Transcript: Oatly Group Q2 2026 Earnings Conference Call

On Wednesday, Oatly Group (NASDAQ:OTLY) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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The full earnings call is available at https://edge.media-server.com/mmc/p/c7yrw58z/

Summary

Oatly Group reported a 15.2% growth in Q2 revenue, with constant currency growth at 12.7%, driven by strong volume growth and a positive mix.

The company raised its full-year revenue guidance to 8%-10% constant currency growth, up from 3%-5%, but maintained its adjusted EBITDA guidance towards the low end of $25-$35 million due to increased reinvestment.

Despite cost pressures from the Middle East conflict, Oatly Group continues to invest in growth, focusing on brand building and expanding distribution in retail and food service channels.

Strong performance in Europe and International markets was noted, with 18% constant currency revenue growth, while North America saw 5.9% growth, aided by new customer acquisitions and existing customer expansion.

The company is exploring strategic options for its China business, including a potential carve-out, to accelerate growth and maximize value.

Full Transcript

OPERATOR

Please stand by. Your meeting is about to begin. Hello and welcome everyone joining today's Oatly Group second quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star-1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance.

It is now my pleasure to turn the meeting over to John Baumgartner, Vice President of Investor Relations. Please go ahead.

John Baumgartner, Vice President of Investor Relations

Good morning and thank you for joining us today. On today's call are our Chief Executive Officer Jean-Christophe Flatin, our Global President and Chief Operating Officer Daniel Ordonez, and our Chief Financial Officer Marie-Jose David. Please review the cautionary statement regarding forward-looking statements and other disclaimers on Slide 3, which are integrated into this presentation and include the Q and A that follows. Please also refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also on today's call, management will refer to certain non-IFRS financial measures including adjusted EBITDA, constant currency revenue, and free cash flow. Please refer to today's release for a reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. In addition, Oatly Group has posted a supplemental presentation on its website for reference. I'd now like to turn the call over to Jean-Christophe.

Jean-Christophe Flatin, Chief Executive Officer

Thank you, John, and good morning, everyone. Slide 5 features our key messages. First, our second quarter capped a very successful first half, with strong volume growth and positive mix driving our revenue momentum. The results reinforce the success of our growth playbook and, notably, innovation that solidifies our identity and appeal as a full beverage company. The positive impact of our execution is evident in our expanded distribution in both retail and foodservice outlets.

Second, we are driving improvements in our strategic mix of channels, customers, and products to enhance our underlying profit margin. As expected, the second quarter included headwinds from cost pressure due to the conflict in the Middle East. In addition to absorbing this financial impact, we are choosing to invest for growth while continuing to improve our structural profitability. Third, looking at our full-year guidance, we are raising our revenue guidance while remaining confident in maintaining our outlook for 2026 adjusted EBITDA.

With what we know today, our full-year outlook for EBITDA takes into account absorption of increased costs, including from the Middle East conflict, which remains unchanged relative to our expectations communicated in April. Our plan also reflects continued investments for further growth. Turning to Slide 6, here you can see our solid second quarter scorecard for important KPIs. Our revenue grew by 15.2% and 12.7% in constant currency. Our gross margin reached 33.9%, which represents an improvement of 140 basis points compared to last year.

Our adjusted EBITDA was positive 0.4 million and 0.2% of our net sales. This is an improvement of 4 million versus last year, despite reinvestment and the absorption of headwinds, including from the Middle East conflict. Evolving momentum and a resilient bottom line show progress in building a stronger growth model in a profitable manner. Finally, our free cash flow in the quarter was a negative 0.6 million, which is an improvement of 4.6 million versus last year.

Our business plan remains fully funded, and we maintain focus on achieving positive free cash flow, a milestone that will be reached through pulling on all available levers, including continued improvement in the P and L and working capital. Slide 7 reiterates our focused areas for the rest of 2026. As Daniel will soon outline, we continue to see positive traction from our investments in brand building. As results exceed our expectations, we remain focused on executing our growth playbook.

Second, we continue to navigate the uncertainty and volatility created by the conflict in the Middle East. I'm pleased to report that our proactive approach has helped us manage the related impact on our business in the second quarter. Costs matched our expectation, and based on what we know today, the pressure that we expect in the second half of 2026 remains consistent with our initial outlook communicated in April. The global cost impact has been largely fuel-related, either directly in logistics or indirectly through areas such as packaging.

As a reminder, we are utilizing this disruption in part to evaluate and improve the flexibility in our supply chain. Finally, as it pertains to China, our strategic review is ongoing, and we intend to complete this review prior to the end of the year. We continue to evaluate a range of options, including a potential carve-out. Our goal is to accelerate growth and maximize the value of this business. We will update the market on our progress as necessary.

In closing, Slide 8 summarizes our guidance. In 2026 we expect stronger conversion from the rollout of our refreshed growth playbook. We now expect to drive constant-currency revenue growth of 8% to 10%, up from our prior outlook for growth of 3% to 5%. Further, we expect to maintain our ability to mitigate the cost impact of the Middle East conflict. Despite this inflationary impact and growth-fueling spending, we believe we are on course to deliver adjusted EBITDA towards the low end of the range of 25 to 35 million, consistent with our outlook from last quarter.

With that, Daniel, over to you.

Daniel Ordonez, Global President & Chief Operating Officer

Thank you, JC, and good morning, everyone. I will start my discussion on Slide 10 as we enter the second half of the year. Our confidence remains strong on the results brought by the methodical deployment of our growth playbook. Over the past two years, we have focused on the barriers to consumption, creating new occasions, and driving consumer relevance. We remain well positioned to serve the lactose intolerant community and those who are primarily environmentally conscious in their choice.

However, these segments represent only a portion of our addressable market opportunity, as shown by the success of our growth playbook across European markets. Established or New? Multiple new doors are opening as Oatly pivots to become a full-on beverages company, which is relevant to a much broader population and across multiple new occasions, still anchored on the same brand uniqueness, generational relevance with taste, health, and sustainability, and at the core, our expanding portfolio of flavors and formats drive differentiation in a beverages market undergoing significant change as customers are eagerly renovating their menus and shelves to be more relevant in meeting the rising expectations of younger generations. Closing the loop, relevance is manifested again through the brand's iconic live events and digital presence. So first, let's discuss our thought leadership in setting global beverage trends on Slide 11, as we did in Berlin with Oatly on the Rocks in October last year. Last month, we hosted 250 key players from the food and beverage industry at the Aftertaste event in the Flatiron District in New York.

Attendance included members of the media, trend-setting leaders in coffee and beverage, key commercial partners, cultural opinion leaders, and creators. In addition to sharing some of our newest flavors and exciting drinks innovation, we hosted forums that explored how new generations are changing the coffee culture, social media's influence on beverage development, and other discussions at the forefront of this space. In the following weeks, the event generated over 70 million media impressions and reached over 9 million people online globally.

The event was one of our largest brand investments in North America thus far, a clear manifestation of what local relevance with global scale means for the Oatly brand. Building on these, on Slide 12 you see the latest iteration of our recipes lookbook that is hitting this summer in full. So far, we have introduced 63 new drinks, many of which have become category standard, like, for instance, Coconut Matcha Cloud, Salty Banana Split, and the Matcha Jello Shot.

They are open to the public, representing the backbone for Oatly's progressive innovation, and we're highly confident in our ability to continue to surprise and set the industry space. On Slide 13, you can see how, prompted by the lookbook and with the recent expansion of our iconic barista offering, notably with the launch of cold foam, Oatly becomes increasingly relevant to the growing refreshment and mixology movement, significantly expanding the creativity of our food service partners.

The most promising drinks make it all the way into the retail space for in-home consumption, as seen on Slide 14 with the recent successful launches of popcorn, churros, and coconut flavored barista, as well as the expanding matcha range. This model explains why we are growing penetration most strongly with younger consumers, and we view this demographic as a strong foundation for multi-year growth. On Slide 15, you see a concrete example of the cultural relevance of the Oatly brand at global scale with the recently announced second iteration of our partnership with Nespresso, present in over 220 boutiques across 26 markets during the coming months.

Next, let's turn to a discussion of our regions to link our strategic initiatives with market success in the Europe and International segments. On Slide 17, second quarter constant currency revenue grew by 18% driven by very strong volume growth. This is particularly impressive as we lapped volume growth of 9.4% in last year's second quarter. Contributions are balanced from established and expansion markets and included growth in household penetration across our longstanding markets.

At a category level, growth in retail takeaway for plant-based beverages has remained solid in absolute terms, up high single digits driven by volume and far above the rate of GDP growth. In our case, the story is even better. Oat milk is outgrowing other plant-based milks, and Oatly is the main driver, with strong market share gains across all markets. We believe the growth opportunity across this segment is promising, and I'd like to emphasize the reasons why we are outperforming the market on Slide 18.

First, we are engaging the broader beverages industry and seeing strong traction as taste, refreshment, and health combined are particularly relevant to the young. Secondly, we're steadily evolving our strategic choices on channels and portfolio to be decisively accretive to our profit margin and volume, together with a pipeline of new retail and food service customers that underscore our outlook for continued strong growth. Finally, the cautious choice we made to decisively expand our geographic footprint in multiple new markets is paying off handsomely, as they continue gaining critical mass with growth rates that keep accelerating, as we see with an impressive 82% growth year on year for quarter two. On Slide 19, I would like to emphasize the brand's cultural relevance, being part of the local communities in key cities and generating disproportionate global impacts thanks to a seamless brand playbook and efficient social media strategy. Two very concrete examples. In Mexico City, our Losers Cafe consoled the fans of losing World Cup teams through free drinks such as the Lost Matcha or Dulce de Defeat, reaching so far more than 600 million people globally.

In Amsterdam, our Bite Soup paired some of Europe's best coffee roasters with Oatly-inspired signature drinks in one of the bicycle capitals of the world. It not only delighted the local consumers, but has reached so far over 100 million people globally. Slide 20 shows the power of our playbook, as we see now significant market share and penetration gains in Sweden, our home market. Brand penetration in Sweden is three times higher than any other key plant-based market, like, for instance, the UK, and is home to the most affluent plant-based consumer there is.

Growth in Sweden had been flat since JC and I joined back in 2022, but 18 months following the execution of the beverages playbook, we're now seeing increasing household penetration, notably among younger consumers. More trial and stronger velocities are driving accelerating growth in our share of milk alternative shelves, up 10 percentage points since 2023, and we have also gained nearly 2 percentage points of category market share in the past year.

This gives us confidence that there is no such thing as a mature market. Slide 21 shows how our beverage stands drive significantly bigger standout in retail display, geared to both ambient and chilled temperatures for at-home or on-the-go consumption. This impactful presence reflects our importance to retailers to better engage shoppers. Shifting now to North America. On Slide 23, I'm very happy to report that growth keeps accelerating. In the second quarter, the segment constant currency revenue grew by 5.9% year on year, driven by positive volume growth of nearly 2%.

This performance clearly exceeds the milk alternative category and includes decisive incremental mix effects at the retail market level. The macro backdrop remains challenged by tight household financial conditions and the saturation of protein-fortified products. Retail takeaway of plant-based products continues to trail traditional dairy. In this context, our growth keeps accelerating strongly thanks to the relevance of our portfolio, steady distribution gains, and improved execution.

So, as we have seen in Europe two years ago, macro category dynamics can't be explained by the retail performance alone, especially when that doesn't represent the new beverages playbook. We are conscious and at the same time optimistic about our ability to change this dynamic. On Slide 24, we see that in retail measured channels we have reached our near record high market shares in both oat milk and plant-based beverages. Let's look at our out-of-home channel performance on Slide 25.

As previously discussed, we see growing consumer and customer excitement in this space, which is way closer to culture and, for us, defines more clearly the underlying category dynamics. I am very pleased to report that momentum from new and existing customers will soon eliminate the headwind from the customer who was previously our largest in this channel. At the end of the second quarter, the related year-on-year headwind to sales has substantially ended, and we have made significant progress diversifying our customer base.

This will provide greater balance and resiliency for the channel in the future. On a like-for-like basis, our go-forward food service portfolio continues to grow strong following the beverage playbook, with drinks adapted to the local consumer, posting an exceptional 18% growth this quarter. As we discussed before, our confidence is not simply anchored on our growth in the channel, but the fact that we see an identical evolution in the beverage space driven by preferences of the younger generations.

As you see on Slide 26, we're driving significant penetration gains, all stemming from capturing these young generations of consumers. So, not enough yet to turn the category around in retail, but we're confident it is a matter of persevering in execution moving forward. As you see on Slide 27, we expect to gain share of category distribution and new consumers from the full expansion of the new range. We also expect to build breadth and depth across key customers in the mass, club, and natural channels.

This builds on already solid year-to-date volume growth in the retail and club channel. A growing appeal among retailers is particularly evident in off-cycle product uptakes. Retailers will list products outside of the traditional category reset window starting later this year, a significant sign of momentum for our brand. Lastly, shifting to Greater China on Slide 28. Although macro headwinds persist in the food service channel, our second quarter growth was encouraging.

Constant currency revenue grew by 5.6% and included volume growth of 5.5% on a positive offset from the retail channel. Technes sales largely recovered from last year's decline of 6.6%. As JC mentioned, we intend to complete the strategic review this year. To wrap the business update, I would like to focus on the trajectory of the key business metrics on Slide 29. Strong growth continues to drive a direct positive effect on cost absorption and profit margin.

Put simply, steady progress on our model to drive profit growth through demand generation is essential to future value creation. And with that, I will now turn the call over to Maria Jose, MJ.

Marie-Jose DAVID, Global CFO OATLY

Thank you, Daniel, and good morning everyone. Slide 31 summarizes our solid financial delivery for the second quarter. Aside from strength in Europe, this quarter marked our second consecutive period of positive volume growth in North America following declines throughout 2025. In Q2 we grew net revenue 15.2% and 12.7% on a constant currency basis. Gross margin was 33.9%, an increase of 140 basis points compared to last year's Q2 and the result of efficiencies including facility optimization, volume absorption, productivity improvement, and favorable mix.

Q2 adjusted EBITDA was a positive 0.4 million and an improvement of 4 million relative to last year's Q2, although the magnitude of year-on-year improvement was smaller than Q1's 8.7 million. This year's Q2 absorbed incremental headwinds from a full quarter of cost pressure due to the Middle East conflict and the anticipated phasing of brand reinvestment. As a reminder, our investment in the growth playbook has been more concentrated in Q2 than the expected average for the year.

Considering the strong growth in household penetration and consumption, we are pleased with the return on our brand investment. We also remain very pleased with the underlying trajectory of structural profit improvement. I will now provide more detail about our financial performance. Slide 32 shows the bridging items of our revenue growth. Volume grew 11.2%, price/mix increased by 1.5%. Foreign exchange was a 2.5% tailwind compared to 7.5% last quarter.

Moving on to slide 33 and the year-over-year gross margin bridge, which shows the 140 basis point improvement. This improvement is explained by 210 basis points from fixed cost absorption and supply chain efficiencies, 30 basis points from product and channel mix, 10 basis points from foreign exchange currency tailwinds, and partially offset by a negative impact of inflation of 400 basis points. Slide 34 shows the quarter two year-over-year improvement in our adjusted EBITDA.

The 4 million improvement was driven by a 13.7 million increase in gross profit, partially offset by a 9.7 million increase in SG&A and overhead in SG&A. The increase is driven nearly in equal parts by customer distribution costs, which are linked to sold volumes, and an increase in branding and advertising spend, in addition to foreign exchange headwinds that are offset by cost-cutting initiatives. As a volume-driven business, our cost structure scales with growth and we remain focused on delivering profitable growth over time.

Slide 35 shows segment level detail. Europe and International grew net revenue by 18% in constant currency. However, brand reinvestment and cost inflation related to the Middle East conflict limited year-on-year growth in segment adjusted EBITDA to 0.7 million, yet still achieved a solid adjusted EBITDA margin of 17.5%. North America's revenue grew 5.9%. The segment adjusted EBITDA increased by 3.1 million to 0.7 million, identical with last quarter, as we proactively manage incremental headwinds from brand investments and costs related to the Middle East conflict.

Greater China constant currency revenue increased by 5.6%. The increase was explained by growth in the retail channel that more than offset strong competition and weak macros in the out-of-home channel. The segment reported negative 1.5 million in adjusted EBITDA in Q2. Corporate expenses were 1 million lower year over year as our continuous focus on increasing efficiencies has more than offset foreign exchange headwinds. Turning to our cash flow on Slide 36, I reaffirm that our business plan remains fully funded and we remain focused on bringing the company to positive free cash flow.

Following the positive inflection on our adjusted EBITDA in Q2, free cash flow was a net outflow of 0.6 million, which is 4.6 million better than last year. The year-on-year improvement results from growth in EBITDA, smaller capital expenditures, and benefit from net working capital. The improvement exceeded our expectations and reflects our efforts to structurally improve profitability and cash generation. We believe that our progress is increasingly evident and see opportunities for further improvement.

Across all levels of cash flow, we maintain our expectation that we do not anticipate positive free cash flow for the full year 2026, given the impact of phasing factors in the second half, including larger inventories to support volume growth as well as capital expenditures. Turning to our 2026 outlook on Slide 37, as Jean-Christophe mentioned at the top of the call, we are raising our outlook for constant currency revenue growth from 3% to 5%, now up to 8% to 10%.

Although our outlook implies year-on-year growth deceleration in second half, it is a result of a harder comparison relative to first half. On a reported basis, considering recent FX rates and assuming no change for the rest of the year, we estimate FX to add approximately 200 to 250 basis points to net sales, a stronger tailwind relative to our prior expectations for a benefit of 100 to 200 basis points. For adjusted EBITDA, we maintain our outlook to deliver towards the low end of the existing range of 25 to 35 million and including absorption of the cost impact of the Middle East conflict.

Based on what we know today, our expectation for related cost pressure is unchanged from our forecast in April and we are pleased that proactive management has allowed us to maintain the EBITDA guidance range that we provided pre-conflict in February. We expect support from favorable reinvestment phasing in SG&A and sustained improvement in gross profit from revenue growth and operating leverage. Our price/mix is offsetting cost pressure from the conflict in the Middle East and the tight market for freight in North America.

As a reminder, our outlook is provided in the context of what we know today and set against elevated macro volatility. Our fundamentals remain strong and we continue to execute against our growth playbook while maintaining agility to adapt to external factors. Last, our guidance for capex remains unchanged in a range of 20 to 30 million for the full year. This concludes our prepared remarks. Operator, we are now prepared to take questions.

OPERATOR

Thank you. If you would like to ask a question, please press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star 1 to ask a question, and we will pause for a moment to allow everyone a chance to join the queue. We'll take our first question from Camille Garawala with Jefferies. Please go ahead. Your line is open.

Camille Garawala, Analyst at Jefferies

Good morning everybody. Well, I guess good afternoon, guys. So well done on the revenue front and the volume front. If we could maybe break down a little bit, Daniel, and some of your comments on the drivers of that growth, but specifically is it bringing in new users? Is it existing users consuming more? Is there maybe a pricing component to it? So just sort of like more of a breakdown on what is driving some of the acceleration in your revenue growth would be helpful.

Daniel Ordonez, Global President & Chief Operating Officer

Hi Camille, great hearing from you. Thank you for the well done. That's certainly the sentiment here. Agree with you, we see momentum getting stronger. The specific answer to your question, is it existing or new? It is certainly both in both regions. If I focus in North America and in Europe and International, it's existing and new. It's existing consumers and new consumers, it's existing customers and new customers, and it's existing, I would say, countries and new countries.

That's the kind of, in a nutshell, the balance that we see between existing and new. Now giving you a bit more color on both regions, Camille, we see growth accelerating. If I start with Europe and I take a couple of minutes, accelerating after two strong consecutive quarters of growth, volume-driven growth with mix on top. And we're lapping, I mean in this quarter in particular, we're already lapping an almost 10% volume growth in 2025. So we're really seeing incremental demand.

And we also went fully back to this dynamic where the Oatly growth brings oat milk growth on top and certainly outweighs or outgrows plant-based in general. So plant-based, by the way, is in solid high single digit growth. So outlook positive in this region in Europe and International. Why? Going back to your point about existing and new, we see relevance of the beverage new portfolio with focus on new use occasions, again new, that allowed the taste strategy to lead this reframing of the space, coffee, that now is full-on beverages with solidifying mix effect.

And then the other thing that is working really well, as you saw with 82% growth in Europe and International, is the new markets gaining, maintaining the growth but gaining in critical mass. So this concludes Europe and International, Camille, with a very nice flywheel and we always insist 70% of penetration growth ahead of us. The users that still don't adopt, haven't adopted the category. If you allow me one more minute, unpacking North America for you and your colleagues on the call, very encouraged with the progress we have done. Still step by step, two key dynamics here: again very strong, as strong as in Europe, dynamics in out of home at the back of the identical consumer strengths, coffee, flavors, tastes, signature drinks, et cetera. And this segment now is one quarter of the total revenues of this segment and counting.

So we're very excited about that and I'm glad not having any questions about legacy customers here. But we are nicely lapping all that legacy effects. And then on top of that, and that's my final remark for you and your colleagues, in the retail space, still soft but clearly outperforming and gaining penetration again. Gaining penetration, gaining share, gaining share of shelves, and gaining penetration with very strong velocities and new TDPs already in the making and much more to come in the remaining parts of 2026, but also the early parts of 2027.

That's the summary on the drivers, Camille.

Camille Garawala, Analyst at Jefferies

Very useful. Thank you very much.

OPERATOR

Thank you. We will move next with Max Gumport with BNP Paribas. Please go ahead. Your line is open.

Max Gumport, Analyst at BNP Paribas

Hey, thank you for the question. You had another strong quarter of top line momentum and you've meaningfully raised your top line outlook for the year. And it seems like the costs associated with the Middle East conflict remain unchanged from your estimate in April. So just looking for more color on why your EBITDA outlook was not raised today. It seems like it's likely largely due to increased reinvestment. If that's true, can you talk a bit more about that increased reinvestment?

Thanks very much.

Jean-Christophe Flatin, Chief Executive Officer

Thanks a lot, Max, for the question. Great to hear from you. JC speaking here. Let me unpack our EBITDA guidance for you, and I will split it in three inputs. First, we are clearly harvesting the demand-generated growth of margin, and we do that both through volume growth and positive price/mix effects. We are confident that this momentum will continue in H2. So that's the first part of the equation. Second, when it comes to the Middle East conflict impact, we continue not only to monitor but to absorb it.

As I said, it's mostly on logistics and packs, and our full-year estimate remains in line with what we have said. Practically, that means that when you think of Q3 and Q4, we expect a Middle East conflict impact that is broadly in line with what we had in Q2. And finally, because we are confident in our beverage playbook, because we see this momentum, we have decided, despite the Middle East conflict headwinds, to consciously and carefully reinvest behind the goals in Europe and International in order to fuel the success.

How are we doing that? These choices are done meticulously, market by market, channel by channel. And of course we will calibrate these choices going forward based on our overall profit delivery equation. From a pure phasing standpoint, you heard MJ say in her remark that probably Q2 was the strongest of these growth reinvestments and therefore you can expect them to continue, but probably on the slightly lower end. And by the way, we continue to monitor them.

So when I group these three factors together, as a net impact in an environment that remains super volatile and unpredictable, we choose to be conservative and to confirm our expectation to deliver adjusted EBITDA towards the low end of the range of 25 to 35 million.

Max Gumport, Analyst at BNP Paribas

Okay, great. Very helpful. I'll leave it there. Thanks very much.

Jean-Christophe Flatin, Chief Executive Officer

Thank you, Max.

OPERATOR

Thank you. We will move next with Andrew Lazar with Barclays. Please go ahead. Your line is open.

Andrew Lazar, Analyst at Barclays

Great, thanks so much. Appreciate it. I was hoping maybe to get into a little bit more detail on some of the drivers of growth in North America because obviously you're seeing pretty solid growth despite the category remaining weak and despite still in the quarter having been lapping some of the loss of a foodservice customer. And then also maybe just a little bit on what is going on with the oatmeal category specifically, even though obviously Oatly is outperforming.

Thanks so much.

Jean-Christophe Flatin, Chief Executive Officer

Thank you, Andrew. I will try my best not to repeat myself, but if I do I apologize up front. How to bundle... So the drivers of performance were clearly outperforming the market: market share, share of shelf, velocities, all the classic metrics of how we measure success in terms of our competitiveness, the strength of the brand, the resilience of our portfolio. Remember, as we are lapping, we have fully lapped portfolio delisting. Right. Ninety-eight percent of the— I hope you appreciate I'm giving you more level of detail now.

Right. Ninety-seven, ninety-eight percent of our portfolio is clean beverages, all with strong velocities. That's one driver. Then customer base. You see we are just clean and neat. So moving forward, what we see, the drivers of category growth—we see two things that make us feel very optimistic about the outlook. Number one is the out-of-home performance. And I know you asked about retail, but we insist out-of-home is where the category is created, and that is where it's, you know, giving us...

We have growth at the level growth rates that we see in Europe with the exact identical dynamics. Some of the innovations may be slightly different, but we see the same dynamics. The second one is penetration. You saw the chart of penetration, especially on Gen Z. So we are recruiting new consumers into the brand and into the category. And of course, I will pause there because you see why in aggregate that builds up to soft category, and I cannot comment about the other competitors in the fields.

Right. But you see movements there that are perhaps not helping with the mathematics, and that's why, controlling the controllables, we are obsessively focused on executing. And then, before moving into the outlook, I have another very good data point here to provide, which is our share of overall oat milk GDP is now 22%, up from 17 last year. We generate 30% of the oat milk category sales and growing, so we have significant opportunity for further share of shelf gains.

So as we said before, we are engaged in a retail—old traditional-school—retail wake-up call for the retail space to adopt what we see in the dynamics on out-of-home. And we have every hope that the new portfolio—when you see what's happening now, and that's my last data point—the off-cycle uptakes in retail, which mean normally you will start getting the new distribution, new TDPs coming in February 2027, you will see them coming in late in Q3 and Q4 already.

That gives us hope—or I would remove the word hope. That is a proof point of the relevance of the portfolio we're bringing in front of consumers and the velocities that they see could be coming. That's pretty much the double click on the question I'd answer to Camille at the beginning, Andrew. Let me know if that's okay.

Andrew Lazar, Analyst at Barclays

Yeah, thank you for that. A quick follow-up would be anything of note on just the sort of the competitive environment in retail oat milk in North America that's worth sort of calling out, just because you are picking up, as you mentioned, pretty significant share of shelf and market share. I didn't know if there were some that were, whatever, de-emphasizing their competitiveness in some way or changing how they're thinking about competing in the category.

And if not, that's fine too. But just curious. Thank you.

Jean-Christophe Flatin, Chief Executive Officer

Thank you, sir. Two data points. First, I will insist with our velocities, but we see—if you see our highest-ever shares, first, that is telling you something, right? So it's both execution/distribution plus velocities gives you that ever-highest share. I think it's 31-something for oat milk. It's the highest ever, and we're really close in it to be, in the near future, number one. Right. So that's number one. And number two, hey, I'm not going to quote other brands by name, but we all see the same data, right?

And some relevant brands losing significant share. I don't want to quote numbers because you're better at mathematics than me, Andrew, but we're taking the lion's share—of that very, very significant lion's share—of those dynamics. Right. So we expect to take share. But I would like to come back to the beginning of your question and Camille's, which is we're not here only to take share. Take share is good because it means the brand is up there and the velocities are there.

We're here to grow this category. And I would like to go back to 22% penetration of oat milk in the U.S.—there is an ocean for us to grow this category and multiply growth and multiply value creation. That's our obsession.

Andrew Lazar, Analyst at Barclays

Thank you.

OPERATOR

Thank you. And once again, that is star N1 on your telephone keypad if you would like to join the queue. We will move next with Dara Mohsenian with Morgan Stanley. Please go ahead. Your line is open.

Dara Mohsenian, Analyst at Morgan Stanley

Hey guys. So just wanted to expand on that last point you had mentioned on shelf-space opportunity—clearly accelerated North American momentum from a top-line perspective. You mentioned some of the drivers behind that. Consumer strength also gives you more shelf opportunity going forward. So can you give a bit more specifics there, both in terms of existing accounts, the shelf-space opportunity this might afford you going forward? And also, are there new partner opportunities that are emerging for you as you look out to 2027?

Daniel Ordonez, Global President & Chief Operating Officer

Yes. I mean, we've got—you know our ACV numbers, right? We're up there. You know, I think when JC and I walked in, we were at 32%. We are, you know, we're closing into 50s, which means that we have made significant progress in terms of presence in most accounts, believe significant. Without penetrating the least accretive accounts, we have significant headspace to grow in ACV. We have significant growth opportunities in clubs as well, which qualifies as a non-measured channel in which we're doing pretty well.

So, you see, I prefer not to go into specific details or names here, but we have significant opportunities on TDPs and ACV.

Jean-Christophe Flatin, Chief Executive Officer

If I look at 2027, it's more TDPs than ACVs. And I'm giving you a bit of a hint—the emphasis is more, and this is why the TDPs and not ACVs. I go back to the root cause of the wake-up call to the retail, the traditional retail space, which is portfolio. Right. The mother of all opportunities for this category is to adopt the new beverage playbook—the new beverage dynamics, the dynamics that Gen Z is enjoying in North America at the moment when they go to a foodservice account.

That's what we need to see in this old and traditional space. And that's portfolio. And therefore, when you look at where we are in Europe, what we call the taste-driven portfolio, this is what progressively you will see the different accounts adopting in North America. And then we chose not to make a specific remark today, but we are super excited, Dara, on how in the U.S., and as well in Europe, the search and the uptake for gut health and fibers seems to be significantly increasing.

And as we are an oat milk company that comes from the good of oats, we see a significant opportunity there. Nothing to announce today, but stay tuned because we have exciting stuff coming up in the next few months.

Dara Mohsenian, Analyst at Morgan Stanley

Great, that's helpful. And then I just wanted to get a bit of an update on the cost side. Obviously more reinvestment this year looks like it's working with the revenue yield you're getting from that, although sometimes revenue upside can lead to more reinvestment also, so there's a bit of a chicken-and-egg dynamic there. Just as you think and look out to 2027, do you expect generally to increase the pace of investment in advertising spend over time?

How do you think about that conceptually? And also, as part of that, just as you look at your pipeline of productivity, maybe give us an update on your progress in 2026, but also some of the key priorities from a productivity standpoint as you look out to 2027.

Jean-Christophe Flatin, Chief Executive Officer

Thank you, Dara. First of all, I think far too early to discuss 27, so I'll focus on 26. And the first point is volume is clearly yielding cost improvement for us on both sides of the Atlantic, and it's volume absorption, but it also allows us to bring more efficiency in the system. Of course, why you don't see that fully panning out in our gross margin or EBITDA is because of the Middle East conflict impact we have been quoting. So what you see at the moment is really the net between these two pictures.

Where are we? We are pleased and confident about the delivery of our productivity improvements, and they continue along the same lines that we have been pursuing since four years, since Daniel and I joined the business, which is simplification, lean asset model, and continuing to push efficiency and quality at the same time across our supply network. So not the place to go into infinite details, but just to let you know: do we have a plan? Yes. Is that yielding what we expect?

Yes. Do you see the full picture of that? Not yet, because of the Middle East impact. And we believe in continuous improvement—I will end up there with that philosophy—which means of course we have a permanent pipeline of improvement projects that keep going and will continue in 2027.

Dara Mohsenian, Analyst at Morgan Stanley

Great. Thank you.

OPERATOR

Thank you. And at this time there are no further questions in queue. I will now turn the meeting back to John Baumgartner for closing comments.

John Baumgartner, Vice President of Investor Relations

Thanks, Nicky. And thanks, everyone, for your participation today. Feel free to reach out with any follow-ups. Have a good day. Thank you. Thank you.

OPERATOR

Take care. Bye bye. Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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