We like to think competitive advantage comes only from R&D developing a hot new product, but the reality is that competitive advantage can come from many places if one actively hunts for it. While a new product feature is the most obvious area of derived competitive advantage, it can also originate from creating a superior supply chain, a more efficient distribution system, a better cash flow, enhanced credit management, or in the following story, superior market positioning. Watch how Oatly milk creates a competitive advantage by finding an exclusive market position while avoiding competition in a very crowded market.
Oatly milk’s breakthrough wasn't about product innovation. Their competitive advantage came from identifying an un-owned market position and moving the conversation to where incumbents were weak. Here’s how they did it…
When Oatly milk hit the plant-based milk market, it was already a crowded space. Soy milk was mainstream, almond milk was already established not to mention rice milk, coconut milk, hemp milk, etc. The shelf space for plant-based milk products was crowded. Additionally, each of these products claimed a similar market position all based on attributes like “dairy free”, “lactose-free”, “vegan friendly” and “low calorie”. They all looked so similar consumers had difficulty distinguishing any meaningful differences. Newcomer, Oatly, risked being seen as a “me too” unless they did something different. What they did was brilliant.
Semantics is key. Previously established plant based “milks” positioned themselves as milk substitutes, i.e. what to drink if you can’t drink dairy milk. Oatly framed their product as a milk “replacement”. The difference was subtle but important. “Dairy replacement” caused environmentally conscious consumers to pause and ask themselves, “Should I be consuming dairy products at all?” Oatly positioned itself as a replacement to dairy.
Secondly, Oatly didn’t target the supermarkets where all their competitors lived but rather they introduced Oatly into the specialty coffee shops and to the baristas offering Oat milk as a dairy replacement in your morning latte. Oatly foamed well, steamed well, and delivered a dairy-like experience that almond and soy milk couldn’t match. Coffee shops became both a distribution channel and a credibility engine allowing consumers to experience the difference in their cappuccinos. By the time consumers saw Oatly on store shelves, they had already experienced the product and trusted it.
Thirdly, Oatly leaned hard into the sustainability message. All the other milk alternatives made claims of “low calories”, ”vegan friendly”, “lactose free”, etc. and added “sustainability” as a side benefit. Oatly zeroed in on sustainability with “Your everyday choices can have a different environmental impact."
What can Oatly teach us about strategy and competitive advantage:
-
Find a unique position: Competitive advantage can come from more than just new attributes. Oatly’s message as a replacement for dairy caused consumers to question if they should consume dairy at all. This changed the competitive landscape leaving Oatly alone as the only dairy replacement product. -
Beachhead customers matter: Oatly targeted specialty coffee shops which allowed consumers to try out oat milk without having to risk a full purchase. It also helped that it foamed up well for barista’s and tasted nice in coffee which served up a unique experience. Bold positioning is the only positioning: “Your everyday choices can have a different environmental impact”, as opposed to “Oh by the way we’re also environmentally friendly”. Oatly’s positioning challenged consumers to make a better choice.
Most enterprises believe they lose in the market because their product isn't good enough, but markets often tell a different story. Products that win are the ones that occupy the most valuable position in the buyer's mind. What are you doing to find a unique market position?