Monday, March 4, 2013

Chobani: A Startup Story

Bloomberg Businessweek recently carried an article on the founder of Chobani: Hamdi Ulukaya, it is tale that every entrepreneur should read, it has all the ingredients in the roller coaster ride of a startup, here are a few that I found interesting:

1. Do what you love, love what you do
This is a clear case where the founder is very fond of the product he makes, and has grown up eating it. And he has first hand experience in making it.
Ulukaya grew up milking sheep at his family’s dairy in eastern Turkey. He ate the thick, tangy yogurt of his homeland day and night. “My mother used to make the most amazing yogurt,” he says. He and his five brothers fought over who would get the scrim of cream on the surface.
2. Give your customers quality product as never before
High quality gels very well with today's discerning consumers - 'no preservatives'.
The yogurt that most Americans ate for decades was a travesty, in his view: too thin, too sweet, too fake. “So horrible,” he says in his Turkish accent, his eyes bright against a lean face. “Terrible.” As he sees it, we were all snookered by big food companies that cared little for our taste buds or health. Greek yogurt’s high protein content makes it more filling, and it contains little or no fat. His doesn’t have preservatives, either. “There is no reason for us to put preservatives in the food,” Ulukaya says. “I would say to the big guys, ‘Watch out. You’d better change your ways. The consumer knows now, and the consumer will punish you if you don’t do the right thing.’ ”
3. Leverage the latest trends [in this case the rise of "protein" and the health consciousness]
Paleo diet is in, benefits of protein are on the rise. [formatting with bold is mine, not in the original article]
As the founder and chief executive of Chobani, the brand of Greek yogurt that has stormed the stainless steel refrigerators of coconut water drinkers and ancient grain eaters, he has some standing in the matter, although he’s actually Turkish.
4. Find a gap, trust your instinct, exploit an untapped opportunity
Hamdi realized that an opportunity existed in the yogurt market, and he jumped in.
After a visit from his father, who complained about American feta cheese, Ulukaya started a company in Johnstown to make feta for restaurants and food distributors. He named it Euphrates and still owns it.
5. As a founder, entrepreneur - be ready to roll up your sleeves
Be willing to do what it takes to get your dream into a reality - painting walls is part of the game.
His first employees were four ex-Kraft workers and Mustafa Dogan, a yogurt maker in Turkey Ulukaya knew by reputation. The first thing they did was paint the walls.
6. Hire & expand at the right time
Hamdi took a couple of years before he hired a sales guy... and hire the right people. Attitude is as important as aptitude and experience - in Kyle he had both qualities.
In 2006, Chobani hired its first salesman: Kyle O’Brien, then 33, a veteran of packaged food startups. He and Ulukaya set a goal of selling 20,000 cases of Chobani a week, which they thought would make the company profitable. “If we couldn’t get to it in 36 months, we said we’d hug it out and go our separate ways,” O’Brien says. “He said, ‘We will change the yogurt category forever.’ I loved that.”
7. Pay importance to the details
Would you obsess? Hamdi knew what was important and clearly spent invested in the design of the packaging.

Chobani couldn’t afford to advertise, so the packaging became almost as important as the yogurt itself. “If you’re going to be buried in the lower left corner of the shelves, it had to pop,” says Joshua Margolis, co-author of a new Harvard Business School study on Chobani. Garbage bags full of sample cups piled up in Ulukaya’s office. He decided he wanted a European-style cup with a circular opening 95 millimeters across. It made for a squatter, fatter tub that looked bigger than others. The packaging manufacturers Ulukaya contacted in the U.S. wanted $250,000 just to create a mold. He found a Colombian supplier that was able to make his cups at a much lower price, but wound up spending $250,000 anyway—half his working capital—on cup design. Instead of painted-on labels, Ulukaya wanted shrunken-on sleeves offering sharper colors. “People say, ‘It’s yogurt, who cares?’ But there’s emotion to it,” he says. “You can make this a moment: the opening of it, the eating of it, the experience. I spent so much time on every single detail …”
Ulukaya still obsesses over the cups. In his office, he plucks a Chobani plain out of a mini fridge and traces a fingertip along a green stripe below the lip. “It has to be the same all the way around, flush with the top,” he says. “I get really pissed off when the label is not put on right.” He peels the foil cover back. A smear of yogurt is stuck to the inner lining. “I see this yogurt on the lid, I go nuts. It shouldn’t be like that.” He tosses the uneaten cup into a garbage can.
8. Luck & Destiny, a little bit of Blue Ocean
As the article suggests not many companies who take on established incumbents, the 800-pound gorillas and emerge victorious:
It’s rare that an upstart can bust into a business as entrenched as packaged food, command a premium, then withstand the counterattacks of large, established players. Boston Beer (SAM), maker of Samuel Adams, has pulled it off. Whole Foods Market (WFM) did the same in supermarkets. Industry analysts expect rivals to squeeze Chobani by discounting prices, though Lu Ann Williams, research manager at Innova Market Insights, doubts that will work. Chobani has “delivered against consumer expectations,” she says. “I don’t think a Chobani consumer would trade easily.” Harvard’s Margolis says eating Chobani, like shopping at Whole Foods, isn’t about any one thing but many—from the label to the cup to the stuff inside. Ulukaya, he says, “thought through the buying experience.”
9. Persistence
Hamdi and Dogan (Chobani's Yogurt Master)  sweated to get the product right, persistence, patience and long nights were normal.
For months, he and Dogan experimented. They wanted yogurt that would retain its good taste and texture for at least six weeks and tested hundreds of recipes using different bacterial cultures with milk at varying durations and temperatures. Ulukaya often spent the night in his South Edmeston office; lunch most days was a slice of cheese pizza and salad at a nearby pizzeria. To bring in a little revenue, he made conventional yogurt for private-label brands. After about 18 months of trial and error—and a great many batches of crappy yogurt—Ulukaya and Dogan hit on the right recipe.
It is an inspiring tale, and a must read!

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