He said that yoghurt is not sweet but sour, he made Americans sour yoghurt fans: Hamdi Ulukaya

Hamdi Ulukaya, the founder of the famous yogurt company Chobani in America and known as the king of yogurt, was born in 1972 in a village of Erzincan in Turkiye. He worked as a sheep shepherd in his childhood and left the Department of Political Science at Ankara University in 1994 and went to America to learn English. He decided to sell yoghurt and cheese with the advice of his father and eventually became a world brand with the Chobani brand.

Hamdi Ulukaya, a yogurt lover, tells his story as follows:

“I love yogurt as long as I can remember. As a child, I grew up eating the thick yogurt that my mother made with her own hands at our dairy. When I moved to the USA in 1994, I found the yogurts here disgusting. They were all too sugary and soggy. So when I was craving yogurt, I usually made it myself at home. So in March 2005, when I was browsing my junk mail box, I was intrigued when I saw an advertisement for a fully equipped yogurt factory for sale. The factory was located about 100 km west of the cheese company Euphrates, which I founded north of New York a few years ago. In 2005 Euphrates had less than 40 staff and $2 million annual turnover. It could barely stand in this state. The factory was owned by Kraft, a famous company that had decided to exit the yogurt business. The ad also included a few rough photos of the factory; The factory, which was established in 1920, was obviously not in very good condition. Then on a whim, I called the real estate agent and set up a meeting to see the factory the next morning.

Located in a small town and resembling a cemetery, the factory had a gloomy atmosphere. Its current 55 employees were preparing to close the factory. There was a lot of equipment inside but everything was old. The best part was that the factory's selling price was under $1 million. So much so that some machines would cost more than that even if I were to buy new ones. On the way home, I called my lawyer, who is also my investment advisor, and said I wanted to buy the factory. He said it was a terrible idea. He had three good arguments about it: First, I was getting the factory "as is", I had no idea how well it would work. Secondly, Kraft was a very successful company and if it was withdrawing from such a facility and the yogurt sector, maybe there were things that I did not know. His last and strongest argument was how I to get that much money. He was right on this point; because I didn't have the money to make such a purchase.

Later it turned out that I could borrow money to buy the factory, and I continued to take loans from banks after Chobani entered the market. I reinvested with profit from sales. I would like to emphasize this part of the work in particular. Venture capitalists, private equity firms, strategic partners and potential buyers have made offers of financial support to us since the day we started operations. However, we rejected all of them, so the company managed to grow without relying on foreign investors. Today, Chobani is a multi-billion dollar business and I am the sole owner of this business. In this way, I can manage the company the way I want and direct its future without any external pressure.

Many entrepreneurs find it impossible to grow a business without venture capitalists or equity investors. But this point of view is not correct. Because if I can start a company from scratch and reach a value of $1 billion in less than 10 years, other businesses can do it too.

I took out a bank loan backed by the US Small Business Administration to buy the yogurt factory. I learned a lot about SBA (Small Business Admistiration) loans from two loan officers at KeyBank. I spent two days writing the business plan, preparing personal collateral and clearing the 10% required for the loan. I obtained the remaining 90% from the bank with a low interest rate and a maturity of 10 years. All these works took five months in total, and on August 17, 2005, I had the key to the factory.

I immediately started by bringing yoghurt masters from Turkey to the factory and we devoted the next two years to perfecting the yoghurt recipe. I recruited all four employees who had worked at the Kraft company. Because we had nothing to produce. I kept them busy with painting and repair work at the factory for a few months. We started making private-label American-style yogurt in early 2006 and became a contract manufacturer for other companies; which, in turn, provided us with some income.

In addition to beautifying the flavor of the yogurt, we also put a lot of effort into the right packaging. Packing was very costly - about $250,000. American yogurt was sold in narrow-mouthed containers. In Europe, the yogurt cups were wider and deeper, which is what I wanted for Chobani. I wanted buyers to understand that the yogurt in this container is different.

By the end of 2007, we were ready to enter the market. At this point, we have made several critical decisions that will enable us to finance our growth. First, we insisted that Chobani be sold in staples rather than specialty grocers, and that it be stocked in the aisle with other yogurts rather than on gourmet or natural product shelves. Probably the most important decision we've ever made. Although most Americans had never heard of "Greek yogurt" before Chobani, in the mid-1990s a rival firm was selling Greek yogurt in specialty grocery stores. They remained a rare item as they had a limited distribution. We wanted Chobani to be a product accessible to everyone. If we had said yes to the specialty and rare markets that made offers to us, the company would not have been able to grow so fast.

Second, we negotiated with retailers about the fees for placing our yogurt on the aisles. Most supermarkets required a minimum of $30,000-$50,000 to put a product on their shelves, with some demanding as much as $100,000. Therefore, when we wanted to put six different kinds of yogurt in a market, the required amount was up to $300,000. We didn't have that much money. For this reason, we tried to agree with the markets to pay the aisle fees as we sell yoghurt. When they said "what if it doesn't sell", we showed our factory as a guarantee.

Third, I worked hard on calculating the product unit price in order to finance future growth. We calculated the cost of the container, the cost of the products in it and the wages of the workers one by one, and made a precise price calculation model that would allow us to make a profit even if around 20,000 sales per week.

This was a relatively low-volume business: if the customer liked the product, it meant we'd quickly make a profit and use the profits to grow. As a result, we set the unit price as $1.50. More expensive than traditional American yogurt, which sells for less than $1, and less expensive than European-style yogurt sold in specialty grocery stores for $3 to $5. Many brands have tried to negotiate with us to launch it at a lower price and raise the price later on. But I prevented this in the future by finding a more sensible unit price.

Often when a new product enters the market, companies have a hasty curiosity about whether the product will be sold. We did not have such a problem. Within a few weeks, Chobani was on ShopRite and we had an order for 5,000 boxes. When we received the first order, I checked several times whether the desired number was 5000. In fact, the first difficulty we faced was not being able to sell enough yogurt, but not being able to prepare enough yogurt.

Over the next 18 months, we found ways to expand the factory's capacity without making major investments. We did not have a situation to buy new products. That's why we decided to travel around the country and buy second-hand products in installments. We were finally able to retrofit our stuffing machine (which was the biggest challenge in the factory) and increase our production capacity to over 100,000 boxes per week. We have also restricted our capital, which is based on manual labor rather than machinery. For example, filled yoghurt containers were closed by hand. During these times I was rarely able to leave the factory - in fact, I slept there some nights.

We were extremely careful with money. Too many startups are hiring a lot of people anticipating future growth, but we waited until the business really grew. Every Friday we went over financial matters with my assistant. I took care to pay the wages of our employees and milk suppliers on time. But we kept the rest of the bills on hold. Because we made the business profitable early on, every yogurt we sold made us more money. Our model also had other advantages: Yogurt was a perishable product, which limited stocks. Supermarkets paid us right after delivery, but most of our suppliers gave us a month or two to pay. This has helped our cash flow a lot.

A few months after our sale, I started getting calls from potential investors. In early 2008, we attended the Expo West convention in Anaheim, where natural product manufacturers and large retail chains meet. Our demonstration at the convention attracted many investors, and they repeatedly told people around them that they wanted to buy a stake in Chobani. Many said that if we want to grow, we will need more money. They said that if we work with them, we will have experienced managers and strategists to guide us in our growth.

All this was very new to me. I didn't even know what private equity was. My dream was to turn Chobani into a simple mother-like and popular company.

I had no strategy about how to deal with potential investors. But Greek yogurt became popular so quickly that stronger competitors, such as Dannon and Yoplait, began preparing to bring their own Greek yogurts to market. We needed to grow faster to prevent rival companies from stealing the market we created. Thus the race had begun.

For a while, I received interview and meeting requests from private equity companies. It was a learning process. They were trying to make you doubt yourself – it was a standard part of their game. I kept hearing commonplace phrases like: “You've never done this before”, “This is not a good world for new entrepreneurs”. They emphasized the experience, sophistication and wisdom they would bring to my work.

But the more I thought about it, the more I started to trust myself. Yes, we had no experience, but all the decisions we made before were correct. The product and packaging was really good. Marketing seemed to take care of itself. Besides money, what would these "investors" add to us?

I took such a stand because the bankers, seeing Chobani's rapid success, wanted to help us grow. In 2009, we had to make a big investment to expand our capacity. We were getting 200,000 crate orders a week and I wanted to increase that order to a million. We needed at least $30 million in new loans. The bankers had been tracking our progress day-to-day for four years, and for the remaining 18 months they had seen our revenue steadily increase. Our growth project was based on simple math: We were selling mostly in the Northeast, and if supermarkets in the rest of the country were selling as many as we have now, the rate of demand justified our growth plans.

I also knew that the moment we received the money from the investors, time would start to work against us. Private equity investors would likely look to make money for five to seven years, then force Chobani to sell to a large corporation. I've seen other small food companies go through this scenario, and they inevitably lost the spirit they had in going into this business. All I cared about was the integrity of the yogurt; I wanted yogurt to be delicious, nutritious and accessible. If I had agreed with the investors, my ability to connect to my mission would have been limited. I spent two years living in this factory; it was still working and it was my baby. As a result, I stopped picking up the phone from potential investors. There was really nothing to talk about.

Major competitors have introduced Greek yogurts, but at a slower pace than I expected. When I first tried their yogurt; the yogurt was so bad that I thought it must have gone bad. When I sent someone else to buy a few cups, I realized that they all actually taste the same. I even wondered if companies were trying to make Greek yogurt look so bad and lure customers back into sweetened American yogurt. When major competitors launched Greek yogurts, I had $7 million set aside so we could make a strong publicity. But after trying the yogurts, I canceled their advertising plans. There was no need.

Note: Hamdi Ulukaya is a businessman of Turkish origin. Sour yoghurt is a type of yoghurt special to Turks. But since sour yogurt is known as Greek yogurt, especially in Europe and America, he had to use this name.