Oatly taking its vegan milk substitute public

Private equity has a place at the table, and so do Oprah and Jay-Z. Food giants such as Nestlé are scrambling to get a foot in the door. There are implications for the climate. There are even geopolitical rumblings.

The unlikely focus of this excitement is Oatly, producer of a milk substitute made from oats that can be poured on cereal or foamed for a cappuccino. Oatly, a Swedish company, will sell shares to the public for the first time this week in an offering that could value it at $10 billion and exemplify the changes in consumer preferences that are reshaping the food business.

It is no longer enough for food to taste good and be healthy. More people want to make sure that their ketchup, cookies or mac and cheese are not helping to melt the polar ice caps.

Food production is a leading contributor to climate change, especially when animals are involved. (Cows belch methane, a potent greenhouse gas.) Milk substitutes made from soybeans, cashews, almonds, hazelnuts, hemp, rice and oats have proliferated in response to soaring demand.

"We have a bold vision for a food system that's better for people and the planet," Oatly declared in its prospectus for the offering. The company's shares are expected to start trading Thursday in New York.

To justify its frothy valuation, Oatly has to convince investors that it can dominate a market where there is already a lot of competition and where big food conglomerates are just beginning to deploy their formidable resources. Nestlé, the world's biggest producer of packaged food, unveiled its own milk alternative this month, made from peas.

Oatly cultivates an upstart image with packaging art and a logo that looks hand-drawn. It advertises that it is "like milk but made for humans." But the company is more than 25 years old and is backed by some serious money.

The interest of heavyweight investors is confirmation that vegan food has gone mainstream, but it could also make it harder for Oatly to maintain its anti-establishment image. The company faced a backlash from some fans after Blackstone led a $200 million investment in Oatly last year. Stephen Schwarzman, Blackstone's CEO, was a steadfast supporter of former President Donald Trump, who has maintained that climate change is a hoax.

Oatly said it hoped Blackstone's investment would inspire other private-equity firms "to steer their collective worth of $4 trillion into green investments." Blackstone's backing also helped lend Oatly credibility on Wall Street. And there was no sign that Blackstone's involvement slowed Oatly sales, which doubled last year.

Oatly's image benefited from a roster of celebrity investors, including Oprah Winfrey, Natalie Portman, Jay-Z's Roc Nation company and Howard Schultz, the former CEO of Starbucks. All have some connection to the plant-based or healthy-living movement.

Oatly declined to comment, citing regulations that restrict public statements before an initial public offering.

Oat milk is part of a larger trend toward food that mimics animal products. So-called food-tech companies such as Beyond Meat have raised a little more than $18 billion in venture funding, according to PitchBook, which tracks the industry.