Business Column

Here’s why central New York-based Chobani is deserving of its rank as 9th most innovative company in the world

The central New York-based Greek yogurt powerhouse Chobani was recently ranked the ninth most innovative company in the world by the business publication Fast Company — and rightfully so. Chobani’s founder single-handedly created a billion-dollar market in the United States for a new food category.

Chobani was founded in New Berlin, a town near Norwich that is about an hour and a half outside of Syracuse, in 2006. Hamdi Ulukaya, who ran a feta cheese business, decided to diversify his business and purchased a factory owned by Kraft Foods that was shutting down. New Berlin was about to become the next victim of the faltering manufacturing economy of central New York when Ulukaya bought the factory on a loan backed by the Small Business Administration and started his journey of creating the American Greek yogurt craze.

Ulukaya set out to build a company that differentiated itself by quality and style and valued all its stakeholders. He created a high-quality product, but not at the expense of the company’s employees, which is ultimately why the company was able to build such a successful brand. But there are several other reasons Chobani was able to work its way to a No. 9 ranking on innovative companies.

Greek yogurt was a new style of yogurt at the time in the American market, and to drive real growth, Chobani needed to create a yogurt that was of much higher quality than the other types already in the market. The Turkish Ulukaya did that by bringing the European-style yogurt — which is thick, rich and nutritious — to the American market, which was full of yogurt that was light, watery and high in sugar.

While building the company, Ulukaya made a decision to not take outside investments because he felt the pressure of external investors would compromise the business he set out to establish. This played a fundamental component in the development of the company’s culture, and ultimately its success. It’s unprecedented to build a company from the ground up in such a high-capital business environment without taking outside investment.

Another aspect of Chobani’s business that has largely contributed to its success is its choice of location. Chobani produces a perishable product, which adds unique business risks and costs. The shelf life of the product is very limited, and in order to extend that shelf life as long as possible Chobani has to reduce its production and distribution time as much as possible without compromising quality.

“Chobani is located perfectly for their business because the upstate New York area is full of dairy farms,” said Patrick Penfield, a professor of practice for supply chain management at Syracuse University. “It greatly helps them reduce costs.”

By locating its manufacturing facilities in close proximity to a vital raw material, Chobani has been able to reduce its costs and in turn keep its prices competitive with the larger yogurt brands that once dominated the market. In terms of finances, without these cost-saving measures, the company may not have survived. And Ulukaya managed to do all that without taking outside investments.

Another central piece to Chobani’s success story is the company’s focus on people, specifically its employees. One of the downsides to Ulukaya’s strategy of not taking outside investment is that he owned most of the company for the bulk of its history. This changed recently when Chobani announced it would give every employee shares up to 10 percent of the company’s total value. The amount of shares were determined by how long the individual employee has been at company.

Organizations that are driven by valuing people tend to be the most successful in the long term. Many companies will value customers over their own employees, but if a company makes its employees a priority, the employees will in turn take care of the customers. In this way, Chobani is setting a great example of how to build a sustainable company around people.

Other companies headquartered in New York state have the potential to emulate Chobani’s success. Although a large part of Chobani’s success does revolve around its strategic decision to locate its headquarters close to vital resources, none of the company’s achievements would be possible without its strong values and culture.

Building a business comes with many challenges, and it’s crucial to not falter in the face of difficulty. The road to Chobani’s success was not always easy, but Ulukaya never forgot the values that he began the company’s journey with.

Daniel Strauss is a sophomore entrepreneurship and finance double major. His column appears weekly. He can be reached at dstrauss@syr.edu and followed on Twitter @DanielStrauss13.

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