The $700 Million Yogurt Startup

http://www.forbes.com/sites/christophersteiner/2011/09/08/the-700-million-yogurt-startup/

by Gaussian • 15 years ago

221 89 15 years ago

stephenhuey2• 15 years ago

Maybe I should do something like that instead of software! What about the cheese market in the United States? Americans are branching out more and more from the limited kinds made here, so it seems like a worthwhile business venture might be to start making some of the European kinds we import.

sammyo• 15 years ago

From the small cheese manufactures I've seen it requires a long term love of the process and a resource, something like a family farm without a significant mortgage. The markup on artisan cheese seems pretty incredible.

rdtsc• 15 years ago

Not a bad idea. But, I don't think there is great demand + a shortage of cheeses. Many grocery stores already have "gourmet" sections of "fancier" cheeses. If there was any increase in interest I would imagine they would be the ones detecting that, and jumping to capitalize on it. Some branches in metropolitan areas, do and have expanded those sections, for example.

For cultural reasons Americans simply don't seem to like cheeses that are not bagged, shredded and kept in the refrigerator. (American HNers might be surprised to find that a lot of cheeses are not meant to be kept in the refrigerator). Good cheese is like a living organism, it not something dead that needs to be kept cold. It has bacteria that lives on it and it alters and changes its taste. I believe you won't even be able to sell that in US simply because of local food safety laws -- cheeses have to be pasteurized to be sold here.

DannoHung• 15 years ago

Putting stuff in the fridge doesn't kill the bacteria, it just slows its rate of reproduction down. Pasteurization doesn't kill all the bacteria either, it just greatly reduces the presence of microorganisms in food.

I don't think marketing a high quality cheese is going to be impossible in America, (well, maybe not Casu marzu, but I don't give a crap how good that is, I'm not eating it) you'd need to educate your customers and take steps in terms of packaging or co-products to help them use the product best.

pnathan• 15 years ago

Around here (Small college town area, middle of farmland), all the grocery stores have a gourmet cheese section. A "made in America" gourmet cheese is not going to be an instant-win unless it offers additional value. Possibly the "localvore" approach might add some warm fuzzies to the value, but I am dubious.

(Of course, if it can be sold cheaper by being made in America, that's a great selling point!)

I see that market as pretty occupied right now.

Gaussian3• 15 years ago

American Roquefort caves.

davidw• 15 years ago

Looking at what I can get in supermarkets here in Italy, and seeing what's available when I visit back home in the states, I think there are huge opportunities in this space. I intend to investigate if we ever move back to the US.

moheeb2• 15 years ago

This seems like a very poor idea if you are trying to pull off something on the order of Chobani.

The United States already produces over twice the amount of cheese of any other country. It seems to me that you are not from Wisconsin and I would guess not from any of the states where cheese is big. Try going to a supermarket in Vermont or New York...the market for imported cheeses would be quite small.

stephenhuey2• 15 years ago

True, I'm in Texas. Here in the middle of Houston I see fairly large sections of imported cheeses in some grocery stores.

chadgeidel• 15 years ago

Another issue may be related to the FDA. It is my understanding that raw milk (unpasteurized) imparts a different flavor/texture to the cheese. I guess we have laws against cheese made with raw milk.

I am not a cheese maker, I've merely read this on food blogs.

justincormack• 15 years ago

Raw milk has a lot the bacteria needed to make the cheese already in it. Cheesemaking is basically farming bacteria... You get more variability and a generally better product with unpasterized cheese.

I mainly eat cheese from unpasteurized milk...

bignoggins• 15 years ago

If you're doing a yogurt startup, do you need a technical cofounder who is an expert in yogurt?

This is not a joke, I'm genuinely curious whether "technical" cofounders are specific to the tech domain or if they are necessary in every startup (another example is chef / restaurants)

rokhayakebe• 15 years ago

Almost absolutely. We say technical co-founder, but it just means somebody who can build the main stuff. In this case it's creating the right yogurt formula. Somebody making a yogurt will probably go through more iterations than someone creating a web apps.

jonnathanson• 15 years ago

"If you're doing a yogurt startup, do you need a technical cofounder who is an expert in yogurt?"

It depends on the category, really.

In this case, it's not as if Chobani invented the concept of strained yogurt. Rather, it practiced the time-honored art of geographical arbitrage: it found a product that had a long history of use overseas (Greek-style yogurt), and introduced it to the US in rather auspicious and on-trend times (the low-carb, high-protein craze). That's more a feat of marketing and operations than one of technical prowess or product development.

I'm sure that there were "yogurt experts" on hand to oversee production, ensure the right consistency, flavor, etc. But it doesn't appear as if there were a "yogurt expert" co-founder in this case. I might be wrong.

That's not to say that product wasn't crucial in this case, because it almost certainly was. But I don't think a "yogurt expert" co-founder would have been absolutely necessary, or that a "yogurt expert" presently occupies one of the top executive spots at Chobani the way a product person would at a tech firm.

e2daipi• 15 years ago

"geographical arbitrage" - Even with the "geographical" modifier, I don't see how it is arbitrage; niche or segmented?

edj• 15 years ago

It sounds like Ulukaya is the technical founder:

"I came from a family of farmers who made cheese and yogurt..."

His dad was urging him to make cheese as early as 1998, and he did in fact start doing that a few years later.

lightcatcher• 15 years ago

I think the idea of technical and non-technical cofounders applies less to yogurt or restaurants than it does to most of the web startups discussed here. People can be passionate social networking, offering web analytics, and sharing photos without knowing anything about programming or having the skills needed to build these businesses.

I don't think many people decide to start selling yogurt because of a business opportunity. People that start yogurt companies are (hopefully) passionate about yogurt, and I would think they would have some experience in making their own yogurt. Starting a restaurant would be similar.

In summary, I think the main distinction is that the barrier of entry to programming (and engineering in general) is greater than that of making yogurt or cooking. There are many people passionate about computers and their applications that don't know anything about programming, but I would think there are far less people passionate about yogurt (and unhappy with the current offerings) that don't know anything about making yogurt.

sethg• 15 years ago

Perhaps the analog/digital distinction is relevant here. If you are making yogurt, and you slightly deviate from the ideal recipe (leave the culture growing for too long?), you will probably get yogurt that tastes a little off. If you are writing code, and you deviate slightly from the ideal program, you will probably get junk: compiler errors, massive performance hits, blatantly wrong GUIs....

Jun8• 15 years ago

I was just wondering about seeing the Chobani brand everywhere, it used to be just in small chains. Strained yogurt used to be niche, now shelves are stacked with it. This company singlehandedly changed the yogurt landscape but the real test will be to hold up to competition from giants. Dannon has followed the trend, too.

kcurtin3• 15 years ago

I think it will be interesting to watch. I also think there is value in being so specific in what they offer: they only make Greek yogurt. As a result, they don't have trouble branding themselves as "authentic".

Companies like Dannon who make all sorts of dairy products don't have this advantage.

kcurtin3• 15 years ago

I grew up in upstate NY and everytime I make it home I hear about this story. It's pretty amazing to read about growth like this from a non-tech company. It's also interesting to think about how big of an impact they have had on the dairy industry in NY(and I'm sure other places as well). Their success has revitalized the industry and helped a TON of farmers get back on their feet.

Gaussian3• 15 years ago

They had originally pledged to only source their milk from New York state, but they've grown so big so quickly that they've literally bought every last drop of available NY milk. The farmers can't keep up. As a result, they're going to have to cross state lines soon.

ilamont• 15 years ago

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.

I am kind of surprised that existing food heavyweights, as well as smaller "organic" labels failed to see the opportunity for a premium yogurt that's not loaded with sweeteners.

The interview really didn't get into distribution, but it is quite impressive. A few weeks ago I even saw it in groceries in a very rural part of northern NY. From what I have read about the grocery business, it's extremely competitive and there is huge pressure from manufacturers and distributors to dominate prime shelf space. For a startup to muscle in so quickly is a real accomplishment.

EDIT: The rural NY distribution may relate to the dairy industry connection described by kcurtin and Gaussian.

sliverstorm2• 15 years ago

Have you ever tasted unsweetened yogurt? Try it and you'll understand- especially the Greek kind.

Really, I'm not kidding. It's a major acquired taste, that 99% of America has not acquired.

saturn• 15 years ago

You gotta remember that 1% of America is still 3 million people. If three million people want a certain kind of high quality unsweetened yoghurt, and you're the first vendor in line, then you may as well put your order in for that G650 because if you can execute you have it made.

jasonwocky• 15 years ago

Even before Chobani, "plain yogurt" took up plenty of refrigerated shelf space in every supermarket I've ever been in. I doubt that was for 1% of America.

petervandijck• 15 years ago

I've spent weeks looking for a regular yogurth not loaded with sweeteners (doable) and thickeners (almost not findable).

rkowalick• 15 years ago

Dannon Plain Yogurt only has two ingredients: Milk and Yogurt Cultures

bh422222• 15 years ago

As someone who is also from a part of the world which has "real" yogurt, I've also always thought American yogurt is horrible. But it never occurred to me there was a market for more expensive but good yogurt in the US! Ironically, I myself would be one of the buyers!

I guess the lesson here is trust hard data, not your assumptions.

replicatorblog• 15 years ago

FWIW, I host a team of Germans every couple weeks in our offices. They complain and gossip when we don't provide a large bowl of yogurt and it is the sweetest, most candy like product I've ever had. So it seems "fake" yogurt has its fans as well!

mc322• 15 years ago

There's also another New York yoghurt maker. Siggi's who makes Icelandic skyr. http://skyr.com/our_story.html

I'm a skyr convert --tho you have to get used to its texture.

It's about $2 per 5.3oz.

michaelbuckbee• 15 years ago

I've always wanted to try skyr, what is the texture like compared to yogurt?

Keyframe• 15 years ago

Next stop: coffee in USA.

cageface• 15 years ago

It's easy to get good coffee in the U.S., at least in the more metropolitan cities. Just don't go into Starbucks.

I had a much harder time finding good coffee in Europe, actually.

iamjustlooking• 15 years ago

Too bad I missed out on that Chobani yoghurt deal Aisle50 recently ran. I wonder if writing an article like this was part of the deal to subsidize the price seeing as the co-founder of Aisle50 wrote this article.

corin_• 15 years ago

Or possibly it's just how he found out about this person/company. (That's not an "or possibly" as in "or you're an idiot, here's the solution", it's a genuine "or possibly".)

nlh2• 15 years ago

I'm a huge fan of Chobani and it's become my breakfast of choice lately -- but I did so for a very specific reason: It's a high-protein, low-carb food, and the diet and fitness routine I'm on specifically requires that.

What I'm curious about: Is that the main reason they've become so popular and done so well? I wonder if many others are following the same diet, or if there's another reason they've become so popular vs. all the other yogurts out there.

Anyone else on HN eat Chobani regularly and, if so, what are your reasons? Any other insights as to why they've done so incredibly well?

kcurtin3• 15 years ago

I think it's been featured on alot of cooking shows. They launched at the right time as demand was on the upswing and Greek yogurt was getting popular.

tremendo• 15 years ago

Last time I checked Chobani had enough sugar in them, they come with mixed-in fruit. I much prefer Fage total, I call it "real" as in full-fat yougurt, lowest carb/sugar of any other competing products, very high in protein too.

mfringel• 15 years ago

Chobani has plain yogurt, as well.

Gaussian3• 15 years ago

The nutritional content of Greek yogurt is definitely behind some of the craze. But those nutritional benefits aren't unique to Chobani; they're something that all of the Greek yogurts share. Chobani has somehow managed to grow faster than the rest of the sector. For instance, Chobani has crushed Fage, the incumbent market leader. Fage grew 58% last year... which sounds good. But in the Greek yogurt business if you're not growing 100%, you're not even maintaining your market share. Chobani grew 258% last year.

antidaily• 15 years ago

I prefer Fage. I like the ones where you mix one side with the other. Ace.

britta• 15 years ago

I like Fage, but its packaging is probably a bit cryptic/dull if you don't already know about Greek yogurt and want it. Chobani looks more inviting and stylish, with more flavored versions and livelier images.

_delirium• 15 years ago

> The nutritional content of Greek yogurt

So, I'm Greek and like Greek yoghurt, but unless I am totally missing something, it is nutritionally pretty similar to plain (unsweetened) American-style yogurt. It's just drained; the name is Greek is literally "strained yoghurt", and you can get an effect that seems pretty darn similar to my taste buds by buying a typical American plain yoghurt (note: vanilla-flavored sweetened yoghurt is not "plain"), and draining it overnight with a cheesecloth. But then I mostly use my home-strained yoghurt to make tzatziki, so I might be missing some of the nuances if you eat it plain.

moheeb2• 15 years ago

Possibly because it tastes good?

That is my reason for eating it.

3am2• 15 years ago

I eat it regularly because I like yogurt and it tastes better than any other yogurts I know of. And it's healthy.

JunkDNA• 15 years ago

Yogurt has been my primary weekday breakfast for at least a decade, probably more. I recently switched to Chobani for one reason: Flavor. It tastes rich and creamy like it should be bad for you, but it's not (true of most Greek yogurt). With Chobani, the actual flavors are not just the typical yogurt ones (blueberry, strawberry, etc...) but also include things like pineapple and mango. Plus the packaging is familiar if you've been eating fruit on the bottom yogurt. there's not a little container off to the side to mix in. That sounds minor, but I don't want to rearrange my fridge because my yogurt needs more realestate.

Most American yogurt is pretty dreadful. When I did an exchange program in Germany in the 1990's, my host family fed me some Swiss yogurt. I'm sure it wasn't "Greek style" or "low-fat", but man it was some of the best yogurt I have ever had in my life. I have been trying various custard varieties ever since in an attempt to get that European style flavor, but all of them are poor imitations.

jon914• 15 years ago

High-protein, low carb and delicious (creamy texture and flavor) at the same time. I alternate between Chobani, Fage and a couple other brands, but the nutritional profile is about the same for all of them.

I prefer to take my yogurt plain and mix in my own jams, rather than the fruit on the bottom variants. That gives me more variety than the default flavors provided and lets me control the amount that goes in.

maukdaddy• 15 years ago

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.

Wow, such a refreshing view. Especially considering the recent sellouts of natural/organic brands to major CPG companies.

squeed• 15 years ago

Chobani got an old factory that Kraft was letting go. Tesla got the GM NUMMI factory for pennies on the dollar, too.

It would do these large companies well to hand old factories over to internal skunk-works teams to tinker first.

SoftwareMaven2• 15 years ago

That would require cannibalizing your own products, the definition of the innovator's dilema.

oldstrangers• 15 years ago

Companies that large already have dedicated tinker factories. In GM's case, they have tinker ... reservations.

http://en.wikipedia.org/wiki/General_Motors_Proving_Grounds

3am2• 15 years ago

I just want to add a small personal anecdote.

I eat yogurt regularly, and I've been a convert to Chobani lately. I started eating greek-style yogurts with Fage, and have had several other brands but Chobani flavors and texture are superior (IMO).

If you don't already know, it's the most expensive yogurt at most supermarkets, and is even pretty expensive compared to other brands at specialty retailers. So in the interest of saving some money, I recently bought some Dannon greek yogurt with coupons for about 1/4 the price.

It was awful in comparison. To get a similar texture, they use gelatin. The texture is still inferior. And the flavors are not in the same league either. I think it's refreshing to see someone rewarded for not buying into the conventional wisdom that the American public has no taste and can't recognize/won't pay up for quality products.

fragsworth• 15 years ago

Nonfat Chobani is also the highest protein yogurt I've seen, and beats all the other yogurts in as far as nutrition is concerned.

lukeschlather• 15 years ago

That's impressive. I've made a general habit of rejecting 'nonfat' foods without even looking at the label because I've never seen a case where the nonfat version had more than 2/3rds of the protein the fatty version has. A nonfat alternative that has more protein is a nice achievement.

sidman• 15 years ago

hmmm makes me wanna try some, love my yogurt, im in OZ, wonder if they have any here or if i can get it from some specialty greek deli's ?!

ericdschmidt• 15 years ago

At my local supermarket they sell 32oz cups of Chobani (in vanilla and plain). Because of the bulk, price per oz is only slightly more expensive than the cheapest stuff they have. And it's really nutritious: 16grams of protein and only 13 grams of sugar per 6 oz serving! Significantly more protein than sugar. The lack of fat doesn't bother me. There was an article in the Times (http://www.nytimes.com/2011/07/19/health/19brody.html?_r=1) about strong new research that found that yogurt was the food "most strongly linked to weight loss". It also found that the fat content of yogurt (or other dairy) consumed didn't affect weight change.

Based on this article and the research suggesting a weight-loss effect of yogurt I'm thinking about getting into the yogurt business.

DrPhish• 15 years ago

Just wondering if anyone knows what the difference between this and some of the other simple, so called 'Balkan Style' yoghurts is. Something like Olympic's or Astro's where the ingredients consist only of milk and bacterial culture.

I live in western Canada and haven't had opportunity to try anything from Chobani, so I'm genuinely curious.

sliverstorm2• 15 years ago

the great American discovery of Greek yogurt.

Hah. I have friends who rave about Greek yogurt, but not a one of them doesn't drown it in fruit, sugar and honey first.

stinkytaco3• 15 years ago

I put stuff in my (homemade) greek yogurt, but mostly it's real stuff. Not corn syrup, food coloring and flavor that may have met a fruit at a party once.

mda2• 15 years ago

Interesting naming choice. The guy is Turkish, and "Coban" means shepherd in Turkish, it seems they preferred adding an i to the end to make it sound greek. "Yogurt" is also of Turkish origin.

jballanc• 15 years ago

In fact, this is very common in Greek. The Turkish word "dolma" means "something stuffed" and it is what they call stuffed grape leaves. Greeks have a very similar dish they call "dolmados". The Turkish word for shoe is "pabuç" whereas the Greek word is "papoútsi".

Also, it's true that yoğurt is of Turkic origin. If you go to Turkey, you will find it in almost all of their dishes. It's odd, though, that Americans don't seem to know anything about any of this. I'm nearly certain that if this Turk would have sold Chobani as "Turkish Yogurt", we wouldn't even know who he was...

reinhardt2• 15 years ago

Actually "chobani" has been maintained with minimal change in greek, "τσοπάνης": http://www.wordreference.com/gren/%CF%84%CF%83%CE%BF%CF%80%C...

mda2• 15 years ago

I see, so it is borrowed from turkish, makes sense, 2 birds with 1 stone.

gokhan• 15 years ago

For full reference, Çoban and Yoğurt, actually.

ipsin• 15 years ago

I'm curious -- I still buy Chobani and I still prefer it, but I've had what I consider to be a disappointing spoilage rate for unexpired yogurt (estimating 3-5%, for something I eat most days). Has anyone else had a similar experience? I realize I'm fishing for anecdata here, but I'd really like to know.

nvarsj• 15 years ago

This is pretty cool. I could never (under)stand how sugary most American yogurts are (Stonyfield farms being the lone exception). My significant other, a U.K expat, has long been a fan of plain greek yogurt. It is really good. The chobani fruit mixes taste great as well - pineapple being a personal favorite.

reinhardt2• 15 years ago

Any similarly good brands in the UK?

mixmastamyk2• 15 years ago

Haven't tried this brand, but was introduced to Fage while in Greece and loved it--until I realized it was 50% saturated fat.

I have a feeling what this guy means about American yogurt being "horrible" is that it is typically low fat and healthy.

I've tried products all over the world and whenever I hear this type of statement it tends to come from someone who has never looked farther than Velveeta and cheeze wiz. You can buy just about whatever you want in America, if you look a little harder. Heck, I can get my Brazilian Cachaça and Açaí at Ralph's (local chain) for C-sakes. It's a world economy these days.

narkee• 15 years ago

Low fat is not synonymous with healthy.

Someone else made the comment that often "Low-Fat" advertised products are jammed with sweeteners or sodium to replace the lost flavor that fat provides.

I think it's funny that the American consumer has been indoctrinated into thinking "Low [Insert Nutrient of the Month]" == Healthy.

mixmastamyk2• 15 years ago

It is healthy compared to the alternative--filled with saturated fat. The main comment thread referred to non-fat not low-fat, where manufacturers take less drastic measures.

The $700 Million Yogurt Startup

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