Chobani: Hamdi Ulukaya (2022)

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31:33Hey, welcome back to How I Built This. I'm Guy Raz. So, it's around 2002, and Hamdi has decided to start making and selling his own feta cheese. He gets a local development grant to open a small factory in Johnstown, New York. And now, he needs to get hold of some vats for making the cheese. how do I afford to bring the vats? Vats is this stainless steel vessel, let's say 2 ,000 pounds, they can go 10 ,000 pounds where you pasteurize the milk. Right. It's like, how do I afford to these equipments? And there was a local bank called MBT in Johnstown. And the gentleman there said, you know, you can get the USDA to have a loan guarantee, meaning it gives some kind of comfort to the banks i guess that's the way to put it in place that they will lend to the local you know businesses to start their business or expand their business and if it goes wrong then their risk is 90 percent removed and they set up the meeting with a gentleman out of syracuse of the usda and he came and met uh with us and then we heard back after I don't know how long a month or two that we were given 90 % guarantee or the banks was given 90 % guarantee it was mind blowing so that basically took care of that part all I had to worry about is the 10 % and working capital and all the unthinkables so you get the loan to make this happen and you've got two things that you have to do you have to start making cheese and then you have to start selling it So first of all, in the making cheese, because I think the factory opened in 2002.

33:21It was called Euphrates. This is the company that you and your brother started to make cheese. Exactly. So you made cheese. You had a palate by that year for sale. So I'm assuming the making the cheese part of it was not that hard. It was everything else that was hard. Or am I wrong? No. In theory, it should have worked. You know, you have the milk, you have the culture, and it should work. I had one of the worst time making the cheese. Why? You know, it turns out the theory and the reality is two different things. But you knew how to make cheese. You had been making cheese for years. Yeah, the milk is different, right?

34:07And then you make the cheese, and then how it stays, and after two months or a month or two weeks, the texture is not right. I mean, it's close, but it's not perfect. You're saying getting the consistency is hard because every milk, every shipment of milk is different. Every shipment of the milk is different. Now, we made cheese with unpasteurized milk. Now you're pasteurizing, and so you have to fine-tune that. And you're relying on culture companies, you're relying on equipment companies to be able to make that kind of adjustments. So there's a lot of trial and error. We couldn't do all of those things until we had the rats in place.

34:45Yeah. By the way, how many people were working there? Five, ten? Ten, twelve people. Yeah, I'm making the cheese. I'm packing it. I'm salting it. I'm putting it in the pails, you know, 10-pound pails or 20-pound pails, whatever it is. Where did you find customers to sell all that cheese? So that's a good idea. I started looking at Greek distributors now because now I'm really making feta. like really feta. Yeah. This is not a table cheese anymore. It's a salad cheese. It's a cheese that they put on their Greek salad, right? So who are the buyers of this cheese are the Greek distributors. And what they do is they deliver to diners.

35:30You know, these diners are all over the... Northeast. There's Greek diners everywhere in the Northeast. Yeah. It's to go places, right? So in these diners, one of the most popular thing that even comes even without you ordering is the Greek salad. And that Greek salad has… Chunks of feta on it. Yeah. But soon enough, I realized that this is not a huge marching thing. Yeah. You know, you have large manufacturers, even though their product is pretty awful. You have these large manufacturers out of Wisconsin that make millions of pounds. Right. They ship it all around the country. And, you know, you look at the diners, the quality is not the number one thing, really.

36:17It is, but it's not. Yeah, it says, I get it. But I put the onions in there and I put black olives in there. And I put them black olives and I put the olive oil. No one cares about the feta. By the time you, yeah. Yeah, I get it. I get it. But so, and were you going literally from diner to diner? or were you working with like a big distributor who would then do that for you? Yeah, so not big, but the distributor. You can't go diner to diner. Yeah, it's not possible. You can't scale that right. Yeah. So the first eye-opening for me was I called this distributor in Syracuse and he says, can I come and show you some fat?

36:55I said, sure, come. And I go and I show him. He says, okay, I'll buy it from you. And I'm like, wow. You know, I feel like this is cool. I said how much you buy is two pallets a week no every other month oh god I mean two pallets every other month it's nothing fraction of it's nothing yeah it's basically so how many of these people I have to have to be able to even pay for my expenses it is at this point I'm saying what an F I did now like what I got myself into yeah I read I read something you said you said that the years those two years from 2002 when you started the factory Euphrates in 2004 it's the first two years you said was the most difficult time of my life yes it was literally most difficult times of my life and I have gone through some difficult life before that but this was really really hard there was no way i could survive there's no way this could make to the other side there's no way every day this this business was gonna die every day every day every day i don't have resources i don't know the knowledge i don't have experience i'm new to the country i got myself into this i'm already not complete since my mother's dad i mean it's a lot of emotions and i remember there was a a little creek next to the uh you know plant and i will go there and i will cry and cry and cry by myself and then i will come up after i'm done into the inside the factory and start making cheese but it was that two years uh made me who I am today.

38:46But also it was one of the most difficult times of my life. Yeah. That two year period, you got through it. But you did start to turn a profit after those two years, a small profit, I think. Yeah. So I realized that I'm not going to be I'm not going to be able to sell the feta amount that needed to pay all my expenses in this place to one person or two person or five person. I have to get it as much as I can. So that means that I have to go between Boston or New Hampshire or Maine to all the way down to Florida and eastwise, maybe Detroit and Chicago and find all these small distributors that would buy one or two pallets a month.

39:31I slept on the roads with the van and meet all these amazing small distributors, family-owned smell distributors. And I ended up getting them, hundreds of them. Yeah. Because I think your sales were, I think you hit about$2 million in sales by 2005, but you had like 40 employees. So no one is getting rich, you know, for 2 million in sales and 40 employees. No. I didn't think that this would make me rich or you would get rich out of this. Right. All I wanted to do is survive, you know. And two years, 2004, you get it and you say, okay, I think I survived. I think I survived. Yeah. Like middle of 2004, I felt like I could breathe.

40:14Yeah. Yeah. Wow. But that year, something pretty pivotal happened. A property came up for sale, I guess, not too far from there. Tell me the story. How'd you find out about this property? What was it? So here's the thing. I'm really a messy person. Even today, I'm pretty messy in my office and my desk. So once, maybe a month, maybe every couple of weeks, I decide that I'm going to organize my desk. I'm just going to go through all the documents, all the papers, all the letters, you know. And you open the envelope. Sometimes you don't even open the envelope. You look at the, where is it coming from?

40:55And you know, this is somebody's trying to sell cars. Somebody tried to sell mortgage. Somebody tried to sell credit card, whatever that is. You know, those junk mails. And you just tear them off and put them in there. And every once in a while, you see an interesting envelope. So I come to this one, and I open the envelope. I don't know where it comes from, of course. It's interesting. I open it. I look at it. It's literally an ad. It says, fully equipped yogurt plant for sale. Wow. And you can tell that it's really, really old. I mean, the picture also says 1920. You can tell it's old. And of course, you know, no interest.

41:30So just like the other ones that I don't remember what it was, I throw them into the garbage. I continue. And you're going through like 20, 30 minutes. And I still don't know why. I went back to that garbage and I picked up that page. Now my tea remaining is in there. My cigarette that was put into the tea cup that is also in there. And I look at that picture again. And I'm staring at it. And there's a big number on top that turns out that it's a real estate agent from Utica. And I called. The person answered and said, yeah, this is a yogurt factory. It's an old one. It's Kraft. And they closed it.

42:21And they are selling it as is. And I asked the price. I said, what's the price? He said$700 ,000. For a yogurt factory? Yeah. Okay. And I'm looking at this whole thing, and you say, even if it's the worst condition, how could this be$700 ,000? You mean it was underpriced? So cheap. It's very cheap. So I thought he meant$7 million. You thought, based on the photo you saw on the postcard, that it was$7 million just because of the equipment? Yeah, because I know pretty much what things cost from the experience of putting a smaller version into our plants. It's 20 ,000 square feet. This one says 67 ,000 square feet, so it's three times bigger.

43:07And it was owned by Kraft at the time they were selling it? Yes. Okay. Yes. So it was enough interest, and so I said, can I come and see it tomorrow? And I picked one of the guys from the plant who was working in the production, and it took us two and a half hours to find it. It was just back roads and country roads. It's not like next to the highway. Yeah. And I saw it from a distance, this old place. And I get there and you go up and then someone's name is Rick Lake, Rich Lake, says, hi, I'm the production manager. The plant manager is not here. I was told to give you a tour. And he takes me to the plant.

43:56And it's basically every time he goes into places, he turns the lights on. It's not a working factory anymore. It was until maybe four months ago, five months ago. So that's basically the last week of the plant. All employees are 55 people in the last six months. They're just, I guess, closing down, slowly bringing down shutting things off yeah um i am not seeing the buildings anymore i'm seeing i'm reminding this sad feelings um that only would come to our time where i grew up if somebody died in the euphrates river and for months for weeks like there was this heavy feelings all over the town like people you felt that when you got to the town you felt it yeah you felt it wow like like a funereal feeling it's yeah i felt like somebody died because they were about to lose their jobs they were not only losing jobs they're losing a place it's been there for 70 years it was a sign of life really that steam came out of that place was a sign of life everybody's grandfather Father worked there, mother worked there, father worked there.

45:15It was just walking in that plant was walking in a cemetery. It was that kind of. And by the way, from what I understand, this was a place that made cream cheese. Philadelphia cream cheese was made there. Exactly. And yogurt too. Yes. Breyers yogurt. Yeah. And I'm curious because from what I understand, from what I've read, it was really old. I mean, it was like crumbling paint and it was not in great shape. It didn't look good. Yeah. And there's a smell, old smell. Like old, just kind of stale or, you know, kind of old cheese smell. Yeah. Everything is old. The biggest important things that the real estate agent keep telling me is that it is as is.

46:00We don't take any liability. Whatever the things that you find is good and bad, it's all yours. Yeah. and I left that place after a couple of hours and then when I left I called Mario Papa who was my attorney in Johnstown and I call him up and say Mario I find this place I didn't think that I would be interested walking in but now I just left it's a really amazing place it's got everything I can make yogurt there and I want to buy it and I'm like I'm just like you know when when you see something you just call and you don't make sense you throw all the words that you know into it and you're excited and all that kind of stuff this guy's like wait wait wait wait wait just wait hold on hold on it tells you tell me what you think who owns the company who's closing it what kind of place and the guy said hanti this is the largest food company in the world craft yeah yeah Yeah, one of them, yeah.

47:01And they're getting out of yogurt business. They're closing the factory. Who the F are you think that you can make something out of this? Which is a fair question. I mean, if one of the biggest food companies is getting out of the yogurt business, at least there in that factory, why would you think you could make it work? He was asking you. Fair question. Yeah, makes no sense. Very fair question. And I said, no, no, they don't make good yogurt. I can make good yogurt. And, you know, I know how to make good yogurt in Turkey. and people love it. I've seen it in New York and all that kind of stuff.

47:33And he said, 700 ,000, right? I said, yeah, it's cheap, 700. I said, you don't have$700 ,000. He said that to you. He said, you do not have$700 ,000. You will never have$700 ,000 and if anything, you haven't paid me in the last six months. I have bills. He just basically said it and it was true. I had not. So he said, you just made it. I know it's been painful for the last two years. You just can't breathe now. don't do this to yourself. I know you get excited about things, but just breathe. Which is very good advice. I mean, it's good advice because he's trying to look after you. He knows what a grind it was the previous two years to make the cheese factory, the cheese plant, barely profitable.

48:16And he knows that you're in for a nightmare if you try to do something new now. Yeah, he thinks that this is the stupidest thing. Yeah. and I took his advice very seriously he was right and I am in my office maybe a few weeks after I have this regional bank it's called Key Bank and you know they're sales people they go from businesses to businesses in the communities and say what can we do do you need anything you know how they are and there's this two gentlemen shows up one his name is Pat Mucci and then he has another person next to him his name is john rider and i said pat i just went to this place and i saw this yogurt factory and they're selling it for seven hundred thousand dollars and you know i i call mario mario i think it's a stupid idea but i thought you know if i get this place i could make some really cool yogurt out of this place and i keep talking about it and he says, Hamdi, you know, we are partnered with SBA, Small Business Administration, and if we get their backing, we can come up with a plan.

49:35I mean, of course, I have to go look at the plant and look at the equipment and all that kind of stuff. We could make this happen. It's a small chance, but it's possible. Wow. It's worth pursuing. And he says, why don't you make a business plan, and I'll send you some applications, and you fill it, and we can look at this. Now, I said, business plan? I've never done a business plan. How do you make a business plan? Yeah. In the last couple of weeks, I put a business plan together, a couple of pages. He helped me how to do it. And then a few weeks later, we went to, a few days later, we went to the plant and see it.

50:07And we kept in contact with the real estate agent. To tell the, to make the story short. They got you the loan. They got me the loan. Wow. Can I ask you a question about the business plan for a moment. I mean, your plan clearly was to make yogurt. But what were you going to do that was different? How are you going to, I mean, if Kraft wasn't making it work, what was the thing that, like when people said to you, hey, Hamdi, what are you going to do? What did you say? So here's the little bit of background. You know, I don't know if it's, I mentioned we eat so much yogurt in Turkey, right? So breakfast, lunch, dinner.

50:48I mean, you can't imagine a meal or time or occasion that you don't somehow consume yogurt. Right. But compared to what it was here, the yogurt was 10 times worse. It was literally horrible. Like, it was awful stuff. Right. And I thought, it's milk and culture. There's no cost side of this. It's just milk and culture. It's just knowing how to make it. And I thought people will love it. Why would it not if there is a better yogurt that is made? I thought people would love it. If they are buying this shit, they could buy that stuff. If they are buying that stuff, they would buy that thing. That was my data point.

51:26And then the second data point for me was, if you meet with people and people ask you where you're from and you say, I'm from Turkey, the next thing they say, oh, I was in Turkey or I was in Greece. And within a few minutes, the first thing that comes up is the yogurt that they had in Greece and Turkey with honey and walnut, and that was one of the best things ever. So there is a disconnect between how people are talking about it and how the market conditions are. So you have the confidence that this can work. You get the money to buy the factory. And from what I understand, that summer of 2005, you spent a lot of that time just getting the factory like cleaned and painted and repaired.

52:09Yeah, exactly. So within that, I have four factory workers that I hired. actually the the manager who was the plant manager who was closing the factory i i asked him i said if one day i wanted to bring this factory back who are the people you would recommend for me to hire and he recommended he says you gotta get maria because he knows she knows all the vendors you gotta get rich because he knows all the production equipment you have to have mike allen mike is the guy the guy knew exactly where the all the pipes were where the lines were because there was no drawings this was so old no one had you know the the the blueprints of the plant so i had to convince my calendar to come back which i did and then the wastewater side of things that was frank he knew how to turn that back on so i had those four people with me uh in the summer of 2005 right And they're questioning me.

53:06They're looking at me. It says, like, who is this guy? How are we going to? And I can tell the way that they are interacting with me, that they're not overly excited. They're not overly drunk with it. But they're cautious. At least they have a job. And they're looking at me and saying what kind of ideas and improvements that he's going to make. So I'm managing that human psychology at the same time while I am not saying I don't have any ideas, but at least I'm not sitting around and doing nothing. All right. One important point, and I think a lot of people know this, which is the reason why what we call Greek yogurt is thicker is because it's separated from the whey.

53:49Because milk is 99 % or 97 % water, right? And then when you turn it into yogurt, there's still a lot of water in there. So you've got to literally put in a centrifuge, like spin the yogurt really quickly to get the water out. But you did not have – that's a very expensive piece of equipment. I don't think it was in that factory, right? Because this factory wasn't making Greek yogurt. It was making regular American-style watery yogurt. You're 100 % right. Commercially, this cannot be done with a cheesecloth. It needs to be a centrifuge separator. and these separators are you know i would say they are close to million dollars by the time million dollars and by the way you just spent seven hundred thousand dollars buying this production facility yeah so there's there's no no way in hell i have million dollars to buy something like this yeah i only have maybe a couple hundred thousand that i can spare and that includes everything so i need to use version of this so i'm going on internet looking at everything I can and see if I can find something that is used.

54:51So I found one in Madison, Wisconsin, and I called the person. They said they have it. I wanted to go see it, so I went to Chicago, drive from Chicago to Wisconsin, and in that drive, basically, I came up with the name Chobani. Choban means shepherd in Turkish, and Chobani, in a little bit of different way of saying it, is also mean shepherd in Greek. But the meaning of the word is always pure, simple, you know, someone who helps, someone who leads, someone. It's a very beautiful word in all dimensions. Yeah. And I was so excited with the name. I couldn't wait until I get back to Chicago to go to my room and see if that Chobani.com was available.

55:39And I guess it was because you got the domain. Yeah. And so now you've got a name and you've got a separator to make the Greek-style yogurt. So what else did you need to do? What happened next? So I spent a enormous amount of time about the cups, you know, what the cups is going to look like. The cups for your yogurt that you were going to sell. Cook for some more yogurt. I was so convinced that if I am going to make this yogurt and is going to make it in the shelf, it cannot be in the cups that is available in this country. It needs to be some European cups. But the cups are, as simple as it sounds, if it goes into yogurt, it needs to be FDA approved.

56:20So you can't just get the cups from anywhere. It needs to be FDA inspected plant. And I found out that there is a plant in Bogota, Colombia, that I went and they said, we will make it for you. We will sleeve it for you and we'll ship it for you. And I said, that was good. Because none of the packaging companies here would make it for me. And this was going to be, initially Chobani was just single serving yogurt. It wasn't like it in the big tubs that you buy it in now. Initially, it was just a small cup. Exactly. Small cups. Yeah. And then I wanted to have a foil that every flavor has its own foil design on top of it.

56:55And at that time, you know, for now it's very, very normal. It's not a big thing. But at that time, people said, why? You know, people never do those things. And don't you waste, aren't you wasting your money? Aren't you making yourself competitive and all that kind of stuff? My view was I spent so much time making this yogurt. And I think it's one of the best that I've made. And people will not, you know, see the difference if I put them in the same cups. So if I can catch their eye, have them to try it once, the yogurt will finish the work. Got it. And that will be the conversion. And the recipe is simple.

57:35It's milk and a culture. But I guess when you talk about perfecting it, it was about how long you sort of heated it and how long you sort of let it kind of rest. I mean, because the basic ingredients, it's two things. It's milk and culture, right? That's exactly right. And unless you make the flavor ones, but the basic thing is very simple, milk and culture. And you don't want to use preservatives and you don't want to use any other ingredients. And so it was just trial and error until you find it. It was. Yeah. And really it was about, it was about experimenting with temperature, time and incubation.

58:11And then you've got to blend it to make it creamy, right? Right. After you strain it, it particulates, you know, you have small particulates. Yeah, there's lumps. Yeah, there's lumps. And you need to smooth that without breaking the texture, right? So that's extremely important as well. I mean, I used to get really upset when I see yogurt on the lid. you know on the lid you didn't want to see on the lid you wanted to be so perfectly smooth in the cup exactly it wouldn't touch the lid exactly i would open a cup and if i see yogurt on the lid that was a bad day right right you were totally obsessed with it as you should be because you're you're trying to make a product that's so good that it's gonna knock people out the first time they try it exactly i wanted to make it something that that they look at from every dimension this is something that they've never seen before.

59:05And probably halfway through, it would have made the job because this is huge standards I'm going. But I have no luxury of, oh, I wish I had done that. I wish I had done that. This is one shot. If it's not successful, I'm out. And I'm out in a very, very, you know, very bad way. Why don't we come back in just a moment how Chobani starts growing so quickly that Hondi can barely keep up, and then how it almost goes bankrupt. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

1:00:14As a small business owner, you know that change is the name of the game. details at T-Mobile.com.

1:00:25Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2007. The yogurt factory is up and running, and Hamdi has found the first retail location for his Greek-style yogurt, a kosher grocery in Great Neck, New York. When I made that first yogurt, it took us all night um kyle and i one of my colleagues who led the sales side of things we were in the plant probably until like one or two o 'clock in the in the morning and we made four flavors each about 50 60 cases and we shipped it to this person and i'm waiting uh for some kind of response how is that going to come and when i received the second order I called the person and I said what do you see if you could share me some observation he didn't say this is flying off the shelf he didn't say this is amazing he said well it looks like people are buying it and some people came back and bought again so yeah send me some more and that was encouraging yeah and then I guess pretty soon after you got into that kosher store in Great Neck you got into your first grocery chain which was ShopRite which is a chain of stores on the East Coast.

1:01:46And that must have been a pretty big deal, right? Yes. That is the biggest event in the history of Chobani. Now, in order to be able to make it to ShopRite or that kind of conventional stores, you have to pay what they call it, listing fee. And every cup, I don't know what it is now, but I think at the time it was$30 ,000 for each cup to be on the shelf. Just let me understand this. So when you go to a small kosher grocery store in Great Neck, New York, you just send them a pallet and that's it. But if you want to get into a big grocery store like Kroger or ShopRite, you actually have to pay them a fee to stock your products.

1:02:25And it can be a lot. It could be tens of thousands of dollars per product that you sell. And by the way, all grocery stores do this, right? Target, Walmart, they all do this. Most of them. And they do it because they can, right? Basically. That's the only way. That's a revenue generation for them. And for a small startup, it's a big block. If you want to play in the mass supermarket chains, you can pay, I don't know, if you have four SKUs, four products that you put on the shelf, so four times$120 ,000,$150 ,000. And$150 ,000 is massive money. And if it doesn't work, within three to six months, it comes off the shelf.

1:03:08So he has to perform to stay. There's no obligation. So it's a huge risk. It's a huge risk. But here's the thing. It seems to me the next logical step would be to go to Whole Foods and to try to get into Whole Foods. Yeah. Which is easier in a lot of cases because there's a lot of autonomy and the buyers are regional and they don't have the high stocking fees or I think any fees. So why wouldn't you just go down that route? so I did not have huge interest on natural channels I wanted this product to be in a mass channels that ordinary people shop you didn't want this to be like an elite product exactly I was very convinced once I can make this to main channel and people tasted it this is going to go up you know everybody was going to happy all I needed was one example yeah and then the shop right guy said how are you going to pay for the for the listing p and this is a true story the guy said well we need to get paid and we had no money and we said can you take percentage of that 150 000 from each invoice when we ship it to you and the guy said yeah that's fine but what if it doesn't sell you know i have no invoice i have no what am i gonna cut it from i personally said if it doesn't sell, I will give you the factory.

1:04:32Wait, so he's saying, well, what if it doesn't sell? You're saying my factory is the guarantee. Yeah. I said, I'll give it back. And the guy laughed and I think he found out that this is pretty crazy and bold and he made a decision to take it. And then, and about two, two weeks later, I had a phone call from him. He asked kyle to call me and he called me and he says i don't know what you're putting inside this yogurt i don't want to know but i cannot keep it on the shelf wow when he called me that was the combination of three years of doubt hard work finding solution being on the road trying to figure out things and all that kind of stuff hassle that call really summarized the whole thing for me how is that possible Hamdi you got how do you just put it on the the thing is that you put on the shelves and you still have to get people to notice it because you go to a grocery store there are 25 30 000 products how did people even know about it it was the cup it was just it was just the label it was bright yeah yeah it was just it's to look different yeah and then I priced it below my cost at that time.

1:05:56You knew you were going to lose money. Yes. I was okay to lose money for probably two months. Okay. And by the way, how many shop rights were you in? Like five, 10? No, no. It's all of them. I think it was over 100, 120, something like this. Wow. So yeah, you get into system wide. Yeah. But I had a simple napkin calculation. If I reached the 20 ,000 cases I will break even and everything after that it would be you know profitable. And a case is how many cups of yogurt? 12. 12 okay yeah so you're taking a gamble that people would just find out about this at shop rights and buy it. Exactly and when he put it into an ordinary shelf like a common shelf where everybody shopped on yogurt aisle I received an order and it said 25 ,000 cases.

1:06:47And I'm looking at this order and I'm saying, is this 25 ,000 or is it 2 ,500? I'm not sure. And I called Kyle. I said, is this accurate or is the missing one zero? He says, no, that's accurate. And I said, is this for a month? He says, no, that's for the week. Yeah. I'm wondering, Hamdi, I mean, this is the thing, right? It sounds great. You're selling all this yogurt, which is exciting, but then you have to actually fulfill those orders. like how are you actually able to make all that yogurt

1:07:19so that is so you know you say you get this all good news that yeah he wants 25 000 cases the other one and then you look at your blueprint you look at available equipment and the volume you look at all the limitations that you can think of, and they all cost money, right? And how are you going to meet the demand? Yeah. So we're converting, you know, cooler space into a filler room. We're converting toilets into the offices. Whatever needs to be done outside of jeopardizing the quality of the food, we're trying to find. I read that you were like, people were like sleeping in the factory because you literally had to fulfill these mass orders and you just did not have, I mean, the people and the facilities to actually do it unless you just operated 24 hours a day.

1:08:17It is, I mean, you're talking about Thanksgiving, Christmas, Fourth of July, weekends. Anyone who has a minute to spare, they're back in the factory. And it's not even, I'm asking, they're doing it by themselves. You have to realize, guy, this is a plant that was the last factory that got closed, right? So you have a large corporation closed and left. You know, they're looking at me and says, what are the chances? And then they see the orders are coming. And this is like, what the hell is going on? Like, is this ever possible that this could happen? So everyone went from complete disastrous mindset or soul set to exciting place where everyone gets so elevated we were just high in a way right and you were chain smoking just to get through the day yeah and i was i was i was taking tylenol advil like uh nuts i was i was wow not you were not taking care of your health no i was physically mess most of the nights i'm sleeping on the floor on my office there there is an office i guess on chairs really eating pizza every day i mean it's it's pretty pretty horrible lifestyle yeah um all right so you obviously this thing is taking off and then you start to get more accounts and there's bjs and then and then costco um but you had to i mean now you really have to bring lots of people in.

1:09:53And one of the things that you did was there was a, I guess, like this refugee resource center, like in that part of upstate New York. And they had people who just needed work. And you were like, great, we need people to work. Tell me how you connected with them. So this is how it happened. Utica is about 30 minutes drive from where the plant is in south edmonton and i lived in utica utica new york yeah yeah i lived in that apartment in utica and i hear that people are settling in utica as refugees from around the world and they're having a hard time to find a job yeah and i called the refugee center and i said what is the problem and she said uh these are people have right to work legally settled and they don't speak the language they don't have you know transportation or people don't want to touch it because it's an unknown and you know all the other social issues i immediately said we can solve these problems um i drive from you to cut the plant every day so why don't we get some cars and buses that people can come with and we will hire some translators and we will train them at the work and we will make this work and people had concern and said why are you sure you know how people are going to take this i said i'm pretty sure i know my people and that was started very slow and and the people who started working there brought their brothers, their sisters.

1:11:21It became a community. And I never thought that was a refugee work. It was people in the community and an opportunity for them to participate as much as everybody else participated. So you have the people, right? And you've got this plant by 2010 so just three in three years you're doing 260 million dollars in revenue that's like by my calculation that's more than 150 million cups of yogurt that you're selling how do you go from like two you know maybe hitting 200 ,000 to 150 million cups how how do How were you doing that? Well, one of the best thing that I had is the price architect that I put it in place.

1:12:10It was giving me enough profit to be able to invest back into the company. So you could finance the growth entirely through the sales of the yogurt. You could finance, because making more yogurt means buying more milk, means buying more containers. Like, you got to pay for all that. And that is usually when a business goes out to investors or private equity, you know, to bring in a big chunk of cash to scale. You were able to do that just from the sale of the yogurt? Exactly. And having a macro attention on the cost, keeping it extremely simple. You know, at that time, you know, not only$250 million until$600 million, I ran that company on QuickBooks.

1:12:52Wow. And everything, everything in Chobani was internally financed. We never had an outside investors. Right. So I had over a billion in sales in five years and making really, really good margins, good profits. Every penny. I had not even taken a penny from the company. I just put it back into the company and invest in equipment. Yeah. Yeah. But here's a question, Hamdi, right? You're this guy from a village in rural Turkey, right? In a Kurdish village. You barely spoke English when you came to the U.S. Here you are now, okay? So a couple things I'm assuming start to happen. First of all, the big brands, the Danans of the world, start to see this and are like, we got to get into the Greek yogurt business.

1:13:44But the second thing that I imagine is you've got people coming up to you and saying, hey, Hamdi, you're going to get crushed by Dan and you'll play the General Mills soon. You've got to bring in outside capital. You've got to blitz scale this thing. You've got to bring in a professional team to run it because you are not equipped to do this. You don't have the experience. You're going to get crushed. And I have to imagine people are saying that to you. They are. and I'm getting a lot of phone calls from private equity people, venture capitalists and all that kind of stuff. I'm getting calls from the ordinary banks.

1:14:19But this is the blessing I had. I was isolated in that small town upstate New York. I have no previous network of people in business. I don't know anyone. And I am kind of unreachable. I have no board. I have no advisor. I have no investors. And the people in the company is factory workers and salespeople and, you know, that kind of stuff. So we are kind of from Mars. Right. You just had your head down just working all the time. You weren't. And I don't even, I don't think it sinks at me that what I have just made it. I don't even realize what it is. Until, like you just touched a little bit, that I realized that this is how it is.

1:15:06You build something. The big food is going to come with two things. One, do you want to sell? And in that is a hidden another information. If you don't sell, I'll make the same thing. Yeah, I'll crush you. I mean, big food companies must be coming to you and saying, look, sell to us. We can make this bigger. You'll make a lot of money. But if you don't do it, let's do it on our own. And we've got massive marketing budgets. We've got a huge distribution network. You're going to be in trouble. Yeah, yeah. Yeah. That's very scary. And all this time I'm betting on they're going to be very slow. And they were slow.

1:15:43So by the time they wake up, really, I was at$500,$600 million sales area. Wow. And they did come and they said, what about selling? And the numbers were with billions. They were offering you. And you could have just, because you owned the company. It was yours. Yeah. It's a great, great offer. so now he's so imagine this guy um you know working in the factory 24 7 living in a one bedroom apartment in utica that the bed hasn't been you know fixed maybe chain smoking not taking care of himself drinking a lot of coffee eating pizza slices okay exactly and then somebody says you can be a billionaire and i can't even spell billion you know really literally i didn't know going to have to spell billion so now that's you yourself having this real moment right um no one can tell you what to do yeah no one can stop you what to do i have done no promise to anyone i have no partners it's just this thing is in front of me so there must have been a pull to just do it take the plunge hi imagine i am in upstate new york and i am mid 30s right maybe at the time i don't know close to 40 and i have offered this huge amount of money and yeah there's endless what you can do with this money yeah and i said no to it and i said no a few times and why I was more excited about the journey these things was happening than the value was generating from it.

1:17:33And it felt like I'm in the soccer game. I'm in the middle of the soccer game and I love it. And I'm into this game in such a massive way and I'm completely elevated. First time in my life, I feel like things are coming out of my being that I didn't even realize it existed. and I feel alive. Like the childhood I used to be is like, I'm wondering what is behind that mountain, what is behind that mountain. I have this enormous amount of curiosity and I wasn't going to stop it for anything that in the world, that desire to see where this was going to go. Yeah. But you clearly had enough confidence that your brand at that point, Because I think by 2011, you were the number three yogurt brand in the country after Yoplait and Dannon.

1:18:27But at that time, you knew that there was going to be an explosion of competitors. Absolutely. And you weren't worried. I was very worried. I was very worried. And when I said no to those things, I knew that I needed to build another factory out west. To make more, well, to produce more, obviously, yeah. To produce more and de-risk it, you know, be in one location and bring more innovation to it. When people will copy the first thing I do, I would be on my way to the second thing and third thing. And I built a factory in Idaho, which I went to Idaho first time. I said, we need to build this factory really fast.

1:19:06It's a million square foot plant. Yeah. Yeah. I think now it's a 1.4. At that time, it was close to one million square feet plant. Wow. And with 14 lines, we built it less than one year. Wow. So that really, it was in the borderline stupidity. Meaning I underestimated how complex that was going to be and I underestimated how crucial would that be on the health of the company if I was wrong and if I did something not right. Yeah. And one plant or one location or early company's journey is completely different than the second phase. And if you don't make that transformation, it's going to be extremely damaging.

1:19:55And it became almost – the problem with that is you do not know how to make separation with your people that you started with when the company grows. In other words, you had to basically get rid of some people, and it's hard to do that because they were the loyal people who helped you start it. Exactly. But you had to make some changes. Yeah. We made changes after we hit the wall, right? We had a quality issue with mold. Well, this is in 2013. You guys, I think you had a recall, which really was very damaging, right? it was actually quite damaging for you because you you don't use preservatives and yeah you know and you had some containers that got spoiled yes i will never forget that gentleman that came to our plant in idaho he said hamdi this is mold mold is in the rooms in the bread it's everywhere you know you open the cup and you see green mold and it's not nice yeah and it was it was a recall And as you said, it was very damaging.

1:20:54But we came out, we fixed it, all the issues. And it took us three more years after that to get the bottom of the structural issues like peoples and all that kind of stuff. But to my bone, to myself, I knew the investment in Idaho was the right thing. What I would question now is the way that I did it, right? I would have been more prepared and I would have done in stages. I wouldn't do it as fast. I would be more cautious. I would put more team members in place and make some changes. Right, because the mold issue came from that manufacturing plant in Idaho. Exactly. Right. And there was a time that I will never forget, which is another moment that I will always go back to.

1:21:42You're about to file bankruptcy. You were about to file bankruptcy. Exactly. I've never talked about this anywhere before. So that recall was that damaging you'd gone from? It wasn't that damaging. But what it is, is the banks got really nervous and they wanted their loan to be paid back. Yeah. And that loan was used to build a factory supported by EBITDA. Now you have enormous amount of losses because of that factory. Yeah. So the recall happens, all the loans get called in, and you've got to basically come up with a cash. And so you're thinking, we're done. We got to file bankruptcy. Well, there's cash.

1:22:20People want the world. They want so much from it. And the people who are showing interest, looking at your situation, and they start acting opportunistic. So they offer less money. They offer more money, but they want more. They want more equity, right? Exactly. And then they use different, different reasons to come up with those things. A time came, and I remember the gentleman called me, and he said, here's the amount that you will get. Here is the percentage of the company that you have to give away, which was almost majority at the time. And you will be out of the company. And I take this.

1:23:02I said, okay, what will happen if I take this? I'll probably regret every day going forward. you are an entrepreneur, you build things and you make one misstep. And then someone comes with the money and say, hey, take it or leave it. Or this is our conditions for you to do it. And I look at this and I say, I must say no to you. And I tell you why. Because if I'm going to die, I'm going to die now. I'm going to die one time. I'm not going to die every day, rest of my life. So I said, I'll take this company to bankruptcy. Wow. And you say, how do you go from the top of the mountain to bottom of a hole within three to four months?

1:23:45Yeah. Right? And I'm not expecting that, accepting that. And I said, okay, it's fine. I built it. I'll bury it. It's a very, I mean, you're very stubborn, right? And I mean, that's a good quality, but it can also be sometimes not a good quality. Yeah. Ask my wife about that. So she would say the same. you have a way you have a way to make me say things that i've never said before but i love that this conversation because because we come close to making decisions like that that people normally don't know it is hard that people make decisions yeah but i had no doubt at that moment i remember walking from my apartment at the time i had an apartment in new york to an office where I was meeting one of my colleagues and a lawyer and a financial person.

1:24:36And next to the park, I cried. And I saw the tears coming because it's hard. It's hard that you are about to bury something that you give your best to and you built. And the options were not good enough for you to be able to save it. Yeah. Clearly, you didn't file for bankruptcy. You didn't. But how did you get out of that? A night before. A night before. Wow. Yeah. One night before we filed, the banker called and said, Hamdi, we hear that you're going to do this. It's going to make us look so bad. I think they were also acting really out of ordinary at that time, forcing me to do something. And he says, well, why don't we give you so much money and six months as long as you promise you're going to do an event that you're going to deliver yourself in certain things.

1:25:32I said, yeah, sure. But I had no idea this was going to come. I knew this was a road that we were going to end up and this company was going to be a bankrupt and maybe it wouldn't exist later on. Yeah. If you had filed bankruptcy, it doesn't necessarily mean that the brand would shut down, right? I mean, you could restructure it. Totally. But it was unclear what would have happened. I don't know. I mean, but the one thing is, How do you go become one of the fastest growing company in the history? Because we literally went from zero to billion in sales in five years without taking a penny from our side in that factory.

1:26:08It shouldn't have happened. It's a story that should never have happened. It should have been buried by the big yogurt makers within a year or two. Yeah. No. Hamdi, I'm curious because after that crisis in 2014, TPG, this private equity firm, comes in, makes an investment. And part of that agreement is that a man named Kevin Burns would become the interim president and COO. You were the CEO. You had founded this company from nothing. You built it from a cheese place in upstate New York into what it was. So the achievement at this point was enormous. Now, there was pressure for a new CEO to bring in a professional CEO.

1:26:54At the time, there was an article in the Wall Street Journal. I'm sure it was not easy for you to read, but it was critical of you. It said, you know, he's in over his head. You know, there's not the operations are scattered and blah, blah, blah, blah, blah. I'm sure that must have been difficult for you to read, but I also wonder whether a part of you was able to say, you know, look, I've done this. I've made this. Maybe we should have a different CEO in here. I think you come to a realization in a certain time and you say, okay, I'm good at certain things, but I'm not good at this and this and this.

1:27:29I was very convinced that I knew how to start things, how to scale things, but not necessarily put the infrastructure in place to be able to run the company day in and day out without being involved in the floor every single day. So I saw that value. And that's not because we were not growing. That's not because there was a lack of opportunity, all that kind of stuff, or I was tired or I didn't want to do it. I was questioning myself if I'm capable of taking this company from what it is to the next level because I had never done this before. And you should be, and by the way, you should be asking yourself that question.

1:28:02A hundred percent. Yeah. The problem with the CEO things is through this journey of my, from 2009 to 2011, I probably interviewed five, maybe six candidates for CEO. and every time I interview the person and I would see a dimension that would not fit Chobani. I would see a dimension that it would be risky. I would see a dimension that it would not, it would not be a good working relationship with me. Whatever that might be. Yeah. I was extremely worried about the culture and what I want this company to be. Now it's coming to a place that business can be really, really powerful force. And it is not about money.

1:28:54It's not about this. But what is the role the company can play in society? I can't say I had that state of mind in 2009, 2010, 2008. No. Right. Right. Because you, in the last sort of seven, eight years, really very much publicly turned, kind of made Chobani into a company that was, you know, big advocate of immigration reform. to hiring refugees, supporting refugee admissions into the United States, things like that that are risky, right? Because a lot of companies don't want to, for understandable reasons, don't want to take stances on hot button issues because they just want to focus on their brand.

1:29:37And oftentimes that's a good decision, right? We just want people to buy Coke and Pepsi. Don't ask me what our politics are, but you decided we're going to actually stand for these things that there's lots of people in America aren't happy about. So why? I mean, it's risky. I look at from the human perspective side of it. I said, why can't we do things that is good for the society and community? And yet I can prove the only reason Choban is extremely successful, if it is, is because of those angles. I didn't follow the craft route. I followed the kid from you know from kurdish mountains i believe yeah mix with the farmers in that community and say you know what let's open the doors let's open the windows let's open the walls that people can come in and participate and be part of the success that you built but never ever in my statements i have said something that i have not implemented into my own place for years and prove that this works before I have a credential to go out and talk about it.

1:30:38Yeah. Hamdi, there's so much we can talk about, and obviously we're not going to be able to get to everything in the story of Chobani. Today, roughly Chobani's got about 22 % of the yogurt market in the US. It's a massive company with lots of different brands. There's talk about eventually taking the company public, which may happen next year or maybe beyond. And when you think about the story of this young guy who was like grew up, you know, helping his family, their flock of sheep and goats to, you know, how you kind of made it to the U.S. And, you know, all those people in New York who brought you their farms and let you kind of live there.

1:31:25And then you built a company that, you know, with a multibillion dollar valuation. How much of that do you think has to do with just how hard you worked in America? And how much do you think has to do with how lucky you got? I guess combination of all. I don't know. I sometimes pinch myself to see that this has really happened. I always say I brought a seed. Maybe it was loaded with a lot of tradition, love, knowledge, and whatever it is. But this land was a great soil for that seed to become something. And I have three kids now, a girl and two boys. And that's, I feel like, is my biggest responsibility, make sure that the next generation, my children and the children's and children's and everybody's children, find the land the way that we found it.

1:32:19And if anything, it's improved. But I think it's in an enormous amount of stress. and we cannot take this as, you know, as like granted. We just have to make it work. We need to work harder to make sure that it stays alive. That's Hamdi Ulukaya, founder and CEO of Chobani. About a year after we ran this interview, Chobani acquired the ready-to-drink coffee company La Cologne for$900 million. And this year, it bought the plant-based frozen meal company Daily Harvest for an undisclosed amount. Chobani also announced that it would be spending over a billion dollars to build a huge factory in central New York, not far from where the company got its start 20 years ago.

1:33:10Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. and please sign up for my newsletter at guyraz.com or on Substack. This episode was produced by Josh Lash with music composed by Ramtin Ereblui. It was edited by Neva Grant with research help from Claire Murashima. Our production staff also includes Alex Chung, J.C. Howard, Carla Estevez, Sam Paulson, Casey Herman, Catherine Seifer, Carrie Thompson, Andrea Bruce, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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