Milk alternative maker Oatly has warned that production and distribution problems hit sales by $7m over the summer despite a surge in demand for its products. Shares in the Swedish oat milk producer plunged by nearly 20% on Monday after it said it expected further lost sales in Europe in the months ahead as it was “investigating a quality issue” which might force it to bin some products. Oatly said UK sales were $1m lower than hoped in its third quarter to the end of September because of driver shortages which delayed deliveries, while mechanical and technical issues at its US production plant in Utah had a $3m impact on sales, on top of $3m from Covid-related closures of hospitality businesses in Asia. It is the latest business to reveal problems from widespread supply chain issues as manufacturers try to keep pace with rising demand after the ending of coronavirus restrictions that have caused cost increases amid shortages of staff and raw materials while delivery infrastructure, from ports to delivery vans, have become congested. Oatly added that the pace of sales growth at new and existing retailers in Europe and the Middle East was “slower than we anticipated” because of the effects of the pandemic. Profit margins for the group, which attracted investment from Blackstone, Oprah Winfrey and Jay-Z last year ahead of flotation on the US stock market, were also affected by higher transport costs and expenses related to expanding its manufacturing site in the US. Oatly’s share price has dived almost 60% since its US stock market debut in May, amid concerns about its potential for growth amid heavy competition from big name brands such as Alpro and Danone. Oat milk is also just one of an array of milk alternatives which can win or lose favour depending on consumer interest. Toni Petersson, the chief executive of Oatly, said: “We’re pleased with our ability to continue to be a leader in driving growth and sales velocity for the plant-based milk category within our key markets. “This positive momentum was partially offset by temporary headwinds as we scale our global production capacity, particularly in Ogden, Utah, and as we manage through Covid-19 Delta-variant related restrictions and temporary foodservice closures in Asia. Despite this near-term variability, we remain very confident in our ability to meet the rapidly growing global demand for our products.” Despite the production issues, Oatly’s sales rose by almost 50% to $171m in the latest quarter but pretax losses widened to almost $41m from $9.8m in the same period a year before. Oatly said that amid growing demand for its drinks, it had produced 131m litres of oat milk, 77% more than the 74m litres produced in the same period a year before.