Oatly announces closure of Singapore facility to align with global supply strategy

Oatly Group AB (Nasdaq: OTLY), the Swedish oat drink giant, announced on 18 December 2024 the closure of its Singapore manufacturing facility.

The decision, part of the company’s asset-light supply chain strategy, is aimed at improving cost structures, optimising capacity utilisation, and reducing capital expenditure.

Chief Executive Officer Jean-Christophe Flatin praised the company’s supply chain improvements over the past two years, including enhanced efficiency and reliability. He emphasised that the closure supports Oatly’s strategic goals for growth and profitability.

“This action capitalises on collective improvements and strengthens our ability to have the right amount of capacity, when needed, while being efficient with capital and costs,” Flatin stated. “The continued simplification of operations will sharpen our focus on execution and drive consistent, structural profitable growth.”

Closure details and financial implications

The Singapore facility, opened in collaboration with Yeo Hiap Seng in 2021, represented Oatly’s first foray into manufacturing outside Europe and North America. It was originally projected to produce up to 60 million litres of oat milk annually, with oats sourced from Sweden.

Oatly announced that the closure, pending lender approvals, would shift the region’s production needs to existing facilities in Europe. This is expected to improve capacity utilisation across Oatly’s Europe & International segment.

The company estimates that the closure will result in non-cash impairment charges of approximately US$20–25 million in the fourth quarter of 2024. Restructuring and exit costs are projected to incur an additional US$25–30 million in net cash outflows through 2027, accounting for anticipated proceeds from equipment sales. These costs will be accrued in the fourth quarter of 2024, with more details to follow in Oatly’s earnings call in early 2025.

Impact on staff and collaboration with Yeo Hiap Seng

TOC understands that the closure will lead to retrenchments affecting staff from both Oatly and its Singaporean partner, Yeo Hiap Seng.

Oatly told CNA that 34 staff members in Singapore will be affected by Wednesday’s announcement.

This will take place “through a phased approach over the coming months”, a spokesperson said.

“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 added.

In 2021, the two companies had jointly invested S$30 million in equipment and the facility, marking a significant milestone for Singapore’s high-tech manufacturing aspirations.

The collaboration also highlighted Oatly’s expansion into Asia, supported by high-profile investors such as Oprah Winfrey, Jay Z, and Howard Schultz. The Senoko Way factory was hailed as a strategic move for Oatly’s supply chain, bringing oat milk production closer to Asian markets.

Future prospects and market outlook

Oatly’s strategic pivot to an asset-light model reflects broader industry trends prioritising flexibility and cost efficiency.

By consolidating operations, the company seeks to enhance its competitive edge in the Asia-Pacific region while maintaining growth momentum in Greater China, a segment that has shown significant improvements since its separation from the rest of Oatly’s Asian business.

The decision to close the Singapore facility underscores the challenges and strategic considerations of global supply chains in a competitive, capital-intensive sector.

While Oatly has reaffirmed its commitment to profitability and operational excellence, the closure highlights the dynamic shifts in manufacturing strategies for global food and beverage brands.

Oatly plans to provide further insights during its next earnings call in early 2025.