Chobani is one of the most interesting food companies operating in the world today. Founded in 2005 by Turkish immigrant Hamdi Ulukaya, Choabni practically invented the Greek Yogurt category. In just 7 short years, it has reached over a billion dollars in annual sales. This pace of growth is typical of successful technology businesses such as Google and Facebook, not companies in traditional industries such as food manufacturing. What makes Chobani’s accomplishment even more amazing is the fact that Ulukaya took no outside investment. After taking a $700,000 loan to get started, he still owns 100% of the company. We’ll get to why this may be critical to the food industry’s future later on.
We recently spoke with Chobani’s marketing and PR team to learn more about the company and where it is headed. We met with Peter McGuinness, an ad agency veteran who recently joined the company as chief marketing officer, and with Laura Herbert, who heads Chobani’s PR department. Our meeting took place at Chobani Soho Café, a sit-down restaurant that offers various yogurt “creations” in a hip NY location.
Fooducate: Tell us about the Chobani Cafe. Are you copying from Apple’s playbook trying to create an aspirational brand? (One of the first Apple Retail Stores is located 2 blocks away.)
Chobani: In phase 1 of our company, which is over now, we focused heavily on manufacturing and ramping up capacity. Chobani caught the other yogurt companies by surprise and had a head start, but they are much bigger than us, and are now investing heavily in Greek yogurt.
Which brings us to phase 2, where marketing and brand building are key to Chobani’s continued growth. Chobani Soho is a yogurt bar, where we can showcase Greek yogurt creations. All dishes start with plain Chobani yogurt, to which we add either a savory or a sweet combination of ingredients.
Fooducate: How much more can the Greek yogurt category grow?
Chobani: The yogurt market is a $7 billion dollar opportunity in the US alone. Greek accounts for $2 billion, so there is a lot of room to grow. Although Greek yogurt is at 50% of the market share for yogurt, we believe it can grow to 75%. We want people to think of yogurt as something that can be enjoyed in different day parts, not just breakfast.
Fooducate: You’ve been the media darling for most of the company’s existence. However, in the past year you have had several issues to deal with, for example mold in some of your product batches. What happened?
Chobani: Even with the best safety practices, at the scale that we manufacture, things can go wrong. We rectified the operational issues very quickly. We also learned that we need to be better about communication with the public when things go wrong. In a way, this was a wake up call for us to step up our game.
Fooducate: What about the acid whey issue? (Acid whey is the liquid runoff that is strained from yogurt to make it “Greek”. The sheer amount of this waste product has turned it into an environmental issue).
Chobani: We’ve actually found ways to recycle this byproduct by working with local farmers who include it in their feed.
Fooducate: Why isn’t there any organic version of Chobani yogurt? It seems like a natural expansion of your mission around “natural ingredients”.
Chobani: We have just announced an organic offering that will be available later this year. This is not a trivial product to make. Sourcing organic at scale is a challenge because there is not enough supply of organic milk in America.
We had similar challenges when we started out and decided to source milk only from cows not treated with growth hormone rBST. At the time, only 4% of cows were untreated. We offered farmers a higher price for their milk to compensate for their higher costs. Today hormone-free is up to 37% of the milk supply and growing. We believe organic will grow as well.
Fooducate: Do you see Chobani expanding beyond yogurt?
Chobani: Anything is possible. An internal motto for the company is “Better Food for More People”. Our 4 tenets for food are: nutritious, delicious, natural, and affordable. This is not trivial to achieve.
Fooducate: Regarding “natural”, you recently launched a 100-calorie yogurt that uses stevia extract. While stevia may be natural, its extraction process is laden with chemicals. Other ingredients such as inulin and colorings don’t seem to fit with your natural mantra.
Chobani: The light segment is huge, about 20% of the yogurt category. We have to be there. If you compare Chobani to competitors, we don’t use artificial sweeteners such as aspartame or sucralose. We don’t use artificial fillers either.
Fooducate: Plain yogurt is just a fraction of your overall sales. Why not use your market leadership as a springboard to educate and encourage the public to buy more plain yogurt and add their own fruit or sweetener?
Chobani: We would love for more people to enjoy plain yogurt. Consumers prefer the taste and convenience of flavored yogurt. Two of the 4 new organic options will be offered as plain.
Fooducate: What about reducing the overall sweetness of flavored yogurts? Look at what Honest Tea has done in the iced tea category (half the sugar of regular iced tea, no zero-calorie sweeteners added).
Chobani: We are continually working on product innovations, but cannot comment specifically on your suggestions.
“With great power comes great responsibility” said 18th century French philosopher Voltaire (oh yeah, Spiderman said that too). There is much to fix in the food industry, but many of the powerful companies stand to lose from change. If Coca Cola really had the public interest at heart it would stop selling sugar water and shut down.
Chobani is in a unique position to challenge norms and innovate in the right direction. In a short time, it has has grown to become big and powerful, for the most part selling healthy products. With 100% ownership of the company and no greedy shareholders to appease, long term thinking should prevail. A $100 billion Chobani doing right can set ripple effects throughout the entire food ecosystem. Much rests in the hands of Hamdi Ulukaya and his inner circle of advisors.