Chobani Founder Hamdi Ulukaya on the Journey from Closed Factory to Yogurt Powerhouse

0:27Hi, welcome. I'm Adi Ignatius, the Editor-in-Chief of Harvard Business Review, and this is The New World of Work. Every week on the show, we talk about how the workplace is changing, how we collaborate differently, the kind of technologies we're adopting. And each week, we try to bring in an interesting guest, often CEO, to talk about how they're seeing things on the front line. So we have a great guest this week, and I will introduce him in just a second. But first, a word from our friends at Unisys. Your employees went from working in one place to working in so many places. Our digital workplace solutions can help them all create and collaborate seamlessly.

1:05We're Unisys, and we do digital workplace solutions really well. All right, so our guest today is Hamdi Ulukaya. Hamdi is the founder, the chairman, and CEO of Chobani, the U.S.-based maker of yogurt. Hamdi's story is fascinating, and we'll talk a little bit about how he's built up the business and how he thinks about certain social issues, particularly the cause he's taken up very vocally, which is support of refugees. So, Hamdi, welcome to the show.

1:36Hamdi Ulukaya:Thank you, Adi. Good to be with you. Yeah, it's great to see you. So you've told this eight million times. I'd love, you know, some of our viewers don't know the story of the founding of Chobani. If you could give the short version just to set up the conversation, I'm sure people would love to hear that. Sure. It really started in, you know, I had a small cheese factory in upstate New York. I'm from Turkey, you know, in the eastern part of the Kurdish region. Arrived in 2000, I'm sorry, 1994, learning English and all that kind of stuff. I've settled in upstate New York, worked in a farm, and, you know, never thought I would be making what my family was making for generations.

2:21You know, nomads raising sheeps and goats and making cheese and yogurt.

2:25Hamdi Ulukaya:So I end up making cheese in a small scale in upstate New York. There I saw an ad that says the fully equipped yogurt plant for sale. Came to it as a junk meal. And I went to visit the plant the next day. And it turns out that this was a very old, almost 70, 80 years old factory. It was being closed by Kraft. And they were getting out of yogurt business. And the price was extremely cheap. So through the SBA loan and some help from the local agencies, I bought the plant in 2005 with$700 ,000. hours, hire the first four people from the previous 55 and work on the recipe that, you know, I thought I have one shot at this.

3:13Hamdi Ulukaya:I bet that people, if they had an option of yogurt being more natural, better and more nutritious and accessible, most importantly, you know, I could make something out of this. I never knew how far this would go. But that's 2007 when we launched it. And then the first signs of product being received really well by people made me think that this is going to be really, you know, challenges that comes with making Chobani, not necessarily selling because people really have so much desire to buy. So I ended up staying in that factory from 2007 to 2012. uh in 2012 i built a factory here in idaho um i am here now about 1.4 million square feet huge factory um and i've always had that that the image in my head that you know how far chobani can go and what kind of challenges i'm going to face you know during this time and try to prepare myself and the company uh you know for those uh challenges um and of course you know you always hear the headlines but there's always a lot of stories in the background uh when it comes to food making especially natural food making especially refrigerated natural food making and if you are competing with the large multinationals and if you are independent and if you don't have a lot of resources um you know this this gets a lot harder um so we try to find a new way of building a a in a sizable consumer good company not following the footsteps of all the large food or the big food but more an entrepreneurial new way of uh you know finding ways finding resources to compete or grow or develop the brand.

5:14Hamdi Ulukaya:So it's been fun so far, but I have became great as well too. So it's been easy. So now to our audience, if you have questions for Hamdi, put them into the chat box and we'll try to get to audience questions later. Hamdi and I were talking before we started the live broadcast and you are the great American success story. We realized that our ancestors, so I'm Armenian on my father's side, you're Kurdish, that basically our grandfathers came from the same, you know, relatively small town in what's Western Turkey now. So it is an incredible story. So, yeah, talk about, so you, you know, you create this thing, you realize it's taking off, then you're scaling like crazy.

5:57And how did you, you know, you didn't have a background in business exactly. How did you cope with the challenges and opportunities of massive scale and what that does to, you know, your business, your culture. I mean, tell us about that experience.

6:13Hamdi Ulukaya:Sure. I mean, you know, you touched, you know, most important things. You know, how do you scale and how do you keep the culture, you know, aligned to your beginning missions, beginning purposes? How do you attract talents? How do you get resources? You know, every single one of those are challenged by itself. I found in the food making, especially in the large scale food making, there's a lot of waste. And in the operational side of things, I saw a lot of waste. The second part is it's really eye-opening to see, you know, if you're not shopping in big cities in a specialty store, but if you're shopping in the large mass supermarkets, the quality of food making.

7:12Hamdi Ulukaya:At back then, it was really bad. Today, it's getting better because there's a push. Quality food making, one of the worst in the world. I mean, I don't know all around the world, but at least on the Europe or, you know, where we grow up in Turkey or in some part of South America, the food makers really did not spend a lot of time making good food for people. So that's why they will have a lot of margins because the cheap ingredients, cheap, you know, food. So it gets harder if you try to make it better food, with holistic ingredients, with natural ingredients, with nutrition, you know, dense food.

7:56Hamdi Ulukaya:If you try to make it, it gets a lot harder. I think the biggest challenge I had throughout this whole thing was the stages that you go through, Adi, in your company. So if you start, it's a startup. It's a different company. If you are a$100 million,$200 million company, it's a different company. If you are trying to distribute all across the country, it's a different company. If you built another plant and you have multi locations, it's a different company. And like you said, I've never done this before. I've never worked anywhere. I've never studied business. So for me, it was a personal journey of figuring out how I can make moves for the company to be aligned for the new realities.

8:41Hamdi Ulukaya:and I come down to one reality. One reality is it's all about people. It really, the changes that you make along the way, the people that you bring along the way, but the most important is how flexible you are as an organization to go from one thing to another thing from year to year or sometimes six months. How do you change? How do you adopt a new reality? that has to be within part of the culture. So for that is I go back to the early days and say, I have four factory workers and myself, none of us done this before other than four factory workers worked in that factory. I've never done retail.

9:27Hamdi Ulukaya:I don't know if this is going to go anywhere. We don't have a lot of resources. But this finding a way, finding solutions, it was a big part of Chobani's culture. So in a way, we do realize the issues and challenges and problems, but one of the best things that has happened at Chobani is that we always welcome it and try to find a way to solve it or even make it even better. I think my biggest, the biggest time I spent, how I can grow and scale this business, but yet how do I keep Chobani whole? How do I keep Chobani committed to the earlier promises, earlier commitments? And we had moments, you know, we had some down moments and up moments.

10:18Hamdi Ulukaya:moments. And I think that's the responsibility of the leadership is to make sure that the people side of it, culture side of it, the mission side of it, purpose side of this whole thing stays in the center and stay true, stay authentic. And yet the business function of those things is, you know, it becomes an engine to find solutions to adopt the new realities and compete or go through the challenges. When we first spoke, you know, around almost 10 years ago, you said you were very proud of the fact that you did not have outside investors, that you did not have, you know, VCs telling you what to do.

10:55Now you're on track. I don't know. You don't know the exact timing, but you're on track for an IPO where suddenly you'll have a lot of outside investors and outside scrutiny. Why the change?

11:07Hamdi Ulukaya:So it's the journey. I didn't say it for nothing. The understanding I realized the early days is here is the founders or really good ideas on making food. And then you see the founders, they raise capital to get into a certain level. And by the time the company or the brand becomes sizable, let's say 50 million, 100 million dollars in sales. the patient of the capital of the investors comes towards the end and the 99 percent of the time i have not seen many examples most of these great ideas they end up being sold for the return of the investors as much as that's the reality almost all the founders that i speak to they have a pain in their stomach, in their gut, that they had to do that.

12:07Hamdi Ulukaya:So the structure really pushes you to get out or sell for financial reasons. So my fight was, if I don't have investors, then nobody can force me to sell, or nobody can force me to merge or do other things, so I can keep this dream alive. That was my fight. It's not about, you know, how much percentage I can own. And that period is really i would say the sign that this company can stand alone in this uh food or cpg world is really depends on the product or depending category that you're in it's it's if you pass this early early stage it could take five years it could take 10 years who knows for us it was a lot faster um then then you can be a standalone you know sizable company the second reason that this happens, I was really crazy about not having investors early on, is, you know, you have a gut feeling, you're a founder, you say, I'm going to buy this plant, and I'm going to launch a yogurt, and I'm going to, you know, sell across the country, people will say, you're crazy, you know, why would Kraft not do it if that wasn't a good idea?

13:20Hamdi Ulukaya:This kind of gut feelings, or this kind of ideas will come along, you know, when you're a founder, then when you have investors, they will come from their own perspective to say oh no that's not a good idea or we shouldn't be doing this or that that risk shouldn't be taken i wanted to have a freedom and flexibility to be able to take those decisions and and make it fast and go forward um i would say in the first five years of chobani's uh time i probably made so many decisions and if i was wrong it would wipe out the company it would literally like i built this this plant here in 2012 um you know it costs us more than billion now but at that time it was over half a billion dollars and there was no sign that if i built this plant that if i launch flip this sidecar yogurt or if i launched drinks and later on and i launched different kind of products like oat milks and creamers people will buy there was no sign Nobody would prove that.

14:23Hamdi Ulukaya:But that was my strong belief. And I said, that's what we need to do. And we need to build it really fast. So we built it. And if you look at it, the conversation I was having that day, there was no way if I had some kind of investor, I would prove that this would be a great idea. But today, this plant became one of the powerful sources of our growth. So these were the reason I was against it. Now, we are in a place where there are companies sizable. We have greater market share. Our growth is really, really good. And it feels like the early days, the energy, the innovation, things that we want to do.

15:07Hamdi Ulukaya:And there's so much long way to go. And I think most of the work that we have done up to this level is really prepare us to make the impact in the food system in this country. I celebrate people coming and being partners and being shareholders. I think we pass those critical times. And I think the most critical, proven points we already have passed. So this would be a perfect moment for us to be able to have others to come and join. So I'm here with Hamni Ulukaya, who is the founder and CEO of Jobani. If you have questions for Hamdi, put them in the chat and we'll try to get to them in a little bit.

15:47So Hamdi, I know you talk about, I know you think a lot about relations with employees. You say that Chobani is an employee first company. What does that mean to you?

16:01Hamdi Ulukaya:Especially in our field. You know, I come from, like you said, you know, rural part of Turkey. I don't come from rich or well-off type of areas. We come from the villagers and factory workers, working class. And there's a disconnect. Of course, this struggle has been all around the world, but there is a disconnect when it comes to wealth, when it comes to access to even state resources. And you come to Southern Upstate New York, and you see the same thing, right? The factory gets closed. The company make a decision in, I don't know, wherever, Chicago in a tower, and the community is left behind and workers are to blame for.

16:52Hamdi Ulukaya:Now, this is the same thing going on. So when it comes to manufacturing, when it comes to rural areas of the work environment that is controlled by the large corporations, this injustice is at a level of affecting people's life in a very, very dramatic way. So when it comes to starting Chobani in that old factory, I always wanted to say, can I start a company? Can I start Chobani? Not to follow the footsteps of the company that closed it. the second angle is when I grow up when I said I never liked the ones that is greedy or whatever you call it how do I build a place where I don't become a person that I grew up hating so that was the blueprint in that for factory workers and myself we started this place my first promise I made is the people who will build this company with me will always be center of this place and always be recognized in all dimension, including financially.

18:10Hamdi Ulukaya:And can I make an example of that the people that left behind, people that forgotten, that made things, especially in food making and manufacturing, how do I make them the most important people in the company? So that was a work of four, five six seven years and there's the steps of every single time i do it and but most important part of this is i i remain in of course my jobs change along the way uh i remain a factory worker and as long as you stay as a factory worker doesn't matter what you do later on in the ceo cfo whatever that is uh you bring attention to that um but that was also the one of the most most I should say one of the smartest things that we've done.

18:58Hamdi Ulukaya:If Chobani became what it became, we broke all the records because our people always found a way to make things happen. In that old factory, it is still unbelievable what we've done in that old factory. That was one small filler, four people, 70, 80 years old. Nobody even knew that it could be turned back on. we end up making sales almost close to a billion dollars in that factory without raising one penny of capital. And that is just not possible in any dimension that you look at it. But it only happened because people just found a way. We just found a way. And then when we built the factory here and then, you know, I can go on and on and on.

19:48Hamdi Ulukaya:So not only is it the right thing to do, but it's also a smart thing to do if you really mean it, if you really authentically mean it. All right. So I'm going to bring in an audience question now because there's somebody who wants to know kind of more detail here. So this is Lurika from Stockholm. So she says, you know, I get that people are your biggest asset, but what is it that you're doing that other leaders aren't that are that are making people number one and that have an effect on the company? Sure. I mean, the number one is recognition. Of course, it's important, but that, you know, you cannot stop there.

20:22Hamdi Ulukaya:So in Europe, especially she's from Stockholm, the northern part of Europe, things are a lot better compared to what we are here. So if you are in upstate New York or in Idaho or somewhere else, you know, you look at five, six, seven, eight years ago, a typical factory workers will work a minimum wage. probably not much, you know, benefits.

20:50Hamdi Ulukaya:And, you know, the common things like parental leaves or, you know, family type of resources, none of those would be available. So I would go back to the time that I started and then you say, okay, pay. you look at the people's living expenses in that community and you make your own math and say, this minimum wage is not going to work, so we have to be a certain level of the income, basic income. And can they have the insurance and, you know, benefits just as mine? Whatever I use, they have the same. You know, these are the basic ones. You know, the later on you say, how come factory workers don't get, you know, parental leave, the moms and dads?

21:44Hamdi Ulukaya:And you realize that 99 % of the manufacturing work in this country does not offer, companies don't offer, at least at that time. I don't know why it is still very high, the parental leaves. So you put that kind of stuff in there. And then later on you come in and you say, okay, I feel like we made it through. how can I make everyone in the company be part of this company as a shareholder, as some kind of

22:09Hamdi Ulukaya:financial benefits from it. And we did the Chobani shares when we distributed 10 % of the companies to all among the employees. You can go on and on stuff like this. It's among all of that, But among all of those, I think there were, we let one of the, you know, few of them were never been done before. One of the most important thing is, can I be myself who I am in a place without judgment, without me feeling like I'm outside? So that means how do I get refugees, immigrants, people who have experiences or don't have experiences to be part of this and learn and share and be part of the community?

22:58Hamdi Ulukaya:So we end up leading the importance of getting diversity in the workplace and having that exchange culturally that people come from all over the world. you know these are the steps that you can take you know fundamentally in the floor but that doesn't end there of course it's endless but if I go back and ask the people what of the most that you love about Chobani is anonymously I feel home and that is a work I think embedded in minutes and hours you cannot just put in the walls and put in the papers and make that happen so you've been very um engaged you just mentioned in the refugee issue and and uh i think it feels like you've chosen that as as something that you know it's controversial uh certainly well almost everywhere now um you know when you look at what's happening in ukraine um and the refugee crisis that's been triggered you know what's what's what's what's your response or what's chobani's response to what extent can you try to make a difference um Adi I was there I think last week or week before I lost count in the days I was in Poland border uh with Ukraine um went to a couple of cities spend a lot of time the people in the floor in the ground there um so another border right another border from Ukraine to Poland you have close to 5 million people just left, displaced within weeks.

24:34Hamdi Ulukaya:But this is not the first time I see it. I saw it in Colombia and Venezuelan border. You know, you go through the bridge and flow of people. You see it in the Jordan and Syrian border or Jordan and Lebanon border or Turkey border. Or you see people go from Myanmar to Bangladesh. the suffering, the general picture is the same. One thing is different, that we never thought that this would happen in the heart of Europe. We never thought this would happen.

25:06Hamdi Ulukaya:When I started TANT, I actually started because I saw what happened when people had a job after their settlement at Chobani, and how it changed their life. It was just simple. When we started hiring refugees, we didn't hire them because it was a refugee work. We hired them because they were people in the community, and we were growing, and we were hiring everyone, and they were in the community, and we hired them. And the reason that they couldn't get a job at the Refugee Settlement Agency would say, oh, they don't speak the language, they don't have cars, they don't have the trainings, which for us or for anyone, these are very small obstacles to overcome.

25:50Hamdi Ulukaya:You can, you know, rent buses, you can hire translators, you can do the job training at work. And the biggest eye opening for me was when Yazidis get attacked on the Syrian war. It felt like these were the people that I grew up with. Like they felt the faces, they smell, you know, look like our people. And I went to Switzerland, UNHCR, and tried to understand how individually I can help the people who were fleeing from these horrible people. Okay, you can donate money, you can get tents, you can get sponsorship to camps, which we did. But in that trip, I realized that the business community, entrepreneurs and CEOs, are really absent from this biggest humanitarian issues that we're facing.

26:43The second one is I thought I knew something about it.

26:47Hamdi Ulukaya:I didn't even realize how big this one was. You're talking about millions, 20, 25 million people, and the average they stay in a camp or a city stuck 19, 20 years. And I thought if I could bring a business community into this with the motion of hiring, training, and using their supply chain, whatever they are in the world, to support refugees, we could have another dimension even getting closer to solving this or at least start the way. So I started Tent in 2016. We call it Tent Partnership for Refugees. You said it. This is a topic that has been used politically, unfortunately, so badly all across the Western world.

27:37And I look back and it was tough, but Chobani really came up and said, let's be fair.

27:45Hamdi Ulukaya:These are our brothers and sisters, and some of them are here at Chobani. and the meaning of CEOs and companies and brands coming in, of course hiring, most important, but also be an advocate of this injustice. I'm proud how far we have come. So we are over 220 multinational companies. I was just in Netherlands after Poland last week. We had 13 really nice, beautiful Dutch companies committing to hire 22 000 refugees which we've done three years ago before that they end up hiring almost 30 000 refugees we organized in colombia we organized in germany canada and here and looking at the last ukrainian refugees or the before that the afghani refugees who are settled in the us and looking at the companies and ceos coming forward and making commitment and looking back, and I think we came a long way.

28:48Hamdi Ulukaya:We still have a long way to go, and it's a responsibility of all of us. My last point is, you know, you go to border in Poland, and you see 2.5 million Ukrainians fled into Poland. No one is on the street. There is no tent, you know, towns or cities. all the Polish people, they take them to their home. Two and a half million people living in people's homes. It's something that I've never seen before. And the same thing with Romania, same thing in Moldovia, same thing in Slovakia. So people are opening their arms, opening their homes to these children and women, mostly children, women and children.

29:36Hamdi Ulukaya:I saw the similar things in Colombia where people did it when people came from Venezuela. And of course, the generosity of the people or something. But then you see these political things is going away. So in Poland, there is no political noise that is against receiving these neighbors, people coming into their countries and be safe. So this is a sign. And you say, if I can take this and apply to all refugee hosting countries, and if the humanity open their arm and receive these people, you know, we talked about it. There's a great benefit to society, to companies, having refugees to be part of their community.