USA: The $700 Million Yogurt Startup

Christopher Steiner, Forbes magazine

In a scant four years, Hamdi Ulukaya has built something that even Silicon Valley types should covet: a $700 million business that’s profitable, dominant and growing at a furious clip.

Even more incredible: Ulukaya makes yogurt.  YOGURT. The stuff comprised of milk and culture.  This is the ancient food that must be produced, packaged and shipped to grocery store chains who, if they feel like stocking their shelves, finally disseminate it to consumers.  It’s perishable (like software rot, but worse).  And the yogurt market is competitive, stocked with old stalwarts such as Yoplait, Dannon and Fage, the king of Greek yogurt before Ulukaya showed up.

Ulukaya, in short, is the Steve Jobs of yogurt.  That makes Chobani, of course, the Apple of Greek yogurt.

Ulukaya got Chobani got off the ground in 2007 with the help of an SBA loan. Between then and now, Chobani became the largest yogurt maker in America.  It started with Ulukaya winning over upstate New York shops.   Then came regional chains, then New England, then national coverage.  Chobani became one of the primary engines in the great American discovery of Greek yogurt.  Ulukaya could barely keep up with demand.  Sometimes he couldn’t.  His yogurt plant in New Berlin, NY used to see one milk truck a day.  Now it sees 75.

Zero to $700 million in four years.  That’s a story that Silicon Valley has only seen a few times.  And Silicon Valley scales.  Yogurt doesn’t.  Well, not easily, anyhow.

Groupon, the fastest growing company ever, got to $700 million faster, but, as any snarky tech pundit will tell you, the Chicago deals site isn’t yet operating in the black.  Chobani, by most indications and according to Ulukaya, is firmly profitable.  Chobani has taken no investor money, instead building on cash flow and conventional bank loans.  Making yogurt at this scale makes the production of software look easy.  Don’t think so?  Would you like to try your hand scaling up a base software product that already had a small but faithful legion of users? Or would you rather try and grow a popular boutique dairy into a national powerhouse, negotiating the whims of retail chains, consumers and dairy farmers?  Do you want to figure out how to deal with 3 million pounds of milk a day?   Option A, please.

I recently chatted with Ulukaya about the improbability of what Chobani has accomplished in four years.  As a startup founder and a generally curious person, I found his story fascinating, not unlike something knit out of the tech world.  (Other than the glaring fact that we’re talking about yogurt, of course.)

Here’s some of the salient nuggets from our talk in Q & A form; startup founders will find Ulukaya’s five tips at the bottom of this piece transfer well from yogurt to tech:

CS: You bought an old yogurt plant from Kraft for pennies on the dollar in 2005.  What did you do for those two years before Chobani launched?  How hard was it?

Ulukaya: You go from some days when you’re smiling and you’re thinking you’re going to make this thing rock—to the next day when a pipe breaks, the yogurt doesn’t taste right and your costs look too high.  As a founder, you have to learn to keep your eyes on an ultimate goal.  If you lose sight of that goal, you have to get out.   I always saw the goal.  It was always there in my head.

CS: Surely somebody has come across your path looking to buy Chobani?

Ulukaya: We’ve said no to almost everybody you can think of.  We’re having fun.  I’m going to be here a long, long time.  I’m not somebody who is going to build something for a few years, sell it and then go off and just have fun.  That’s not why I did this.

CS: What gave you the idea to start a Greek yogurt company?

Ulukaya: When I moved to the U.S. from Turkey in 1995, I did not move here to make yogurt.  I came from a family of farmers who made cheese and yogurt, but that was the furthest thing from my mind at that time.  I came here for education, to learn English, to learn business.

My father visited me here in 1998.  He talked the whole time about how mediocre the cheese is in America.  He told me that I should make cheese, good cheese.  That gave me an idea, but I blew it off.  I would not move to America to do what my family did in Turkey, I thought.

CS: But you changed your mind, obviously.

Ulukaya: Yes.  In 2002, I began making feta cheese.  I supplied local New York speciality shops.  A few years later, I heard that Kraft was selling that yogurt plant, which was 100-years old.  I went over to take a look, with no ambitions of buying the place, but then I began to put together a vision.

I had always wanted to make yogurt and I had always thought the yogurt in America was, well, horrible.  I thought if I could make something better, people would immediately take to it.

CS: There are parallels and advice that’s valid to anybody growing a business, yogurt, tech or otherwise.  What are your main tenets to starting and growing something successfully?

Ulukaya: There are five main things I focus on:

No. 1:  Keep your product simple.  Know what you do and do it better than anybody.

No. 2:  Invest in your core.  For us, that’s our yogurt plant.  We have the biggest best plant in the U.S., maybe in the world.  We’ve invested $220 million in taking that plant from a capacity of 50,000 cases to 1.4 million.  It’s the backbone of what we do and we treat it that way.

No. 3:  When you market your business, know that can fool almost nobody anymore.  There is too much information available to anybody who wants it.  Be real.  People can tell—or easily find out—when you’re not.

No. 4:  Focus on profit.  I run my business like a mom and pop store.  Cash is everything.  Without it you can’t increase production and it’s hard to be innovative.

No. 5:  Lead as an example.  If you make yogurt, go to the plant.  Work with your people; if you want people to work on Sunday, be there next to them.

Christopher Steiner is a co-founder at Aisle50, a Y Combinator company, and a former senior writer at Forbes magazine.