IPO Radar - Chobani
A great dairy product, but an even better founding tale
Hey All, it’s Ty-PO putting up my first post of new year. I hope everyone enjoyed their time with their families this holiday season!
As we’ve now taken our first leap into 2022, I’m sure all our readers have begun working hard to execute their new years resolutions. I know Dez and I have already exchanged goals for the 2022 year (one of which is writing 10 IPO Radar articles this year so stay tuned 🔥). Resolutions are a great time to reset one’s mind and come up with ~fresh~ endeavors to pursue in the upcoming year. In my opinion, any resolution requires immense motivation as one embarks on their quest to achieve a goal. Rather than rolling with the usual Ty-PO format that’s more business & numbers focused, I thought it would be more appropriate this time of year to tell the inspirational tale of Hamdi Ulukaya, founder of Chobani and dubbed by many the “Yogurt King”.
Chobani (Nasdaq:CHO) filed for IPO on November 17th, 2021 and is well known for its delightful tasting Greek yogurt (although it’s diversified its product base into oat milk, probiotics, and coffee creamer). However, do not be fooled by the yogurt’s wonderful taste and creamy texture. Chobani is a consumer goods goliath with over $1 billion in annual sales, and is expected to enter the public markets valued at up to $10 BILLION DOLLARS. That’s a pretty stellar outcome for America’s darling yogurt brand.
As much as I’d love to take a deep dive into the Greek yogurt market today, I figured I spare our readers their sanity by instead focusing to Hamdi’s founding story and the principles he built at Chobani. Hopefully, upon hearing his tale, it’ll help spark a little motivation of your own going into 2022.
Chobani’s Founding Story
Hamdi Ulukaya was born in Turkey to a family of Kurdish dairy farmers. Although he grew up to humble means, Hamdi’s family always emphasized access to high quality food from fresh cheese & yogurt to delicious olive oil. Hamdi’s passion for food was cultivated at a young age due to his country’s emphasis of natural, healthy food for all citizens.
Hamdi immigrated to the US in 1994, where he attended school and started his career working in the cheese industry. He imported his father’s Turkish cheese and opened a local cheese shop in upstate New York. At that time, Hamdi began to notice the poor choices made by large food companies to prioritize low cost of production over high quality of ingredients. The lack of access to fresh, nutritious food by the lower and middle class infuriated Hamdi, since in Turkey there was always a focus to make food access equitable.
Finally, in 2005, Hamdi’s chance to change how Americans consumed food emerged. In a junk mail advertisement, Hamdi noticed a former Kraft Foods factory in New Berlin, NY was shutting down and looking to sell. He high tailed his way up to the plant the following day, and soon after took out a small business loan to purchase the plant. From there, he began the process of building his vision of creating affordable, nutritious, and delicious yogurt for Americans.
The first two years were dedicated to repurposing the decrepit factory to his needs and creating the perfect dairy product. He hired back five former Kraft employees who were crazy enough to blindly follow an indebted immigrant and first time entrepreneur, and began the renovation process. Hamdi, a founder fiercely focused on standing on the front lines with his employees, started the refitting process by painting each wall one by one with his new employees. As the factory was being repurposed, Hamdi spent sleepless nights aggregating the pieces he needed to create a yogurt that no American had tasted before. He travelled the country finding the machine parts and workers he needed to concoct the final Chobani yogurt product.
It was grueling work, but in 2007, the New Berlin factory opened and the first Chobani product was distributed. In the early innings of the business, Chobani didn’t have the money to pay for grocer slotting fees, so Hamdi would pay grocers in additional yogurt for the employees to enjoy. With limited access to a marketing budget early on, Hamdi got creative with marketing methods by setting up free samples in stores, initiating grassroots marketing through social media, and even creating a sampling truck, the CHOmobile, to hand out Chobani yogurt at festivals and parades. As Hamdi and his team continued to lean in on iconoclastic marketing methods, the reputation and popularity of the Chobani brand grew. In 2007, Chobani was a no-name, but ambitious, upstart consumer product. By 2012, Chobani was a billion dollar brand with popularity across the country.
Chobani by the Numbers
I promised I wouldn’t go to crazy on the numbers this time, but given Chobani is only a 14 year old brand, the business’ results deserve some recognition. In just about a decade and a half, here’s what Hamdi and his team were able to accomplish with a small business loan and some serious grit:
$1.4B in Net Sales in 2020, up 5.2% from 2019 Net Sales of $1.3B
$191M in Adj. EBITDA in 2020, up 7.5% from 2019 Adj. EBITDA of $178M
20% market share in the US Yogurt Market (as of Q3 2021)
2,000 food distribution partners and 95,000 Chobani retail locations
2 Production Plants in New York and Idaho that have revitalized and bolstered the local communities they reside in
30% of the manufacturing workforce is comprised of refugees and immigrants
Hamdi & Chobani: The Rise of the “Anti-CEO”
The last two bullets above illuminate Hamdi’s (and Chobani’s) fierce focus on being a steward to the communities they touch. Hamdi, in a TED Talk in 2019, coined his leadership style as that of an Anti-CEO who, by his definition, focuses on his customers and workers rather than chasing profits.
One detail I left out in Hamdi’s founding story was the horror he witnessed when he first visited the Kraft Foods factory. Upon arriving to the factory, Kraft was still in the process of closing down, and Hamdi witnessed first hand the glum faces of the 55 factory workers who had just lost their jobs and were forced to upend their lives. Kraft leadership was nowhere to be found as these workers were losing their jobs. Hamdi at that moment vowed that any business he built from this factory would be surrounded with love and compassion for the employees he touched.
To say the least, Hamdi held true to his word. Hamdi tirelessly focused on supporting the employees that were the lifeblood of his organization. He dedicated his time to hiring immigrants and refugees within his factories to provide them with an opportunity to participate in the American Dream. Through his hiring, Hamdi built vibrant communities around his production facilities. The town of New Berlin, nearly abandoned by Kraft in 2005, is now home to over 2,000 Chobani employees and even a Chobani-funded state-of-the-art little league field. Hamdi continued his efforts by setting up philanthropic organizations to fight American hunger and provide underserved schools with free Chobani products. Finally, in a VERY generous act in 2016, Hamdi gave up his own equity in the company to provide all employees with a 10% stock pool. The stock pool gives all workers equity in the business upon a sale or IPO (an outcome that will materialize soon for many diligent employees).
All these valiant acts by Hamdi sound familiar don’t they? They should, primarily because Hamdi embodies the prototypical ESG-focused CEO that’s become all the rage globally. Hamdi Ulukaya, much like the Arthur Blank’s (Home Depot) and Herb Kelleher’s (Southwest Airlines) of the world, were leading their firms with ESG principles before it was “cool”, and certainly before there was a formal name for ESG. Leaders like Hamdi are the reason why so many more “anti-CEOs” are emerging to focus less on sheer profits and more on benefitting the communities they serve.
Closing Thoughts
The story of Hamdi Ulukaya defines the American Dream and demonstrates what amazing results can be achieved when a leader is mission driven and compassionate to his employees. Chobani’s upcoming IPO is merely a product of 15 years of hard work and an unwavering focus on always doing right with its constituents. As we all look to 2022 as a new year full of opportunities, I hope Hamdi’s story can provide some inspiration to those looking to set some lofty goals and make an impact in their own way. Good luck with everyone’s resolutions!
We at All Things Venture believe that Hamdi leads his business in a way that should be revered and emulated by other corporate leaders, and wish him and Chobani the best of luck as the business makes its splash in the public markets.
As always, please email me at tylertriscari@gmail.com if you have any thoughts on or reactions to this article; I love hearing feedback from our audience! Next IPO Radar will be on Reddit so look out for that in your inbox soon. Until next time 👋👋.
P.S. For those who wanted some typical Ty-PO thoughts on the outlook of Chobani in the public markets, I’m posting my key discussion topics to think about before investing below
TL;DR
Chobani is a market leading consumer products business whose core product is nutritious Greek Yogurt. Hamdi Ulukaya founded the business in 2005 and leads the company with a fierce focus on the wellbeing his customers and employees. Hamdi’s founding of Chobani is an amazing immigrant success story that embodies the American Dream.
Appendix: Key Discussion Topics to Think about Before Investing in Chobani
How can Chobani continue to grow its revenue given the last few years it has grown quite modestly (3-5% annually)?
Does a $10 billion valuation make sense given current financial profile (revenue & EBITDA) and its future financial outlook?
Will Chobani continue to gain US market share for Yogurt?
How does Chobani stack up against its competitors (Siggi’s, Danone, etc.)?
Can Chobani grow its presence in oat milk and other new products?
Can Chobani expand into Europe and other new geographic regions? What are the barriers to entering new geographies?
Key Sources
The Story of Chobani’s Founding
Hamdi Ulukaya Ted Talk: The Anti-CEO Playbook
Disclaimer
Please note that I wrote this article myself and that this article solely reflects my personal opinion and not the opinion of my employer, Providence Equity Partners L.L.C. (“Providence”) or any other employee of Providence. This article is not endorsed in any way by Providence and does not contain any information derived from my role or work at Providence. I am not receiving compensation for this article and have no business relationship with any company mentioned in this article.