Update: This article was revised to include a response from Chobani, which was received on Monday, January 5.
Oh, how it must hurt. Hamdi Ulukaya, the founder, chairman and chief executive of Chobani, is reportedly being pushed out of his executive role by new private equity owners.
The news was first reported in the New York Post on January 5. And for any small-business owner, the Greek-yogurt impresario's fate offers a variety of business lessons--from building too quickly and taking risks to taking on partners who may not see eye to eye with your own vision.
Chobani doesn't see it that way. A company spokeman said Ulukaya is not being ousted, and that the company has been publicly searching for a new chief executive since the spring.
"We've had an active, operationally based CEO search underway to partner with our founder and owner and, while we have several exciting, qualified candidates, no decision has been made," a spokesman said. He added that Ulukaya, who owns the “vast majority” of Chobani, will remain owner and chairman of the board, as well as continue to have an active role in the company.
In April, the Wall Street Journal reported that, as part of its financing deal with private equity firm TPG, Chobani had to replace its chief executive within the year.
The Post's report stands in contrast to a decidedly upbeat Ulukaya, who spoke with Inc. last year, expressing great optimism about Chobani's prospects for 2015.
"We are great dreamers and a great startup but we aren't yet perfect executors on the landscape for distribution and supply chain," Ulukaya said, adding: "If I can do that, I can build the world on top of that."
That hopefulness, however, may mask some problems. Last April, Chobani, an Inc. 5000 company, secured a $750 million loan from TPG, for which it reportedly received a 35 percent stake in the company. Chobani sought the loan after a serious product recall in 2013, when mold allegedly contaminated its product and sickened more than 200 people.
The recall caused a one-point drop in market share, according to the spokesman, which was recovered thereafter. Meantime, suppliers such as Whole Foods, questioning whether Chobani's ingredients were genetically modified, announced it would stop stocking the yogurt in 2014, to make room for smaller brands.
Ulukaya spent $450 million for an Idaho production facility, allegedly the source of the food poisoning. The food safety issues occurred due to inadequate worker training, and a rush to get the factory up and producing at full capacity, according to news reports. The factory was built in less than 11 months in 2012, according to Chobani.
Defending the company in 2013, Alejandro Mazzotta, Chobani vice president of global quality, food safety, and regulatory affairs, had this to say in a statement:
Chobani conducted an aggressive, statistically significant series of tests of the products voluntarily recalled in September 2013 with third-party experts confirming the absence of foodborne pathogens. Chobani stands by these findings, which are consistent with regulatory agency findings and the FDA’s Class II classification of the recall on October 30, 2013.
As late as October, however, Ulukaya was still stoking the engines of fast company growth, and urging the company to move full steam ahead.
"We have to be fast, really, really fast," Ulukaya told Inc. "That means risk, and you will push yourself and the plants and productivity and planning, you have to do things four or five times faster."
Ulukaya, who founded Chobani in 2005 in an abandoned upstate New York factory, became a billionaire by riding the wave for high-end Greek yogurt. At its peak in 2012, Chobani ranked 112th on the Inc. 500, reporting a three-year growth rate of 2,662 percent and sales of $633 million for 2011.
Ulukaya, it seems, will now join the legions of entrepreneur CEOs replaced by their own boards.