How Turkish 'Dairy Boy' Hamdi Ulukaya Started $600 Million Chobani
A self-described “dairy boy,” Hamdi Ulukaya grew up in Erzincan, Turkey, working on his family’s dairy farm and in its feta cheese operation. After studying politics in Turkey, he initially came to the U.S. to study English at New York's Adelphi University, and then to do graduate work at SUNY. In 2005, Ulukaya says he used an SBA loan to buy an old yogurt-making plant in upstate New York. Now Ulukaya’s company, Chobani, has more than 1,200 employees, annual revenues of more than $600 million, and is building a plant in Australia. Ulukaya spoke with Inc.’s Kimberly Weisul about start-ups, ghosts, and, of course, yogurt.
I was sitting in the office of my little cheese-making company and saw a small ad on a flyer. There was a fully-equipped yogurt plant for sale. I threw the ad in the garbage can. Half an hour later I picked it out and called. The plant happened to be an hour away. I went to visit, and it was a 90-year-old Kraft plant they were closing. There were 55 or 60 people working to close it down. One of the managers gave me a tour. From the price, you could tell it was being sold as junk.
When I left there, I said I don’t know why, but I just want to buy it. An advisor of mine asked me if I was nuts. He used some nasty words to convince me not to think about it, because he really cared. He said that there is this humongous company that is getting out of the category, the plant, and the town, and if there were any value to the plant, they would know.
But I knew something was going to happen with yogurt. For years, I had asked why yogurt was so bad here. I was always told yogurt had to be sweet to appeal to Americans. But when people go to Turkey or Greece, within 15 minutes of their return they start talking about how much they enjoyed the yogurt there. There was this imported yogurt from Greece, and it was available in cities here, and people were enjoying it.
I didn’t own a house, and my little cheese business couldn’t support the purchase of the plant, either. Then I found out about SBA 504 loans. In one night I made a business plan. I wrote a story, actually. The SBA supported us, and we bought this plant in 2005.
I hired five people from the original 55, and they’re still with me. The first board meeting was me and these five people in this closed plant. It was quiet. A closed plant is like a cemetery, it really is. The walls will talk to you, the machines will talk to you if you really talk to them. One of the guys said, “What are we going to do now?” And I said, “Well, because this plant was run by a large company, no one ever turned off the lights. We have to turn off the lights. I’ve seen the bills, and it’s crazy.”
Second, I said, “We have to start painting the walls outside. It was meant to be white, but there aren’t any white spots left.” The guy said, “You have to have other worries, what do you care about the paint outside?” But that’s what we did that summer. We started to paint.
I spent the next 18 months trying to get the right yogurt recipe. I brought in a yogurt master from Turkey. I went to Greece. I was always going back and forth, from New York to Turkey and Greece. The recipe we use has been around hundreds and hundreds of years. Growing up in Turkey, not a day would go by that we wouldn’t eat yogurt like this.
In October 2007 we got our first orders, from a Kosher store on Long Island. When we needed more people, those first five people knew who to call. When the time came, they rocked. Now we have 1,200 people in that same plant.
Even in 2007, we knew we would have to expand, soon. When we started, nobody from the banks would talk to us. We had to show that this was going somewhere. We had an old filler would do up to 50,000 cases a week. We would have many people on the line packing the yogurt manually. You would normally pack it with a million dollar packing machine, which we didn’t have. But nobody knows, as long as it’s safe, healthy, and looks nice.
By our second year, the bankers would talk to us. That’s when we started feeling good, that we could go to the second level.
On the tech side, little start-ups can do something magnificent. They don’t need too much in terms of plants and infrastructure. But I think the same thing can happen and will happen on the consumer goods side. As start-ups, in some ways we are in a better position than big corporations. We can make good products and be passionate and convince our consumers that they can like it. If the consumer likes you and likes your product, they’ll take it to the top so fast.
The problem is that you come up with something unique and cool, and you sell it. The large companies just wait around to see what’s going to work. Then they talk to you. And they say, “Hey, you’ve got two options: You either sell to me, or I’m going to do the same thing you’re doing.” So we have to be really smart. We started with an idea of quality yogurt, and the challenge was, how are we going to start this? Now, we will have to stay ahead of it. All of the time.