#7 How Hamdi Ulukaya Founded the Multi-Billion Dollar Yogurt Brand Chobani

  • Post category:Billionaires Series
  • Post last modified:February 1, 2023

Hamdi Ulukaya is the owner, founder, and CEO of Chobani, the number one brand of strained yogurt in the United States.

Chobani is a variant of the Turkish word for shepherd “çoban”.

Hamdi Ulukaya

Hamdi built and grew Chobani into a billion-dollar company in just five years.

He became a billionaire in 2013 and his fortune amounts to $2 billion as these lines are written.

Find out how growing up on a dairy farm in Turkey has led Hamdi Ulukaya to build one of the biggest yogurt brands in the world.


Origins

Hamdi Ulukaya was born in 1972 in a small village in the eastern part of Turkey.

He is Kurdish, which is an Iranian ethnic group native to Kurdistan.

Kurdish-inhabited area by CIA (1992) box inset removed.jpg
Kurdistan. Wikipedia.

Hamdi grew up in an entrepreneurial family. His parents operated a small dairy farm where they made yogurt and cheese.

Since their flocks were their only source of revenue, they were gone half of the year to tend to and herd them.

At 18 years old, Hamdi moved to Ankara, Turkey’s capital, to study political science.

He left Turkey for the US in 1994 after protesting against the government’s oppression of the Kurdish minority.

He moved to New York and enrolled in an English course. Three years later, he moved to Albany where he studied business at the University of New York in Albany and took a job on a farm.

At the beginning of the 2000s, Hamdi’s father came to visit him in the US.

After tasting the local cheese options, he persuaded his son to import the family’s cheese and sell it in New York.

Hamdi wasn’t convinced so he first imported a small volume. He sold it without problems, so he opened a wholesale plant and began a wholesale business.

Unfortunately, the company wasn’t as prosperous as he had planned. Selling the cheese turned out to be difficult, and two years later, Hamdi barely broke even. His feta cheese company had 40 employees and only $2 million in sales.

He recalls this period as being the most challenging one of his life.

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The Valley of Despair

In 2005, Hamdi Ulukaya learned in the mail that a small dairy factory belonging to Kraft Foods was for sale. It was located 100 km away from his feta cheese plant.

It was far, but Hamdi hated US yogurt, so he made it himself for his own consumption.

When he saw the factory, he thought he could make yogurt for everybody else.

He seized the opportunity and went to visit it.

After his attorney advised against buying the plant, he applied for loans from the state and bought it.

This detail, in appearance insignificant, turned out to be crucial for Chobania: Hamdi never got any investor.

He grew the company with government and private loans that he refunded with profits. To this day, he remains the sole owner of Chobani, which enables him to do whatever he wants with the company.

After he bought the factory, he brought over to New York a Turkish yogurt master to create the perfect recipe.

They worked together for two years and tested (and tasted) hundreds of recipes.

In order to make some cash meanwhile, Hamdi manufactured US yogurt for other companies.

When they finally found the right mixture, Hamdi was ready to sell.

Since he had no money for ads, he focused on designing packaging that would help his brand stand out.

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The Reward

Now that the yogurt was made, Hamdi could sell it.

He credits his success to three decisions he made at the start.

First, while his product was considered to be premium yogurt, Hamdi wanted Chobani to be accessible to everyone.

He refused offers from specialty and gourmet stores and focused on mainstream supermarket companies, insisting that the yogurt be placed in the dairy aisle, next to US yogurt.

Second, Hamdi thought very hard about the price.

While US yogurt sold for less than a dollar, European yogurt sold for $3 to $5. He strived for a price that would enable him to break even if he sold 20 000 cases per week (a relatively low number) and set it at $1.5.

Finally, Hamdi had to find a way to get grocery stores to sell his yogurt. Traditionally, food companies launch giant ad campaigns and pay supermarket chains to sell their products in their stores.

But Hamdi had no money.

So he shipped his first crates of yogurt to a small grocery store in Long Island, New York, and offered to pay the product placement fee (called slotting fee) with…more yogurt.

He also promised to pay the slotting fee if his product turned out to be successful. It was the end of 2007.

The store asked for more yogurt after just seven days. The market had spoken: it liked Chobani.

From there on, Chobani didn’t struggle with finding customers – it struggled to produce enough yogurt.

Soon, they needed to expand the factory but had no money to do so. So they went around the country and bought used equipment that sold for much cheaper. For example, they bought a straining machine for $50 000 that would sell new for one million.

Chobani grew fast and Hamdi began receiving calls from investors telling him he’d fail if he didn’t take their money and let them advise him.

The more meetings he took, the less willing he was to accept external investments.

While he knew that bigger established brands like Danone and Yoplait were going to come after him, he wanted the company to be profitable as soon as possible, so he remained the sole owner of Chobani.

That enabled him to get more loans from banks and fuel growth.

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Expansion

Once Hamdi got money to grow his company, he focused on increasing sales.

The first action he took was to offer free samples in grocery stores.

Then he and his team reached out to bloggers and built social media presence to be in constant contact with customers.

He managed to build momentum and information started spreading that Chobani was delicious.

In 2009, the chain stores Stop & Shop and ShopRite began selling Chobani and by June of that year, Hamdi sold 200 000 cases per week.

A couple of months later, he signed with BJ’s Wholesale Club and Costco to have his yogurt distributed.

This growth enabled Hamdi to set aside $7 million for marketing he planned to spend when his competitors would launch their own Greek yogurt.

When they did, he went to buy a container and tasted it.

It was so disgusting he went to buy another one to make sure it was the actual yogurt.

It was.

He laughed and never used the $7 million. With the competition out of the way, he could focus on growth.

His yogurt was so good that he just needed people to taste it once to get them to buy it.

In 2010, he sent a food truck to give out free yogurt containers to people in the entire country.

In one year, they distributed 150 000 containers.

That same year, he began to add more products.

In 2011, he bought Bead Food, an Australian dairy producer, and started selling Chobani in the country.

In 2012, he built an $88 million facility to expand his New York factory.

The same year, he built another $450 million factory in Idaho and invested $100 million every year.

He opened an R&D center, a cafeteria for employees, and more production lines for different types of yogurt.

Chobani doubled in sales every year until 2013, the same year Hamdi became a billionaire.

He 2019, he began selling dairy creamers and oat-based products.

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Business Philosophy

Hamdi Ulukaya is not like any other ultra-rich leader.

First of all, he pays his employees a much higher salary than other companies. He also gave them a 10% stake in the company.

Then, he implemented a series of social services, like 15 weeks of paid maternity leave when his employees have children.

Hamdi makes it a purpose to help others create better lives for themselves. He has given grants and financially supported local communities multiple times and paid many’s outstanding debts.

One day, he gathered all of his employees and told them that success could lead to arrogance and make them fail.

He then personally gave them permission to “punch him in the face” should he change his behavior and focus on profits instead of people.

For the 10th year anniversary of Chobani, he gave one free container to every American.

As he was looking for more employees to hire, he realized there were none besides immigrants that had no driving license, no English skills, and no yogurt-making skills. So he hired instructors, drivers, and translators and hired these people.

Today, 30% of his workforce is made out of refugees and immigrants. He offers them free English classes.

He is also engaged in helping refugees, making donations to a wide array of different NGOs.

He received 40+ awards and honors for his business success and philanthropic involvement.

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Conclusion

Hamdi Ulukaya’s story is a classic business tale.

From finding an opportunity to going through the Valley of Despair and becoming successful at the end, this story is the blueprint of virtually every entrepreneurial success.

What I particularly like about Hamdi Ulukaya is that he thinks for himself. He doesn’t have an MBA and I don’t think he’s a genius like Nguyen Thi Phuong Thao either.

But he looks at the problem in front of him with logic and without ideology. That’s why he didn’t take investors’ money, and how he filled the gap in the market.

Chobani is also proof that one can grow a multi-billion dollars brand without treating employees like slaves.

Hamdi continues to invest in communities which doesn’t make him poorer, but richer.

As we can see, growing a business isn’t so much about the idea. Hamdi sold yogurt, but he could have sold anything else as long as the product was better than the competition.

What mattered for him to succeed was the execution.

Would Hamdi have succeeded had he not brought over the Turkish yogurt master? Would he have succeeded had he sold yogurt in specialized shops? Would he have succeeded had he taken investor money?

Likely not.

Deciding to sell yogurt was the easy part.

Executing and selling the yogurt was the difficult part.

Ideas are dumb. They don’t help you succeed.

Execution does.

For more billionaire stories, head to auresnotes.com.

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Sources:

Wikipedia

Forbes

Les Echos

Hbr

Concordia

Crunchbase

Thoughteconomics

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