Chobani looks to greener pas­tures

Com­pany built on yo­gurt bets on oat drinks

Baltimore Sun Sunday - - NATION & WORLD - By Ben Payn­ter

Chobani CEO Hamdi Ulukaya is stand­ing in his com­pany’s in­dus­trial-chic test kitchen in lower Man­hat­tan, glee­fully do­ing shots. He’s not drink­ing al­co­hol, but some­thing that is, at least for him, an­other kind of con­trolled sub­stance: milk. Yes, the Greek yo­gurt ti­tan — the man who once milked cows for a liv­ing and fa­mously boot­strapped what be­came a $1.5-bil­lion-in-an­nual-rev­enue com­pany by get­ting Amer­ica hooked on the creamy, tart and pro­tein-rich yo­gurt of his Turk­ish youth — is sen­si­tive to dairy.

Around the time his trade­mark mop of curly hair be­gan turn­ing salt-and-pep­per, Ulukaya re­al­ized that he was lac­tose in­tol­er­ant and stopped drink­ing milk. (Yo­gurt, be­cause of the fer­men­ta­tion process, is eas­ier to di­gest.) Then, about a year ago, he be­gan stealth­ily de­vel­op­ing his own plant-based al­ter­na­tive.

“Awe­some, no?” he says, grab­bing an un­marked card­board car­ton and pour­ing him­self an­other small glass of his vel­vety off-white elixir. He downs the glass and sets it on a large wooden ta­ble topped with rows of other top-se­cret prod­ucts.

When I fi­nally taste my sam­ple, it’s creamy and smooth, coat­ing my mouth and fin­ish­ing with­out the sort of chalk­i­ness or cloy­ing sweet­ness that I’ve come to ex­pect of plant-based milks. Ulukaya praises it as “very earthy, very com­fort­ing.”

This month, af­ter years of ex­pand­ing its yo­gurt port­fo­lio with in­no­va­tions such as crunchy mix-ins and lower sugar lev­els, Chobani is de­but­ing a new prod­uct cat­e­gory, called Chobani Oat. The com­pany is launch­ing four oat drinks — plain, vanilla, cho­co­late, and plain ex­tra creamy — that approximat­e milk (al­though Chobani has strate­gi­cally cho­sen not to call them that). There will also be a barista edi­tion for cof­fee shops, a line of fer­mented-oat yo­gurts in fla­vors such as straw­ber­ry­vanilla and blue­berry-pome­gran­ate, and mix-in va­ri­eties with names like Peach Co­conut Crisp.

It’s a bold de­par­ture for a com­pany that made its name in dairy and is the top seller of yo­gurt in Amer­ica. Lit­tle more than a decade af­ter it launched, in 2007, Chobani cat­a­pulted over Yo­plait, Dan­non and other es­tab­lished brands

to claim 19% of yo­gurt sales in this coun­try and a full 43% of the Greek yo­gurt mar­ket.

Chobani’s new oat line is de­signed to boost sales even fur­ther by mov­ing the com­pany into an in­creas­ingly pop­u­lar sec­tion of the gro­cery store. Af­ter decades of jock­ey­ing, first by soy- and then al­mond-milk pioneers, al­ter­na­tive milks have se­cured shelf space be­side cow’s milk in most stores. It turns out you can “milk” al­most any­thing — quinoa, hemp, cashews — al­though the dairy in­dus­try has lob­bied hard against pro­duc­ers us­ing that term.

The re­tail milk mar­ket in the U.S. (both cow and nondairy) topped $15 bil­lion in 2018. Al­ter­na­tive milks, on their own, pulled in $2.4 bil­lion, a num­ber that’s pro­jected to grow ex­po­nen­tially. To­tal sales of cow’s milk in 2018 dropped by roughly $1.1 bil­lion dol­lars com­pared to the pre­vi­ous year.

The alt-milk surge is driven both by Baby Boomers, who are dis­cov­er­ing that lac­tose in­tol­er­ance in­creases with age, and younger gen­er­a­tions well­versed in the car­bon foot­prints and cru­elty of many an­i­mal-based prod­ucts. But there have al­ways been draw­backs to plant-based milks: funky tastes, wa­tery con­sis­ten­cies, an in­abil­ity to mix well with other prod­ucts.

Oat milk is an ex­cep­tion. Its main in­gre­di­ent is a sus­tain­able cover crop that can be sourced or­gan­i­cally with­out mas­sive amounts of wa­ter. Made by a sim­ple en­zy­matic process and fin­ished with a dash of oil (Chobani uses canola), it’s creamy, slightly sweet (even when it’s made with no added su­crose) and per­fect for cof­fee and bak­ing.

Ulukaya is now bet­ting that he can lever­age his com­pany’s re­sources, which in­clude a mil­lion-square-foot man­u­fac­tur­ing fa­cil­ity in Twin Falls, Idaho, and a new, 14,000-square-foot re­search and de­vel­op­ment lab at­tached to it, to do for oat-based prod­ucts what he once did for Greek yo­gurt: Take them main­stream.

He’s mov­ing ag­gres­sively. Gro­cery stores typ­i­cally re­set their shelves twice a year, in Jan­uary and July. Ulukaya has rou­tinely cap­i­tal­ized on those mo­ments to drop new prod­ucts — and turn them into mon­ey­mak­ers.

Ulukaya, 47, went from sleep­ing in a run-down fac­tory to be­ing a bil­lion­aire in less than a decade. Born and raised in a Kur­dish sheep- and goat-farm­ing fam­ily, Ulukaya fled Turkey for the United States in the mid-’90s, fear­ing that his vo­cal sup­port for Kur­dish rights would be pun­ished by the coun­try’s mil­i­taris­tic regime.

He learned English and started a small-scale feta cheese com­pany in up­state New York. When he saw an ag­ing Kraft yo­gurt plant for sale nearby in 2005, he took an­other risk, se­cur­ing a Small Busi­ness Ad­min­is­tra­tion loan to build a Greek yo­gurt en­ter­prise.

As Chobani has risen, its com­peti­tors have be­come in­creas­ingly nim­ble. They’ve cut the sug­ars in their yo­gurts to match Chobani and in­tro­duced low-fat Greek lines. So Ulukaya, who had long been fas­ci­nated with the ver­sa­til­ity of oats, di­rected his team to some­thing new.

Chobani could be the com­pany that pop­u­lar­izes oat-milk prod­ucts, but it cer­tainly didn’t in­vent them. It’s play­ing catch-up to other play­ers in the alt-milk space, in­clud­ing the sorts of in­ven­tive upstarts that Chobani once was. Swe­den-based Oatly, most no­tably, ar­rived in the United States in late 2016 and be­gan per­suad­ing high-end cof­fee shops to use its oat milks.

IVAN VA­LEN­CIA/BLOOMBERG

Hamdi Ulukaya, the CEO of Chobani, says his new oat prod­ucts taste “very earthy, very com­fort­ing.”

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