Chobani looks to greener pastures
Company built on yogurt bets on oat drinks
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.
Hamdi Ulukaya, the CEO of Chobani, says his new oat products taste “very earthy, very comforting.”