saying the dairy industry feels really threatened. They hit us with this lawsuit. Big Milk prevailed in court, totally had to stop calling its product milk, and was ordered to stop disparaging the dairy industry. So maybe a big win for big milk during OSTI doesn't think so, especially since the lawsuit gave otally lots of free publicity. They lost their hearts and minds of the consumers. I think they learned that it's not a way forward. They just have to learn to be competitive and fight on equal terms. They can't keep competition through the court. True, and in fact, it lost a lot of the consumer followings that way, and there was the classic David versus Goliath. David was now ready for bigger battles totally wasn't just popular in Sweden anymore. It now had fans all over Europe. And Tony and John decided to break their board second rule by setting their sights across the pond to one of the world's biggest milk markets, the United States. That was such a like monumental turning point, and then it just started to get really fun after that. I'll bring you that story after the break. Okay, I'm back in my house again, and I'm going to try to trap my wife Devon in the kitchen high and I'm going to talk to her more about milk, and specifically about the memories you had of milk as a kid. You know, I remember these little comforting cartons of milk, either in blue and white cartons or red and white cartons that we would stick a little straw. And when I was maybe in kindergarten through second grade, at least maybe third and it was part of our lunches every day, and and it's a distinct part of my memories as a kid. Do you have those memories. I certainly remember the little cartons. I was wanted the chocolate milk, not the white milks, and like white milk, and I do remember hearing that it was the healthiest thing you could have. You have to have milk every day. And I don't remember getting a lot of milk to drink as a kid, but I do remember it like the school lunches, and I remember it for cereal. I never really liked drinking it though. Do you remember like it was healthy though? Like do you remember like it was cordy or healthy? Have milk. It's the only way you could have strong bones and you know, good eyesight and good skin. I mean you had to drink milk. That was what you did. What I didn't really knows a little kid was that great forces were at work making sure I got that milk including the president of the unit at it states, I want to say a few words this morning about a very important subject to us all, and that is milk. I've long been convinced that milk is an important aid to good health. This has led me to direct that milk be served in every White House meal from now on. That's JFK speaking in nineteen sixty two at a national conference on milk and nutrition. I mean, how often do you hear presidents going out of their way to sing the praises of food. I hope more and more children we'll be able to receive school milk and luncheon's in the day ahead. The coolest president of the jet set era, the same leader who worried about nuclear annihilation and winning the space race. He's also at the most boring conference imaginable, and he's hawking milk. My twenty one century years find that twentieth century speech to be alternatively hokey and charming. Everybody had clarity. Amrikans believed back then that milk was a power food for them and their kids. They made it a staple of school lunches. Milk was also marketed ubiquitously in the decades before and after JFK gave that speech, making it a fixture and consumers minds. Here's a TV at from the nineteen fifties. Oh, I'll command all night stuff ditched to drink at least three glasses of delicious Bardon's milk each day. Milk was at rare food that had become almost mythic in American life, nutritional legends and an industry had sprung up around it. Totally would be taking on all of that when it came to America. It would also discover that once it began trying to pop some of milk's balloons, it would become a target itself. To understand what toatally was up against, I needed to learn more about how plain old cow's milk came to be so celebrated. Here. Vitamins played a big role. The scientists who discovered vitamin B made milk one of his specialties, winning the allegiance of the dairy industry. They helped fund some of his research. The scientist was happy to return the favor, publicly praising milk as the greatest of all protective foods. Kendra Smith Howard is a history professor at Sunny Albany and has written extensively about milk. The notion that milk was a pure and complete food what at the time was called Nature's perfect food. Has sugars, that has proteins, it has fats, and now it also has this vitamin content. All of those components really helped put milk in a positive nutritional light in the first few decades of the twenties century. Kendra said this kind of research helped create a boom in milk sales. Washington also fell under milk spell. Dairy farmers were in almost every state, and that translated into political cloud and protection in Congress. Washington also put milk at center stage by including it in the federal school lunch programs it introduced in the nineteen forties. So that again adds a stamp of endorsement and familiarity with milk that not all products received, and so I think that also elevates milks sort of nutritional credibility in the eyes of many Americans. The U s d A also marketed milk as one of four basic and Essential food groups. I don't know how one white liquid makes for an entire food group, but the campaign worked whole milk consumption in the US sword in the first half of the twentieth century, but then began a steady decline after that as alternatives became more popular and as eating habits changed, Consumptions of all forms of fluid milk is now about a third of what it was at its peak. In to chat about the current state of the milk business, I called Paul Zimnisky. He's the executive vice president of Global Innovation at Dairy Management, Inc. A trade association that receives some funding from the government. He says the sational milk business still stands strong, and he compared it to another industry facing competitive threats. When you look at the automotive space right where you've had the evolution from like the F one fifty. Now you've got the Broncos coming in, you've got the electric cars coming in, But the F one fifty still drives the category. Flood milk is still households despite the massive innovation in the coffee space, massive innovation and water, and what about massive innovation and milk alternatives like goadly. I think everything is a competitor, but it's not a nutritional threat. Maybe that's the case, but milk so own nutritional value has never been as robust as the industry would have you believe. I turned to Marrion Nestle, a noted nutritionist and former public health professor at New York University, for her thoughts. You know, everybody kind of assumed that you have to eat dairy products, and that you have to have two or tree serving today of dairy products or you're going to be missing out on essential nutrients. But the idea that milk was an essential food was really not backed up by research. You can have a perfectly healthy diet without having dairy products at all. Is Totally any better? Some critics have complained that Totally is high in sugar and is not a magical nutrition drink. Totally thanks otherwise, and complains that some regulators even forbid it from promoting its benefits. We can't even its sweet and say that oats are good. We are not entitled to say that, even though that's true and that everybody knows it, we are not allowed to say even that. Now. We as a company, we conducted eight clinical studies so far that is related to the fibers. So we actually do have a claim in Europe stating that if you drink three glasses of Oatally, it's healthy for you. All of these disputed health claims aside, milk remains a huge market, with yearly sales of about twenty seven billion dollars. Competition for shelf space and grocery stores is fierce, with big retailers like Walmart Bottlings selling their own milk. When Odly came on the scene in the US just five years ago, alternatives weren't considered a realistic business for the milk giants, much less a competitive threat. Grocery stores looked at it in the same way. Odally decided it's best move would be to blow off grocery stores entirely. To learn more about what convinced the company to take that risk, I drove down to Millville, New Jersey, to an Oatly plant. There. It was on a quiet road, just off the highway. It wasn't at all what I expected. I grew up in northern Illinois and we would go on family trips to Wisconsin, so I'm used to seeing the big milk casks silos that you see it dairy farms. So from the outside this looks like sort of like a dairy farm, except there's no cows. There's no barns. There's no standard farmhouses or any other stuff that you see around old school farms. This is all brand spanking new stainless steel and warehousing. I walked inside and med Mike, Hi, I'm Mike, see you. Thanks for giving us your tony yeah pleasure in. Mike messrs Smith is at least president of North American Business, and I wanted to talk to him to understand how the oat Milk gets made. The story of how oatles David has been able to take on the big milk Goliath is still a hard one for Mike to wrap his head around. We're making several hund thousand liters a day. That was a number that, if you had asked me years ago, would have been beyond my comprehension, to be honest, because we started with literally ten coffee shops that were carrying our product. Back in I was the third employee in the in the US organization. I used to carry oat Milk around in my backpack, um around New York City, trying to get coffee shops to carry the product. Coffee shops, not grocery stores, because the real coffee gormands are in the shops, not the stores. And Mike, like his boss, Tony, knew they had to enchant barista's. Tony had seen that strategy in action once before. Back in Sweden, I had restaurants and bars, and how liquor companies are building their brand is behind the bars. That's how you build brands. Because advertising has been very limited, especially in Sweden, a liquor company wouldn't just spend money on billboards and commercials. They would go talk to the people serving the drinks, bartenders. They would convince bartenders that their product was the best, and bartenders would recommend their liquor to customers. In at least case, they targeted barista's instead of bartenders. We knew one thing that the barista community has such a high integrity when it comes to quality and what they want to serve. They simply want to make the best coffee ever, So you can't go in there and sell share. If you see what I'm saying, you have to sell the best. You can't you even tell them that I want to sell this to you. Don't think we could do knock on the doors and tell them, hey, if you want please try to stand let us know what you think about it. And we used people that were from this community to approach these coffee shops, and that's how we all started. That's where Mike came in. His team in New York City would fill their bags with outly cartains, get on the subway and visit coffee shops. And the key thing is that we weren't going in there to try to sell anything. There was a need, a market need for these high end especially coffee shops who have gone to extensive lengths of sourcing this incredible coffee from all these incredible origins, roasted to perfection ground for these drinks, and yet they had more and more people coming into their coffee shops looking for plant based options. And you know they don't want to sway milk on. The milk is too thin, it doesn't foam, it doesn't do justice. And so when you went in there, did they look at you like you guys were crazy? Like what was the pitch? I mean it was literally like you take the carton out, like we worked for this oat milk company, do you want to try it? And like you don't have big power point decks or binders of things, you don't have coupons. Literally the litmus test for success is take the carton. We'd order a couple of drinks and then they would try to say, wow, like that's better. This was the summer of there weren't any other oat milks on the market. Totally was really the only option out there. And I think those initial reactions with such a you know, before we had built factories, before we had done any of these other pieces, the validation of seeing the kind of immediate response from very educated, high barrier to adoption like customer base was thrilling for us. So the baristas were on board. Totally started being served in specialty coffee shops. The first phase of the guerrilla marketing was complete. The next phase is probably familiar to anyone listening in a major city like New York. Were Los Angeles, oly d started popping up in the strangest of places. The first thing we did is what we call like the Island of Misfit Toys strategy. Well that's John Schoolcraft again, the head of at least department of mind control. If you've never heard of the Misfit Toys strategy, you're not alone. The media agencies John spoke to were also confused. They're like, what it's like, what is the media that nobody wants. You got a guy down in the basement booking media and no one calls him anymore. So he's just sitting down there alone. And they were like, um, no one wants to buy the bus fronts, and so he said, okay, we'll take them all totally put advertisements on the front of nine thousand buses in New York City in l A. If the fronts of the buses in New York are different, you'll never notice them, but if you have them all. And there were thirty different headlines, and people walked around and collected them, like what's the next one, saying I'm I've seen that one. So, whether people were learning about totally from their local barista or watching the fronts of busses as they whizzed by, the company was building a customer base and it took off very quickly, way faster than we ever anticipated and were read out of open Milk. That was just the beginning of at least production was totally was growing incredibly fast, and it seemed like oat milk was everywhere, but it was also nowhere. They had incredible production snaffoos that would stifle its growth against competitors, but investors didn't necessarily see that as a problem at this point. Totally. It built a market for a product that didn't exist, and it was popular, So of course all signs pointed toward a natural next step taking this private company public. I'll bring you that story after the break. Okay, I'm ending into my kitchen for a third and five time at least for this podcast, not in my life, because we sort of live in our kitchen, but I'm coming in here again to grill my wife Devon. The thing I want to ask you about now is how you first became aware of totally, Like when did it land in your consciousness? I think I first heard about it right before COVID or right when COVID hit. I was always looking for a really good milk substitute, because for certain things, I just think you need something that's like milk, but I didn't want to actually buy milk. And did you talk to friends about it? Did you see it on store shelves? Did you become aware of it through ads? Like how did you become aware totally? Specifically? I think I saw it on the store shelves after a friend mentioned it to me. Actually think it was. My aunt mentioned it to me and then she said this was the best she'd found, and so I went and found it and I started using it. And then during COVID, I noticed it was really hard to find, and sometimes I would go to the store and it wasn't there, like there'd be a whole shelf and it would be empty. So I knew then to stock up every time I found it. Devin wasn't alone totally. Was getting a lot of attention by the time the pandemic hit, and it had some big time investors Oprah Winfrey, Natalie Portman, Jay z and the former CEO of Starbucks, Howard Schultz. They all backed ontly, but Ontally needed more capital to keep growing, so Tony decided to take the next step and go public. We need the proceeds to expand our our production capacities across these three continents. If you think about what we do, we'll build demand across three continents successfully, you know, multiple channels from niche to mass and generating a demand that and we had that we haven't been able to supply. That's Tony on Bloomberg TV on MA when at least I p O value the company at ten billion dollars. Tony was elated, but also cautious. This is just the beginning. This is this is the beginning of long, long journey and incredible journal and massive opportunity. You know. So I am so happy to sit here with you guys today and just you know, being where we are. But it is about and long term. Totally debuted at seventeen dollars a share. By the end of the day, the stock had jumped over twenty two dollars. A couple of weeks later, it reached what, in hindsight, turned out to be its peak nearly twenty nine. Let's take a minute to reflect on when all of this was going on. May You may have been preoccupied with the buzz of vaccine availability more than a year into the pandemic, but Wall Street was buzzing with I P O s. It was a record breaking year for companies going public. The market was bubbling in this gold rush. Yet Tony's visions for at least future seemed within reach, especially because investors were swooning over plant based foods. Totally needed more capital to take on the milk giants, and they were going to get it. It raised one point four billion dollars on I p O Day to work toward that goal. We're positioning ourselves to take a global leadership. This is Tony again on Bloomberg TV. We determined to lead this revolution and forward and it will evolve. You're right, it will evolve, and we are going to lead that. Do you know if you think about what we do here, beating the demand across the free continents, with the organization and supply and everything, we are positions to take this to the next level. Well, I feel pretty good about it, to be honest, Tony felt good about it. But the stock market is a fickle suitor. Over the next year, many young companies the market once adored fell out of favor. Totally was one of them. In May, just a year after that hot I p O Otally shares had plunged to three dollars and sixty six cents, not even enough to buy one cart and a Votely, the stock price has only gone down from there. Shortly before we published this podcast, the stock was hovering around two dollars a share. Some of that was beyond at least control. You have to remember we made the I p O hitting a series of macro events that was and still is unprecedented. I haven't heard of any other company with own production at that scale and growth rate making an I p O and then immediately hitting those types of events. Ever, there was quite a roster of macro events, a pandemic, putin invading Ukraine, soaring inflation, buckling supply chains. Despite those headwinds, Tony doesn't have any regrets about going public, but he has his work cut out for him. This was the platform for us to become a global brand, and the appeal was part of that. But eventually you have to be profitable, right You don't just want to run a high world company forever and not ever make money. You have to do that. Going public not only subjected only to the vagaries of the stock market, it invited a whole new set of big investors, some of whom improved controversial. The big private equity firm Blackstone and a Chinese state agency took stakes in only totally fans of the investments represented a betrayal of the company's core values. Blacks Own was seen as environmentally hostile, and China was seen as politically oppressive. Tony disagrees most small companies that want to go larger have to tap public markets with all of their complexities, including outside investors. None of that, he says, has disrupted Atle's mission. We can't live in an isolated, parallel universe, right, We live in this system. So this is about how do we bring everybody on board, how do we make everybody understand? But more importantly, what are the mechanism for change? Right? So to me, it's always about impact for us, it's also about education. What does sustainability mean? What can company do? And if we're not alone in this, but we are part of educating authorities and stakeholders about what is sustainability and how do you actually make an impact, which is the most important thing. Atal has had another challenge finnicky consumers. The truth is is that olt milk is no longer as like sexy as it was a couple of years ago when it first arrived. They are no longer the only oat milk at the supermarket. This is Dina Shankar. She covers food and agriculture here at Bloomberg, and she says that after the initial hype around totally, the market became saturated with different kinds of oat milk, and oatally couldn't keep up there was a time when people were reportedly anecdotally, you know, going from one coffee shop to the next looking for Totally. I don't think people are going to do that anymore, but especially because the coffee shop might not have only, but they'll have some omal and so you'll say, okay. Sure. Dina thinks Oatally felt short because they got too big, too fast and lost focus. The company was more obsessed with making sure people knew about Totally rather than ensuring there was enough. Oatly only captured about of the retail sales in the oat milk market, so only a quarter of the very same market it created. It. Every time a customer walks into the supermarket and can't get Totally and buy something else, they're losing a sale. So they're losing market share. They had the entire market, and then they have just been losing it ever since then. The clock is ticking to a certain extent on them. How long is it before investors and competitors make them fold. I wouldn't put like a deadline on Totally. What I would say is that Totally has benefited from being able to rely on the COVID excuse. Our supply chain problems are from covid our factory isn't up and running because of the pandemic. I think that that excuse is basically has pretty much run its course. By the way, meeting demand is antally only problem. As the company grew, it also came under fire for sometimes not being as environmentally friendly as it claimed to be. Wall Street Journal article recounted how local officials who live near Least New Jersey plant, we're outraged about how much wastewater the plant was producing, totally ended up trucking it's runoff out of the state for a while as a solution, and Mike mr. Smith told me the company has since gone out of its way to reassure the locals and now we've invested millions of dollars in that on site wastewater treatment facility and it's discharges directly to the city system with no issue. When I asked Mike about that Journal article, he didn't dispute its conclusions, but also pointed out how hard it is to start businesses from scratch, building things that didn't exist before. It's really hard, and I think that there can be elements of humility and transparency and trying to build something that you know it doesn't always go exactly as we plan, and we have to continue to push, so at least pushing forward. And it says it's finally sorting out its production problems. It forged a partnership with an experienced packaging company Yeah yeah Foods in an effort to streamline its operations. Maybe it'll even be well to get ahead of demand. The clock is certainly ticking, though. You see, most small companies get a lot of attention at their I p o s, but then disappear. It's a fact of life. When a company is successful, it's not usually because it stayed true to itself. Wall Street changes a company it has to. There's a ton of pressure from big investors and from the extra media attention. Oftentimes companies cave. They'll bring in plain vanilla people to run the company safely, which is all well and good for some playing vanilla companies, but that's not what makes Totally Totally. It's known for its eye catching cartons and its quirky ads for the department of mind control, and it's avoidance of bureaucratic barriers. Can everything that makes Totally fun and interesting survive. Wall Street can Tony. They are going to be challenges along the way, and we face criticism in the past. That's never detured us from the mission. What is teaching us is resilience. And no one knows more about the positives of this company than our own team, right, our wins, our successes, our benefits, what we actually do within the company, the pioneering approach we take to challenge throwing our way. You know, we're going to continue to have that approach, stay true to our mission and have true ambitions to try to do the right things, knowing that we will never be a perfect company because you can't be that, but to have genuine ambitions about wanting to do good and that is then converted to action that we're going to stay true too. And I know one customer who plans to stay true to Tony's Oat milk. So do you consider yourself a loyal totally drinker. Yeah, I do, and I'm not loyal to a lot of things, but this is the one thing that really works for me and I know what I'm getting when I buy it, So totally forever, totally forever unless they change the formula. Don't change the formula. What if it just can't stay afloat so to speak, in this brutal American consumer market. Is there not enough trouble in the world? Um, I don't know. I guess I'd keep searching for something else or find the next best thing, but it won't be the same. Here at crash Course, we believe the collisions can be messy, impressive, challenging, surprising, and always instructive. In today's Crash Course, I learned that being a quirky, daring pioneer can be a magical, exciting thing. Being a pioneer is also perilous. Your own growth and popularity can consume you, and holding on to your identity and your mission can be really, really hard. Let's see what oatly has in store for us. What did you learn? We'd love to hear from you. You can tweet at the Bloomberg Opinion handle at Opinion or me at Tim O'Brien using the hashtag Bloomberg crash Course. You can also subscribe to our show wherever you're listening right now and leave us a review that helps more people find the show. This episode was produced by the indispensable Anna Mazarakis and me. Our supervising producers Magnus Hendrickson and We had editing help from Samantha Story, Katie Boyce, Jeff Grocott, and Mike Nietza. Blake Maple says, our sound engineering and our original theme song was composed by Luis Gara. I'm Tim O'Brien. We'll be back next week with another Crash course

So I'm walking into my kitchen doing my morning routine. I'm gonna make some coffee, and I come in here and here's my lovely wife. What are you doing, honey, I'm making shy, you're making chi? What are you putting in your chi? I'm gonna put some oat milk. And what compelled you to put toatally in your chi instead of say, soy milk, which we've had around, or almond milk or skim milk, which we also have. Why are you putting totally in there? Well, I don't like cow milk, and almond milk was too watery, and I needed something that made my chie creamy but wasn't too sweet. And you sound like a pretty finicky and hard to sell to consumer. To me, I am very picky, and I think if you have things that you really enjoy, they should be the way you like them. Okay, I'm going to pour some coffee into a cup and add a little bit of totally to it. That is not a complex process, although totally is a complex proposition in a lot of ways. It's a interesting light blue carton with black and white market lingo all over it. This oat milk has a mission statement on the side. The reckless pursuit of profits without any consideration for the well being of the planet and the humans that live here should be considered a crime. Companies have as much responsibility as politicians for building a society. The rest of the world can admire Bigfoot, the legendary Sasquatch is real. Okay, blah blah blah. That is quite a mission statement and not something I'm used to seeing on the side of any products. But now I'm curious. I want to know more about this company. I want to know about this little oatally that is claiming to change the world with a carton and some liquid and an outlook that is uncompromising and inclusive. And I think maybe this podcast has to do some digging into the history of otly, So let's get started. Welcome to Crash Course, a podcast about business, political, and social disruption and what we can learn from it. I'm Tim O'Brien. This week's collision totally versus Big Milk. It's hard for little companies to take on huge competitors, especially in industry like Big Milk, which has a longstanding grip on consumers, diets and lifestyles. It takes attitude to consider yourself a revolutionary force rather than just a carton of milk. It takes courage and vision to create a whole new food category, and yet Totally is one of those companies. It's a pioneer, but it is struggled with growth and competition recently. Totally Story will make you think about what food you put in your body, how big Milk markets it's wares, and whether Totally can live up to its promises. To begin trying to understand Totally Story, I went right to the top to Tony Peterson, the company CEO, and everybody Hey Tony. Tony is an engaging suite who had no experience in the milk industry when he decided a decade ago that Totally was going to take on the world. I had two lengthy conversations with Tony over the last year. When we chatted most recently, I had at least survival on my mind, and I asked Tony to think about both the companies and his own legacies. We are addressing one of the humanity's greatest challenges right which is to feed a growing population over time within the planetary boundaries, and we are a part of that solution, which means that you know, we are at pride a solution to that, to change that food system totally. Like other hot startups, has been burdened by its own success. It created a new food category, oat milk, that invited big competitors onto its turf. Its popularity also meant it had trouble keeping up with demand, disappointing consumers who found themselves staring at empty store shelves. The company's stock and it's standing took hits, so how long can it really keep fighting? Every small business, no matter how bright it's prospects, needs great management. That was true of Otely, which ran through a series of CEOs as it built its business in Sweden. In two thousand and twelve, it decided it needed something more, somebody who could shake things up. That guy turned out to be Tony Peterson. He was definitely an out of the box pick. When I was a teenager, I thought I was going to be a pulp star sort of. So we met my friend when I was eighteen and we ended high school. The first thing we did was to buy this music studio. Um by no means a musician, but I love making music, so I thought I was going to do that. So you're super bowlad. So I know you're not a musician. Yeah right, so you so no, but Naivey, you had like hopes. Right. You may not know who Tony is, but I'm sure you remember his ad. It's like milk paid for You loves Tony popped up on tens of millions of TV screens sitting at a synthesizer in the middle of an oat field with a cart and of oatly singing really badly during the Super Bowl Well don't come, no No. Everyone seemed to hate that ad, just as the company expected. It had printed up T shirts and advanced saying I totally hated that only commercial. I mean, who does that? Odally does that? And Tony and his married band of pranx ers had burm ideas about why lots of people who work for totally consider themselves rule breakers, including Tony. Oldly was Tony's first corporate job. In other words, his first corporate job was as a CEO. How often does that happen? Prior to that, he was an entrepreneur running successful restaurants and retail businesses. You start to question the life you're living, right, and you want to achieve things in life besides just work. Tony was looking for a calling when someone came calling. A head hunter firm called me. I met them in Malma. I went to their office and actually had a company there. It was black and white and it was the picture of a factory and it said Oatley. I had no clue what that was. I just knew that I didn't want to run a factory for an American serial company, which I thought it was back then. He found out was actually Swedish. That was good, so he kept meeting with them. He didn't really want the job at first, then suddenly he did. The more I learned about it, I just realized that, hey, I mean, this is something that the whole world needs. You know. It is something that's probably relevant to night and nine percent of the population, but yet unknown to the nine of the population. Totally started in of all places, a Swedish lab run by a quiet food scientist named Ricard. As day. Ricard doesn't like to talk to journalists, but his brother Bjorne, a successful software entrepreneur, popped onto a zoom with me. He describes Ricard as a determined perfectionist, the kind of guy who winds up inventing an alternative to milk in a country that didn't really need an alternative to milk, at least not until people realized an alternative existed. And I would say the number one design criteria, over reaching everything else, was that it had to taste well. I mean, if it doesn't taste great, forget it right. And the Aussies were close knit family, so as Ricard was iterating trial and horror as they gathered at their family cabine in northern Sweden and kept experimenting with their recipe until it tasted just right, and then they took it to market. After their oat milk started selling, the Aussees formed a partnership with the known a Titan of the food and beverage industry, but that quickly soured due to what Ricard describes as the nun's infatuation with consumer testing and an aversion to risk. If you ever go out and ask consumers what they want, but you're already behind right, you're that's not a leadership position. If you want to be a leader, you don't ask consumers what they want. You surprised them. You give him something they didn't know they wanted. Yours a wise man. What he said smacks of an apocryphal Henry Ford quote. If I had asked people what they wanted, they would have said faster horses or even steve jobs. Customers don't know what they want until we've shown them. This all rings true to me. Great entrepreneurs chart their own courses, and that's exactly what totally would go on to do all the way to an initial public offering in the US. I didn't go into this thinking, you know, we're gonna do with them villion dollar i p O and in a few years and far from it. It was Tony Peterson who paved the road to that i p O. When he met Bjorn re Garden board members during his job interview. Growth was all they cared about, and Tony still didn't really know how to deliver growth honest, like, Hey, I have no clue. I gotta think I have an idea, and but I will like I'm a consumer, I've never been the food industry. But I have some ideas of how how he can do that, and I do believe it's achievable somehow, you know, but just give me some time. Can you believe that this company is asking this guy to deliver growth, and he's saying, I'm not sure how I'll do that. I'll give Tony props for raw honesty, but this must have been kind of a weird interview. Even Bjorn, who was rooting for Tony new Tony was a tough candidate to pitch. I could not present his restume to the board right. He was literally unsellable to the board. Tony had no idea how the food industry worked, and that, as it turned out, made him a great candidate and manager. He already knew how to sell things, and his lack of experience actually made him fearless. You don't really worry about sprinting past the big milk geezers if you don't know much about their business. Anyway, Bjorne convinced at least directors to take a chance and hire Tony precisely because he wasn't out of the box candidate, and Tony quickly went about reframing the board's expectations. Instead of saying he would hit growth targets in three years, he promised to do it in four. The board said fine, but had caveats. One was you can only operate in the Europe. At the other you can never go against cow's milk. Those were their restrictions. In short order, Tony went about blowing off these restrictions. I'll come back to that later. To help shake up things that totally, Tony recruited an old friend, John Schoolcraft, a veteran marketer. He made John's chief creative officer. John was just as unusual a newcomer to Oatly as Tony. John told me he didn't like working in house for companies and says he still doesn't trust most corporations. And here he was working in house for a corporation. But he was in on the joke. He renamed Otle marketing team. I kid you not the Department of Mind Control. How can you not love these guys. I think some people actually have taken that really seriously. What do they think they're doing? But it's just like, you know, us fucking around with with what we're what we're given. John was nobody's fool. He was completely serious about his marketing philosophy, being as human as possible. That meant making a lot of their marketing decisions around what they thought was funny. It also meant shredding bureaucratic layers, moving quickly and breaking things like one of the two rules the board had given them, the one that said, don't this big milk and its lovable cows lo and behold. When Tony and John Overhauled's website, they proclaimed their drink was milk but made for humans. We went out big, and I don't know, three four weeks later we got seved by the dairy industry. The lawsuit alleged that Oatly had sullied the entire Swedish milk industry by suggesting that there were healthier and greener alternatives to the stuff they were peddling, and the dairy giants pointed out what only was selling wasn't actually even milk. Tony and John were in Tony's office when the Bible sized lawsuit landed with a thunk on a desk. I started laughing. I just started laughing. I thought it was the funniest thing ever. I looked at It's like, what, it's a hundred and seventy four pages. It was. It was pretty think and John started to laugh and I was like, oh my god. All right, okay, let's see what that's going to take us. The lawyer came in and said, John, I want you to go through this entire lawsuit, and I want you to write me explanations to every line they object to, because I need to know what you were thinking, how you were thinking, how you wrote it, et cetera. And it become very less funny after that. I think they understood were aware of their weaknesses in the concept of Chw's milk, for sure, and they've always been aware of it, and they wanted to kill things at early stage. And usually when those things happened, companies back down because that industry is so big. The difference here was that we didn't back down. What they did is they forced us to become what I think we've become very good at, is any kind of adversity, we take it on as a new brief. So it was like they sued us, Fine, we'll take the lawsuit, we'll put it on the internet so everyone can read it, and we'll take out full page ads in all the morning papers saying the dairy industry feels really threatened. They hit us with this lawsuit. Big Milk prevailed in court, totally had to stop calling its product milk, and was ordered to stop disparaging the dairy industry. So maybe a big win for big milk during OSTI doesn't think so, especially since the lawsuit gave otally lots of free publicity. They lost their hearts and minds of the consumers. I think they learned that it's not a way forward. They just have to learn to be competitive and fight on equal terms. They can't keep competition through the court. True, and in fact, it lost a lot of the consumer followings that way, and there was the classic David versus Goliath. David was now ready for bigger battles totally wasn't just popular in Sweden anymore. It now had fans all over Europe. And Tony and John decided to break their board second rule by setting their sights across the pond to one of the world's biggest milk markets, the United States. That was such a like monumental turning point, and then it just started to get really fun after that. I'll bring you that story after the break. Okay, I'm back in my house again, and I'm going to try to trap my wife Devon in the kitchen high and I'm going to talk to her more about milk, and specifically about the memories you had of milk as a kid. You know, I remember these little comforting cartons of milk, either in blue and white cartons or red and white cartons that we would stick a little straw. And when I was maybe in kindergarten through second grade, at least maybe third and it was part of our lunches every day, and and it's a distinct part of my memories as a kid. Do you have those memories. I certainly remember the little cartons. I was wanted the chocolate milk, not the white milks, and like white milk, and I do remember hearing that it was the healthiest thing you could have. You have to have milk every day. And I don't remember getting a lot of milk to drink as a kid, but I do remember it like the school lunches, and I remember it for cereal. I never really liked drinking it though. Do you remember like it was healthy though? Like do you remember like it was cordy or healthy? Have milk. It's the only way you could have strong bones and you know, good eyesight and good skin. I mean you had to drink milk. That was what you did. What I didn't really knows a little kid was that great forces were at work making sure I got that milk including the president of the unit at it states, I want to say a few words this morning about a very important subject to us all, and that is milk. I've long been convinced that milk is an important aid to good health. This has led me to direct that milk be served in every White House meal from now on. That's JFK speaking in nineteen sixty two at a national conference on milk and nutrition. I mean, how often do you hear presidents going out of their way to sing the praises of food. I hope more and more children we'll be able to receive school milk and luncheon's in the day ahead. The coolest president of the jet set era, the same leader who worried about nuclear annihilation and winning the space race. He's also at the most boring conference imaginable, and he's hawking milk. My twenty one century years find that twentieth century speech to be alternatively hokey and charming. Everybody had clarity. Amrikans believed back then that milk was a power food for them and their kids. They made it a staple of school lunches. Milk was also marketed ubiquitously in the decades before and after JFK gave that speech, making it a fixture and consumers minds. Here's a TV at from the nineteen fifties. Oh, I'll command all night stuff ditched to drink at least three glasses of delicious Bardon's milk each day. Milk was at rare food that had become almost mythic in American life, nutritional legends and an industry had sprung up around it. Totally would be taking on all of that when it came to America. It would also discover that once it began trying to pop some of milk's balloons, it would become a target itself. To understand what toatally was up against, I needed to learn more about how plain old cow's milk came to be so celebrated. Here. Vitamins played a big role. The scientists who discovered vitamin B made milk one of his specialties, winning the allegiance of the dairy industry. They helped fund some of his research. The scientist was happy to return the favor, publicly praising milk as the greatest of all protective foods. Kendra Smith Howard is a history professor at Sunny Albany and has written extensively about milk. The notion that milk was a pure and complete food what at the time was called Nature's perfect food. Has sugars, that has proteins, it has fats, and now it also has this vitamin content. All of those components really helped put milk in a positive nutritional light in the first few decades of the twenties century. Kendra said this kind of research helped create a boom in milk sales. Washington also fell under milk spell. Dairy farmers were in almost every state, and that translated into political cloud and protection in Congress. Washington also put milk at center stage by including it in the federal school lunch programs it introduced in the nineteen forties. So that again adds a stamp of endorsement and familiarity with milk that not all products received, and so I think that also elevates milks sort of nutritional credibility in the eyes of many Americans. The U s d A also marketed milk as one of four basic and Essential food groups. I don't know how one white liquid makes for an entire food group, but the campaign worked whole milk consumption in the US sword in the first half of the twentieth century, but then began a steady decline after that as alternatives became more popular and as eating habits changed, Consumptions of all forms of fluid milk is now about a third of what it was at its peak. In to chat about the current state of the milk business, I called Paul Zimnisky. He's the executive vice president of Global Innovation at Dairy Management, Inc. A trade association that receives some funding from the government. He says the sational milk business still stands strong, and he compared it to another industry facing competitive threats. When you look at the automotive space right where you've had the evolution from like the F one fifty. Now you've got the Broncos coming in, you've got the electric cars coming in, But the F one fifty still drives the category. Flood milk is still households despite the massive innovation in the coffee space, massive innovation and water, and what about massive innovation and milk alternatives like goadly. I think everything is a competitor, but it's not a nutritional threat. Maybe that's the case, but milk so own nutritional value has never been as robust as the industry would have you believe. I turned to Marrion Nestle, a noted nutritionist and former public health professor at New York University, for her thoughts. You know, everybody kind of assumed that you have to eat dairy products, and that you have to have two or tree serving today of dairy products or you're going to be missing out on essential nutrients. But the idea that milk was an essential food was really not backed up by research. You can have a perfectly healthy diet without having dairy products at all. Is Totally any better? Some critics have complained that Totally is high in sugar and is not a magical nutrition drink. Totally thanks otherwise, and complains that some regulators even forbid it from promoting its benefits. We can't even its sweet and say that oats are good. We are not entitled to say that, even though that's true and that everybody knows it, we are not allowed to say even that. Now. We as a company, we conducted eight clinical studies so far that is related to the fibers. So we actually do have a claim in Europe stating that if you drink three glasses of Oatally, it's healthy for you. All of these disputed health claims aside, milk remains a huge market, with yearly sales of about twenty seven billion dollars. Competition for shelf space and grocery stores is fierce, with big retailers like Walmart Bottlings selling their own milk. When Odly came on the scene in the US just five years ago, alternatives weren't considered a realistic business for the milk giants, much less a competitive threat. Grocery stores looked at it in the same way. Odally decided it's best move would be to blow off grocery stores entirely. To learn more about what convinced the company to take that risk, I drove down to Millville, New Jersey, to an Oatly plant. There. It was on a quiet road, just off the highway. It wasn't at all what I expected. I grew up in northern Illinois and we would go on family trips to Wisconsin, so I'm used to seeing the big milk casks silos that you see it dairy farms. So from the outside this looks like sort of like a dairy farm, except there's no cows. There's no barns. There's no standard farmhouses or any other stuff that you see around old school farms. This is all brand spanking new stainless steel and warehousing. I walked inside and med Mike, Hi, I'm Mike, see you. Thanks for giving us your tony yeah pleasure in. Mike messrs Smith is at least president of North American Business, and I wanted to talk to him to understand how the oat Milk gets made. The story of how oatles David has been able to take on the big milk Goliath is still a hard one for Mike to wrap his head around. We're making several hund thousand liters a day. That was a number that, if you had asked me years ago, would have been beyond my comprehension, to be honest, because we started with literally ten coffee shops that were carrying our product. Back in I was the third employee in the in the US organization. I used to carry oat Milk around in my backpack, um around New York City, trying to get coffee shops to carry the product. Coffee shops, not grocery stores, because the real coffee gormands are in the shops, not the stores. And Mike, like his boss, Tony, knew they had to enchant barista's. Tony had seen that strategy in action once before. Back in Sweden, I had restaurants and bars, and how liquor companies are building their brand is behind the bars. That's how you build brands. Because advertising has been very limited, especially in Sweden, a liquor company wouldn't just spend money on billboards and commercials. They would go talk to the people serving the drinks, bartenders. They would convince bartenders that their product was the best, and bartenders would recommend their liquor to customers. In at least case, they targeted barista's instead of bartenders. We knew one thing that the barista community has such a high integrity when it comes to quality and what they want to serve. They simply want to make the best coffee ever, So you can't go in there and sell share. If you see what I'm saying, you have to sell the best. You can't you even tell them that I want to sell this to you. Don't think we could do knock on the doors and tell them, hey, if you want please try to stand let us know what you think about it. And we used people that were from this community to approach these coffee shops, and that's how we all started. That's where Mike came in. His team in New York City would fill their bags with outly cartains, get on the subway and visit coffee shops. And the key thing is that we weren't going in there to try to sell anything. There was a need, a market need for these high end especially coffee shops who have gone to extensive lengths of sourcing this incredible coffee from all these incredible origins, roasted to perfection ground for these drinks, and yet they had more and more people coming into their coffee shops looking for plant based options. And you know they don't want to sway milk on. The milk is too thin, it doesn't foam, it doesn't do justice. And so when you went in there, did they look at you like you guys were crazy? Like what was the pitch? I mean it was literally like you take the carton out, like we worked for this oat milk company, do you want to try it? And like you don't have big power point decks or binders of things, you don't have coupons. Literally the litmus test for success is take the carton. We'd order a couple of drinks and then they would try to say, wow, like that's better. This was the summer of there weren't any other oat milks on the market. Totally was really the only option out there. And I think those initial reactions with such a you know, before we had built factories, before we had done any of these other pieces, the validation of seeing the kind of immediate response from very educated, high barrier to adoption like customer base was thrilling for us. So the baristas were on board. Totally started being served in specialty coffee shops. The first phase of the guerrilla marketing was complete. The next phase is probably familiar to anyone listening in a major city like New York. Were Los Angeles, oly d started popping up in the strangest of places. The first thing we did is what we call like the Island of Misfit Toys strategy. Well that's John Schoolcraft again, the head of at least department of mind control. If you've never heard of the Misfit Toys strategy, you're not alone. The media agencies John spoke to were also confused. They're like, what it's like, what is the media that nobody wants. You got a guy down in the basement booking media and no one calls him anymore. So he's just sitting down there alone. And they were like, um, no one wants to buy the bus fronts, and so he said, okay, we'll take them all totally put advertisements on the front of nine thousand buses in New York City in l A. If the fronts of the buses in New York are different, you'll never notice them, but if you have them all. And there were thirty different headlines, and people walked around and collected them, like what's the next one, saying I'm I've seen that one. So, whether people were learning about totally from their local barista or watching the fronts of busses as they whizzed by, the company was building a customer base and it took off very quickly, way faster than we ever anticipated and were read out of open Milk. That was just the beginning of at least production was totally was growing incredibly fast, and it seemed like oat milk was everywhere, but it was also nowhere. They had incredible production snaffoos that would stifle its growth against competitors, but investors didn't necessarily see that as a problem at this point. Totally. It built a market for a product that didn't exist, and it was popular, So of course all signs pointed toward a natural next step taking this private company public. I'll bring you that story after the break. Okay, I'm ending into my kitchen for a third and five time at least for this podcast, not in my life, because we sort of live in our kitchen, but I'm coming in here again to grill my wife Devon. The thing I want to ask you about now is how you first became aware of totally, Like when did it land in your consciousness? I think I first heard about it right before COVID or right when COVID hit. I was always looking for a really good milk substitute, because for certain things, I just think you need something that's like milk, but I didn't want to actually buy milk. And did you talk to friends about it? Did you see it on store shelves? Did you become aware of it through ads? Like how did you become aware totally? Specifically? I think I saw it on the store shelves after a friend mentioned it to me. Actually think it was. My aunt mentioned it to me and then she said this was the best she'd found, and so I went and found it and I started using it. And then during COVID, I noticed it was really hard to find, and sometimes I would go to the store and it wasn't there, like there'd be a whole shelf and it would be empty. So I knew then to stock up every time I found it. Devin wasn't alone totally. Was getting a lot of attention by the time the pandemic hit, and it had some big time investors Oprah Winfrey, Natalie Portman, Jay z and the former CEO of Starbucks, Howard Schultz. They all backed ontly, but Ontally needed more capital to keep growing, so Tony decided to take the next step and go public. We need the proceeds to expand our our production capacities across these three continents. If you think about what we do, we'll build demand across three continents successfully, you know, multiple channels from niche to mass and generating a demand that and we had that we haven't been able to supply. That's Tony on Bloomberg TV on MA when at least I p O value the company at ten billion dollars. Tony was elated, but also cautious. This is just the beginning. This is this is the beginning of long, long journey and incredible journal and massive opportunity. You know. So I am so happy to sit here with you guys today and just you know, being where we are. But it is about and long term. Totally debuted at seventeen dollars a share. By the end of the day, the stock had jumped over twenty two dollars. A couple of weeks later, it reached what, in hindsight, turned out to be its peak nearly twenty nine. Let's take a minute to reflect on when all of this was going on. May You may have been preoccupied with the buzz of vaccine availability more than a year into the pandemic, but Wall Street was buzzing with I P O s. It was a record breaking year for companies going public. The market was bubbling in this gold rush. Yet Tony's visions for at least future seemed within reach, especially because investors were swooning over plant based foods. Totally needed more capital to take on the milk giants, and they were going to get it. It raised one point four billion dollars on I p O Day to work toward that goal. We're positioning ourselves to take a global leadership. This is Tony again on Bloomberg TV. We determined to lead this revolution and forward and it will evolve. You're right, it will evolve, and we are going to lead that. Do you know if you think about what we do here, beating the demand across the free continents, with the organization and supply and everything, we are positions to take this to the next level. Well, I feel pretty good about it, to be honest, Tony felt good about it. But the stock market is a fickle suitor. Over the next year, many young companies the market once adored fell out of favor. Totally was one of them. In May, just a year after that hot I p O Otally shares had plunged to three dollars and sixty six cents, not even enough to buy one cart and a Votely, the stock price has only gone down from there. Shortly before we published this podcast, the stock was hovering around two dollars a share. Some of that was beyond at least control. You have to remember we made the I p O hitting a series of macro events that was and still is unprecedented. I haven't heard of any other company with own production at that scale and growth rate making an I p O and then immediately hitting those types of events. Ever, there was quite a roster of macro events, a pandemic, putin invading Ukraine, soaring inflation, buckling supply chains. Despite those headwinds, Tony doesn't have any regrets about going public, but he has his work cut out for him. This was the platform for us to become a global brand, and the appeal was part of that. But eventually you have to be profitable, right You don't just want to run a high world company forever and not ever make money. You have to do that. Going public not only subjected only to the vagaries of the stock market, it invited a whole new set of big investors, some of whom improved controversial. The big private equity firm Blackstone and a Chinese state agency took stakes in only totally fans of the investments represented a betrayal of the company's core values. Blacks Own was seen as environmentally hostile, and China was seen as politically oppressive. Tony disagrees most small companies that want to go larger have to tap public markets with all of their complexities, including outside investors. None of that, he says, has disrupted Atle's mission. We can't live in an isolated, parallel universe, right, We live in this system. So this is about how do we bring everybody on board, how do we make everybody understand? But more importantly, what are the mechanism for change? Right? So to me, it's always about impact for us, it's also about education. What does sustainability mean? What can company do? And if we're not alone in this, but we are part of educating authorities and stakeholders about what is sustainability and how do you actually make an impact, which is the most important thing. Atal has had another challenge finnicky consumers. The truth is is that olt milk is no longer as like sexy as it was a couple of years ago when it first arrived. They are no longer the only oat milk at the supermarket. This is Dina Shankar. She covers food and agriculture here at Bloomberg, and she says that after the initial hype around totally, the market became saturated with different kinds of oat milk, and oatally couldn't keep up there was a time when people were reportedly anecdotally, you know, going from one coffee shop to the next looking for Totally. I don't think people are going to do that anymore, but especially because the coffee shop might not have only, but they'll have some omal and so you'll say, okay. Sure. Dina thinks Oatally felt short because they got too big, too fast and lost focus. The company was more obsessed with making sure people knew about Totally rather than ensuring there was enough. Oatly only captured about of the retail sales in the oat milk market, so only a quarter of the very same market it created. It. Every time a customer walks into the supermarket and can't get Totally and buy something else, they're losing a sale. So they're losing market share. They had the entire market, and then they have just been losing it ever since then. The clock is ticking to a certain extent on them. How long is it before investors and competitors make them fold. I wouldn't put like a deadline on Totally. What I would say is that Totally has benefited from being able to rely on the COVID excuse. Our supply chain problems are from covid our factory isn't up and running because of the pandemic. I think that that excuse is basically has pretty much run its course. By the way, meeting demand is antally only problem. As the company grew, it also came under fire for sometimes not being as environmentally friendly as it claimed to be. Wall Street Journal article recounted how local officials who live near Least New Jersey plant, we're outraged about how much wastewater the plant was producing, totally ended up trucking it's runoff out of the state for a while as a solution, and Mike mr. Smith told me the company has since gone out of its way to reassure the locals and now we've invested millions of dollars in that on site wastewater treatment facility and it's discharges directly to the city system with no issue. When I asked Mike about that Journal article, he didn't dispute its conclusions, but also pointed out how hard it is to start businesses from scratch, building things that didn't exist before. It's really hard, and I think that there can be elements of humility and transparency and trying to build something that you know it doesn't always go exactly as we plan, and we have to continue to push, so at least pushing forward. And it says it's finally sorting out its production problems. It forged a partnership with an experienced packaging company Yeah yeah Foods in an effort to streamline its operations. Maybe it'll even be well to get ahead of demand. The clock is certainly ticking, though. You see, most small companies get a lot of attention at their I p o s, but then disappear. It's a fact of life. When a company is successful, it's not usually because it stayed true to itself. Wall Street changes a company it has to. There's a ton of pressure from big investors and from the extra media attention. Oftentimes companies cave. They'll bring in plain vanilla people to run the company safely, which is all well and good for some playing vanilla companies, but that's not what makes Totally Totally. It's known for its eye catching cartons and its quirky ads for the department of mind control, and it's avoidance of bureaucratic barriers. Can everything that makes Totally fun and interesting survive. Wall Street can Tony. They are going to be challenges along the way, and we face criticism in the past. That's never detured us from the mission. What is teaching us is resilience. And no one knows more about the positives of this company than our own team, right, our wins, our successes, our benefits, what we actually do within the company, the pioneering approach we take to challenge throwing our way. You know, we're going to continue to have that approach, stay true to our mission and have true ambitions to try to do the right things, knowing that we will never be a perfect company because you can't be that, but to have genuine ambitions about wanting to do good and that is then converted to action that we're going to stay true too. And I know one customer who plans to stay true to Tony's Oat milk. So do you consider yourself a loyal totally drinker. Yeah, I do, and I'm not loyal to a lot of things, but this is the one thing that really works for me and I know what I'm getting when I buy it, So totally forever, totally forever unless they change the formula. Don't change the formula. What if it just can't stay afloat so to speak, in this brutal American consumer market. Is there not enough trouble in the world? Um, I don't know. I guess I'd keep searching for something else or find the next best thing, but it won't be the same. Here at crash Course, we believe the collisions can be messy, impressive, challenging, surprising, and always instructive. In today's Crash Course, I learned that being a quirky, daring pioneer can be a magical, exciting thing. Being a pioneer is also perilous. Your own growth and popularity can consume you, and holding on to your identity and your mission can be really, really hard. Let's see what oatly has in store for us. What did you learn? We'd love to hear from you. You can tweet at the Bloomberg Opinion handle at Opinion or me at Tim O'Brien using the hashtag Bloomberg crash Course. You can also subscribe to our show wherever you're listening right now and leave us a review that helps more people find the show. This episode was produced by the indispensable Anna Mazarakis and me. Our supervising producers Magnus Hendrickson and We had editing help from Samantha Story, Katie Boyce, Jeff Grocott, and Mike Nietza. Blake Maple says, our sound engineering and our original theme song was composed by Luis Gara. I'm Tim O'Brien. We'll be back next week with another Crash course