Chobani
Founded: 2005
Age of CEO: 42
Sales in 2012: $1 billion
Cups of yogurt produced each week: 30 million
Lesson: Food—even bland food—can be better.
The village of New Berlin in central New York sits on the banks of the windswept Unadilla River, 60 miles southeast of Syracuse. Main Street runs north to south through the middle of town, past a storefront church and the lone traffic light, which hangs above the intersection of Main and Genesee streets. There is one gas station, one pharmacy, and until recently, one restaurant, a cozy Italian joint called New York Pizzeria.
About seven years ago, Frank Baio, the proprietor of New York Pizzeria, was ringing up a purchase when a dark-haired stranger walked into the dining room. New Berlin’s population, as of the last census, was 1,028—and Baio prides himself on knowing all his customers. “So I went over and introduced myself,” Baio recalled the other day. “You know, to make him feel welcome.”
The stranger’s name was Hamdi Ulukaya. He was Turkish—a rarity in New Berlin. Ulukaya had grown up in a rural Kurdish region of Turkey, where his family ran a midsize dairy company. In the late nineties he’d emigrated to the States, and in 2002 opened a not particularly successful feta-cheese company. Now, he told Baio, he was in talks to purchase the old Kraft factory, out on County Road 25, and use it to produce strained, or “Greek,” yogurt.
Baio was skeptical. The closure of the Kraft factory, which had also produced yogurt, had devastated New Berlin to the tune of 250 jobs. Like many of the once-prosperous farming towns in the region, with their tired mansions and sagging silos, New Berlin was going to seed. Local kids were headed to the cities, dairy farms were closing down. Even if Ulukaya could get the plant back online and somehow dredge up a workforce, who would buy his product? “You figure that Greek yogurt was for people who look at their figures,” says Baio. “That’s not me. And that’s not really a lot of people I know, to be completely honest.”
Still, he liked Ulukaya personally, and Baio was happy when he decided to make New York Pizzeria a kind of second office. Every day—and sometimes twice a day—for four years, Ulukaya parked himself in a back booth, where he shoveled down slices of pie, worked the phones, and went over paperwork. “I don’t love to use the word, but I don’t know any other,” Baio says. “It was magic. Everything he said, it came true.”
In 2007, a year after Baio met Ulukaya, Ulukaya’s company, originally called Agro Farma, had five employees, most of whom had been former workers at the Kraft plant, and the company was deep in the red. By 2012, Chobani was the most popular yogurt brand in the United States, and Ulukaya was presiding over $1 billion in annual revenue. The 2013 figures are expected to reach $1.5 billion. As one analyst has noted, if you examined Chobani’s fiscal returns and “blocked out its name, you’d think it’s a software company.”
This past December, Chobani opened a million-square-foot plant in Idaho; the facility has helped serve as a bulwark to expand Chobani’s presence in the Midwest and West. (Between the Idaho and New Berlin plants, Chobani produces an average of about 30 million cups of yogurt a week.) Next up are Australia and the U.K., where Chobani already has footholds, and after that perhaps Canada. “We believe,” Ulukaya likes to say, “that the Greek-yogurt boom is just beginning.”
Hamdi Ulukaya is tall and slim, with wide eyes and a triangular face—big hair, broad forehead, tapered chin. He is the king of a yogurt empire that spills across continents, but almost all his employees call him by his first name. He owns a large estate near the upstate Chobani plant; at least once a week, he drives his Porsche SUV very fast (“I can produce the speeding tickets to prove it”) to the company’s Soho offices, where marketing and social media (Chobani’s Twitter feed has 65,000 often vocal followers) are managed. On the day I visited, a handful of tousled twentysomethings were clustered near the south windows, chatting amiably.
Opposite were a pair of chalkboards, emblazoned with inspirational quotes—Voltaire: “I have chosen to be happy because it is good for my health”—and a hulking fridge filled with Chobani yogurt.
When Chobani, which means “shepherd” in Turkish, launched, it offered six basic flavors, including strawberry and blueberry. As a progenitor of the Greek-yogurt craze, the company enjoyed a dominant share of the market—as much as half by some estimates. There was essentially only one other Greek brand on U.S. shelves: Fage, which is based in Athens. But Fage was typically sequestered in the specialty-foods section. In his very first deal with J&J Distributors, a company based in the Bronx, Ulukaya asked that Chobani be placed in the regular dairy aisle. In his recollection, there was some pushback from the grocery stores. “For a start-up, it’s very difficult to make that kind of request,” he told me. “It’s like, ‘Who are you to tell me where I should put this product?’ But we designed this product for everyone. Yogurt should not be a specialty item. It should be normal.” Eventually, the stores relented, and Chobani landed a spot next to Yoplait and Stonyfield Farms.
To found Chobani, Ulukaya had taken on remarkably little debt. He purchased the old Kraft factory with a low-interest loan from the Small Business Association, and even as demand for his product grew, he kept his focus primarily on a relatively narrow market—New York, New England. “I didn’t go crazy,” he said. “I didn’t jump into everywhere in the country. I just wanted to go in line with what we expected from sales and profits.”
As a result, a year after it launched, Chobani was already in the black. “There are two types of business models,” Ulukaya said. “People put together a whole team, and they start losing money until they make it. The other way is that as you’re making money, you add things to cover it. I chose the second one. And that asks for sacrifice. Not only you—everybody has to sacrifice.” Ulukaya even turned down offers from private-equity firms, which would have given Chobani the resources to expand more quickly. “I wanted to have the independence,” he said.
From 2009 to 2010, sales of Greek yogurt rose 203 percent in the U.S., while sales of traditional yogurt grew only 3 percent—this despite the fact that Greek yogurt, according to a report from Nielsen, had a 121 percent higher average price than its non-Greek cousins. (It seems entirely probable that Americans were drawn to Greek yogurt not in spite of but because of the higher price, which connotes quality and good taste.) By 2012, Greek yogurt accounted for 35 percent of all yogurt sales in the United States.
As the craze continued, competitors started cropping up, and smaller brands, such as the Seattle-based Greek Gods, grew increasingly popular; Fage is currently expanding one of its New York plants in the hopes of reaching output levels of 352 million pounds of yogurt a year. Yoplait and Danone, the largest yogurt-maker in the world, pose the greatest threats to Chobani. Both companies have debuted new Greek options in the past two years: Yoplait, which is owned by General Mills, with its blended and low-calorie options; and Danone, with its Oikos line.
Mintel, a research group, estimates that Oikos sales, bolstered by an expensive advertising campaign featuring John Stamos, increased 165 percent from May 2012 to May 2013, and the company now has 29 percent of the Greek-yogurt market. But Chobani, which effectively popularized strained yogurt in the States and benefits from being the most familiar brand, continues to hold on to its dominant share of the market at 39 percent.
When I asked Ulukaya if he ever sampled his competitor’s yogurt, he smiled. “When somebody makes a good-tasting, nutritious product, I say, ‘Good, I like that,’ ” he answered. “It gives me something to compare Chobani to—and it gives me the chance to think about how to improve. Unfortunately, the yogurt aisle hasn’t been that good.”
Not that Ulukaya is content to gamble on the gustatory instincts of consumers alone. In the past couple of years, for the first time, Chobani has invested in advertising, including a gauzy, orchestra-scored TV spot set in the verdant hills surrounding the New Berlin plant. It has expanded its offerings from the original wide-mouth cups to Champions Tubes (for kids) and squarish Flips, which allow consumers to blend yogurt with chia and hemp seeds, pistachios, and clover honey, among other ingredients. And Chobani recently won a bid to provide yogurt for school lunches in New York, Idaho, Arizona, and Tennessee as part of a yogurt pilot program being tested by the USDA.
Driving north from New York City, I saw the 200,000-square-foot Chobani plant from a great ways off—a bristling battery of stacks that leak steam over the adjoining farm fields of New Berlin. The factory employs over 1,200 people, many of whom work twelve-hour shifts three or four days a week.
In order to take a tour of the plant, one must wear black plastic steel-toe booties, earbuds, goggles, a snap-on plastic smock, a plastic hairnet, a neon-yellow vest, and—if you have even a smattering of facial hair—a plastic beard protector. All your parts—fingers, toes, stray hairs, hangnails—are sausaged into a prophylactic shield, lest they fall into any of the open vats or otherwise “contaminate the product,” as David Randall, a Chobani employee, told me on the day I visited. Randall is in his late forties, pale, blue-eyed, and unflaggingly earnest, a veteran of Frito-Lay and a couple of pharmaceutical companies. He’d joined Chobani only a few months earlier, but like everyone at the company, he spoke with glowing approval of the origin story. “Truly amazing,” he said several times.
I followed Randall out of reception and into the warehouse, which has the capacity to house 2.5 million cases of yogurt. On this day, it held a mere 1.8 million cases, or 20 million cups—something close, by my back-of-the-napkin calculation, to 4,050 tons of strained milk curd.
Randall suggested a scenario. “Let’s say we just stopped production because of a snowstorm,” he said. “We would probably be empty in about two days, because we sell almost as much as we make every day.”
We climbed up to where the milk was stored. The floors sloshed with liquid, and men walked in knee-high rubber boots toward us, pushing mops in front of them. The air was suffused with the smell of warm milk—an overabundance really, milk-smell times 3,000, as if the world’s largest barista were making the world’s largest latte in the room next door.
Chobani’s New York plant used 850 million gallons of milk in 2011; in 2012, it used far more than a billion. That milk is sourced from approximately 850 farms, the vast majority of which are located in New York State.
“Before Chobani, the dairy industry was perceived to be dying—a historical legacy and the least interesting agricultural effort in New York State,” Kenneth Smith, the executive director of the Cornell Cooperative Extension of Chenango County, told me later. Smith serves as a conduit between local farmers and the agricultural school at Cornell; as such, he has kept a close eye on the impact of the Greek-yogurt business.
“When Chobani came, it was like, ‘We need more milk,’ and all of the sudden dairy became an important part of New York’s future,” Smith added. “This lightbulb goes off, and [politicians] realize this is a really huge moneymaking business. It’s not just a burden. It’s a huge opportunity.”
Today the constellation of Greek-yogurt operations stretches from the shores of Lake Ontario all the way to the pastures of central New York—there is Fage, as well as a new Alpina facility in Batavia, which will make, according to company projections, 42 million pots of Greek yogurt this year.
But New Berlin remains at the heart of that boom. Chobani’s vertiginous growth here has created what a business-school professor might call a “halo effect”—a rippling, continually expanding circle of profit, which originates somewhere in the heart of the old Kraft factory and spills outward across the surrounding hills. The mayor, Terry Potter, has dedicated his second term to building out New Berlin’s downtown, which now includes a new Chinese restaurant. Dairy trucks rumble up and down the undulating roads day and night; locals have taken to tying up their dogs to prevent them from getting run over. The dairy operations around the factory pump so much milk to Chobani that one farmer told me, only half-jokingly, that he was mulling building a pipeline “straight downhill into the Chobani warehouse.”