Tired of overly sweet American foods and homesick for a taste of the thick, tangy, protein-rich yogurt he ate every day in his native Iceland, Deloitte consultant Siggi Hilmarsson tried to cook up a batch in his Tribeca kitchen in December of 2004. He used a 1913 recipe for skyr, as the yogurt is called in Icelandic, that his mother found in the local Reykjavik library.
"The first batches were pretty awful," recalls Hilmarsson, now 34. But the naturally fat free skyr—whose thick, creamy texture comes from using three times as much milk as standard yogurts—was an unlikely success. Its only added sweetener is agave nectar, and it sells at nearly three dollars per six-ounce container (about triple that of an average yogurt).
The company, which now has nine employees, makes about 100,000 six-ounce cups of skyr a week. It's carried in Whole Foods, Wegmans, and Stop and Shop, and this March goes on sale in 110 Giant Carlisle supermarkets. (Next up: the launch of drinkable yogurt.) The Icelandic Milk and Skyr Corporation, as it's called, doubled its sales last year. And in 2011, Hilmarsson expects to grow sales by 50 percent. He recently spoke to Inc.'s contributing editor Courtney Rubin about starting up and the unexpected success that it brought.
What prompted you to start making skyr?
I've always been a pretty healthy eater. I don't eat a lot of sugar. Growing up at home there was never white bread in my house, only this dense European bread. My mom would give me raw vegetables to snack on, and she told me raisins were candy. I believed her for a long time. I first came to New York to go to Columbia Business School. Coming to America it was a huge shock to go food shopping. Everything had sugar in it. In the 80s Americans got paranoid. They took the fat out of everything and replaced it with sugar. I'd see what looked like really delicious bread, really dense, and it had all the grains, and then I'd toast it and taste it and think: This is weird. It had all
this sugar in it. At home sugar was only for dessert. It was in chocolate. It wasn't in bread or anything else.
I ate rather poorly the first year I lived here, and it was getting to me. I started becoming anal about food, especially with regards to the sugar content. I just wanted simple, healthy things. And I missed skyr. I used to eat it every day in Iceland. So I was in my apartment at Christmas  and I decided to try to make it.
How did you go from the kitchen to a plant?
The first time I made the yogurt at home it wasn't what I wanted. The second time it was OK. I never got it consistently perfect, and I could never really figure out what was going wrong. It's a simple product that people have been making in Iceland for hundreds of years. After using the cream to make butter, the leftover nonfat milk gets
turned into skyr. It's simple but it's not easy. It's chemistry: The yogurt responds to the environment, and you really need to make it in a plant to be able to get consistently good results.
So I took a vacation from Deloitte and went upstate to try to make the yogurt. You need a really specific temperature for the skyr to come together, and you can't really do that in a home kitchen. So I found this dairy plant that is a part of an agriculture college in upstate New York to make it in. It was only rented out when it wasn't being used by the students. And I didn't know this, but you have to have a compliant label to take the yogurt out of the plant and this person at the Department of Agriculture has to approve it. I didn't know that until I was about to start making the yogurt and the guy at the test facility asked me about it. So I had a day to do a label and to decide on a name for the product. So under this pressure, last minute, I picked the name Siggi's Skyr. I did my first professional batch of yogurt there and it tasted awesome. When I was making it in my house I'd have six or seven cups, and now I had 300 cups. So I started giving them away.
Well, one of the people I gave it to was a friend who worked at Murray's Cheese. And with out me knowing it she took the samples to a staff tasting. Then out of the blue I got an email from one of her colleagues saying they liked it and they wanted to start selling it. That's when I started to think maybe I could make a real business of it. I was still young, I didn't like my day job, I had this product I was mad about, and I had somebody willing to sell it. So I quit my job in the fall of 2005. And a few days before I started selling at Murray's [about a year after he quit his job] I started selling at the [Nolita] Green Market, and we sold out there on the first day!
You also had a bit of luck getting into Whole Foods.
I donated some yogurt to an eclectic retreat of artists and environmentalists in Long Island. There was someone from Whole Foods there, and she liked it. And Whole Foods wanted to stock it. But it was scary: right from the start the demand was too much. We were going from 15 stores to like, 100. It wasn't all wine and roses. We couldn't make the yogurt and cool it fast enough. We had to shut down for three months to rebuild the whole production process. As an entrepreneur it was the worst thing that could happen: People want your product and you can't supply it. I was worried I wouldn't be able to make it again. When I started this and thought of it as a business, I thought it would be a cool niche New York yogurt company. I wasn't sure it would have this huge commercial appeal. I didn't think it would be as well-received as it has been. It doesn't cater to the mainstream American market. It's not sweet; it's more tart. And we use the real fruit, not any concentrated flavorings. Being out of production was a scary time. I'd lie awake in the middle of the night worrying, but then I'd have a yogurt and think: Ah, it's actually really good and I would feel OK again.
The flavors—ginger and orange, for example—are fairly unusual. How did you hit upon the variations you make?
The first one I made was blueberry—that was my childhood favorite. I love blueberries. I love how they explode when you bite them. The orange-ginger one—I always liked that combination. I just was making things that I myself like. The pomegranate-passion fruit one a lot of my friends asked for pomegranate yogurt, and it sounded good to me because I like tart stuff but I later added the passion fruit for more flavor. I wanted to make a honey raisin one because my mom used to make a honey-raisin granola. But the raisins turn back into grapes in the process! We used to make a pear and mint one, and that happened because the mint yogurt lacked body, so I added pear to give it body and crunch. But we had problems with the supply chain for our pears. First it was going to be a month out of production and then that became a year. And it's been two years. I still get emails about it from customers all the time, asking for it. I want to bring it back.
How did you fund the company?
I got some seed money [low five-figures] from a professor of mine at Columbia. I'd been a teaching assistant for one of his classes. And it was simple to ask him: Once when I was making the yogurt at home I'd given him some samples. He liked it and encouraged me to start the business, and said he'd be willing to invest if I did. So it was pretty straightforward. My first round of financing after that then came from friends and family. Last year, I got funding from Revelry Brands. I'd met the [founder] Brendan [Synott] at a natural food trade show. He was very supportive of what I was doing, liked the brand, and was very generous sharing his experiences as a food entrepreneur. [Synott, 31, founded Bear Naked, a natural snacks company he sold to Kellogg Co. in 2007.] So when it came time to raise money I had no doubts they would be a good partner.
Why don't you brand the yogurt as fat-free? Isn't that a selling point?
The product is the product—it is what it is. I don't want to call out certain attributes more than others. I just want it to look nice. It's a simple product—it's yogurt with fruit. It's not rocket science. So the label should reflect that and be pretty simple.
You've done no advertising, and it's only recently—years after you started the company—that you've joined Facebook. How did the word about Siggi's spread?
The product is different. If you like it, you are likely to tell other people about it. And I've been very fortunate with people spreading the word. I also think people are waking up to the importance of reducing the amount of processed sugar in their diet, which certainly helps a product like ours.
What have been your biggest mistakes?
It sounds kind of funny to say, but I wasn't prepared for success. I didn't believe that things were going well, and I think I always thought if it didn't work I could always do something else. So I was very conservative about building my infrastructure and hiring people, which I think has its own problems. I think you have to plan for success but still be cautious and guard against failure. It's not very Scandinavian to assume you'll be successful.
What advice would you give other entrepreneurs?
Try to sleep well. You never make worse decisions than when you're totally sleep deprived. People will tell you that you have to make a decision right then and there. You don't. Sleep first and then wake up and decide.