Transcript
Chobani's secret to scale: Tap into community, w/founder and CEO Hamdi Ulukaya
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Growing up the only way I could go to a city bigger than ours was by train at six a.m. in the morning. And then the next train would be the next morning. And then the train comes in the train station. And then leaves and they become silent.
And it was silence, he was always quiet. That Hamda Ulikia. Founder of Chobani. Recalling the teeny town by the Euphrates River.
Where he spent part of his childhood. He spent the rest of his time roaming the surrounding mountains. We are no matter. The Kurdish nomadic family of hundreds of hundreds of years.
And the fires and the stars. It's like the biblical time. The kids go to school in the winter time. And then the summertime they're up in the mountains. Happened if shepherds in the families.
Making cheese and yogurt. This semi nomadic upbringing gave Hamdi his deep sense of community. Money meant nothing up there. So even if you had money, you couldn't buy anything with it. So what meant more was the social reputations, the trust People respect people because of the other qualities, not necessarily what they own.
If you had thousand sheep you ate the yogurt, cheese and bread, and if you had hundred sheep you ate the same thing. There was no difference. When you're focused on growing a business, it's all too easy to get caught up in cash flow, investment, and profit. And that's understandable. Our companies need money to scale. But Hamdi's semi nomadic background taught him that there is another currency.
The currency of social responsibility. This currency sees a shepherd help their neighbor through a harsh winter. or a business help revitalize its hometown. And it brings people together. In a sense of shared mission.
And co ownership. For Hamdi. This currency. is more fundamental than money. It's why a sense of responsibility to the wider community.
has been a hallmark of his scale journey. And the defining factor in his success. That's why I believe you should build a community with a sense of co ownership. Because smart community investment. Always.
Maximizes returns. You gotta have incredible talent at every position. It's like this gives a huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a free bedroom apartment. We haven't made just how you do it. This is masters of scale.
I'm Reed Hoffman. Co-founder of LinkedIn. Partner at Greylock and your host. And I believe you should build a community with a sense of co ownership. Because smart community investment always maximizes returns.
Picture yourself. in an idyllic American town of the nineteen fifties. We're talking the airbrushed, movie set version ideal. Like Hill Valley.
From back to the future. Or Sea Haven from the Truman Show. What do you see? Maybe large. Chrome fin cars gliding along wide clean streets.
Families window shopping amongst thriving small businesses. Boutique cloth stores, a diner, a drugstore with a soda fountain. Shopkeepers wave cheerily and greet you by name as you pass by. Many of their businesses have been in the same family for generations. Oh.
This scene is highly distorted by nostalgia. But one thing that rings true is how business can and should be an integral part of a community. That's because what makes a community thrive is the same thing that makes a business thrive. A sense of shared ownership. Pride and respect.
That motivates everyone to strive for the greater good. This is why business has the most profound impact when it's embedded in the community. I wanted to speak to Hamdi Ulakai about this because his company Chobani Reached massive scale. Thanks the deep sense of community and co ownership.
that Homy has fostered at the company. Hamdi grew up with strong bonds from his semi nomadic Kurdish community. When he left for university in Ankara, he saw how Turkish society as a whole was not as closely knit. When I get to university and I get being aware of, you know, social issues, human rights, especially on Kurdish issues, being Kurdish, and I start publishing a newspaper and that got me into uh enough trouble
that I had to get out of the country. Homdi arrived in New York with just a few thousand dollars to his name. and basic English skills. He spent the next few years moving between colleges and jobs to support himself. Things changed when Homne impressed the teacher with an essay on the cheese making of his nomadic upbringing.
She has a farm in upstate New York with her husband. And she's inviting me to go up there for the weekend so we can make some cheese. With the ghosts that they have. I said, Of course, I would love to come. Um
When I get there, it was one of the most beautiful sights. After five years of New York City's weight on my shoulder, I thought wow. This feels like home. This is familiar. This is so beautiful. And of course it was another level of beauty. The nomad found his next home. And this time, it felt like the kind of community he could invest in. I fell in love and
I said if I'm going to stay in in this country This would be it. And I said I could stay here and I could take care of the animals. And I stay in that farm for a year and a half, built relationship with the other farmers. And then that's how really being with the connection with the farmers and the milk and our connections back home, how we made cheese and yogurts and things started from there. After Homte took classes at State University of New York, Albany, he left that farm to find full time work. And he looked back to his nomadic childhood for inspiration.
My brothers in my family would make cheese, not necessarily hundred percent feather cheese, but the form of feta cheese. We call it Tulum. as a kid growing up, we would just make it it was a small Business and no bets and Everybody would do the same thing.
Hamdi's father shipped over the cheese, and Hamdi sold it to a local distributor. However, importing was expensive and inefficient. So Hamdi quickly developed his idea and moved from importing To creating. He found a small, affordable site in Johnstown in upstate New York, and set to work.
I really had no business experience. So I'm very foreign to this whole thing, but I'm still driven by it. And we set up this small cheese plant. I had really enormous support from the local community there, the economic center there. Making cheese and yogurt had become a way for Hamdi to invest in the rural community he'd fallen in love with. Euphrates Fetachees was born.
But there was one small detail Hamdi had overlooked. And the first cheese came out and I said, Oh, what do I do with this now? So I have to sell And it's like who buys these shoes? Well
There was at least one family who bought it. By the way, I've had some of the Euphrates feta cheese. Um had some of that when I was younger. You know, because uh my family from California is a little bit foody, so we we tend to look for interesting and good international foods. Yeah. There's a lot of ethnic food tradition in California, Armenians and Greeks and Turks and Lebanese Yeah, it's massive. Yeah. Feta is the center of all of those dishes. But a few foodie families wouldn't be enough to sustain Euphrates.
I start looking at the distributors and I realized most of it is Greek distributors that they use this cheese to make in the Greek salad and then you go to diners and that's how you use it. And the volume is so small, they only buy a pallet a month or maybe every two months. Hum David's so wrapped up in the romantic image of bringing his family's variation on feta cheese to the US. He hadn't stopped to consider that people might be indifferent to his efforts. And I made the calculation and I realized I didn't make
All this planning right. You know, I thought I would just make the cheese and people come and Oh, you're the savors of all nations that making the feather cheese here. You're the best and the picture was complete opposite of that. Hamdi realized. He needed to invest even more deeply in the community in order to scale Euphrates. extending ties with local distributors and customers.
Meanwhile, he faced a grueling mix of physical labor making the cheese and long distance drives to far flung suppliers. All while Trying to keep the company afloat. I was so close. to bankruptcy, to breaking myself, to shut it down, to not being able to pay for the milk or not being able to pay for employees.
It really trained me to survive. It trained me to be resilience, you know, it it trained me to find the solution and find a way to make it work. And I always said if I survive through that, I could survive through anything. You know, that was so intense. Hamdi did make it work, and for a time his ambition went no further than keeping it a small scale operation. Until one day
A piece of junk mail caught his eye. And for some reason, I don't know what that is, I called the number and happens to be a plant that craft was closing after seventy five, eighty years and it was fully equipped Yogurt plant. And it was being sold as just Junk.
Once again, Hamdi didn't have a firm business plan. But he decided to buy the plant. And was it because it was like, Okay, I've now figured out the entrepreneurial thing? There was any thought about the market, any thought about the you know the classic kind of entrepreneurial questions, like there's a competitive hole, there's a I'm seeing demand, I need to do product expansion. Any of those thoughts or
No. No, no, no, none of that. It's a nomadic approach really I have no deep knowledge of how can make this work. The only thing I have a knowledge of I just made one plant work, small cheese plant, which is dairy, but I think I can make this one work as well. But Hamdi had spotted a gap in the market.
One that he believed had huge potential. I was so surprised. Living up. in upstate New York that you could not get a cup of simple yogurt. I was so surprised And
I just couldn't understand why that wasn't available. Everywhere and why this yogurt was so much sugar. It was anything but yogurt. Now by yogurt, Hamdi means thick, creamy Greek style yogurt. A staple for him growing up.
But at that time, hard to get a hold of outside of specialty stores in the US. So Hamdi took out a small business loan and bought the plant. Which was in South Edmiston, upstate New York. Again. It was something about the community that made Hamdi want to invest in it.
But it was also A community in peril. Plant had been there. Since the nineteen twenties.
So it's closure. Shock the community. You have to understand it it was as if you have a dark cloud over your town. Everybody feels it. This plant was closed.
The steam is off. After seventy eighty years. And grandfather walked there. And father work and I I can relate with it.
Hamdi had no illusions about being a lone savior, bringing the plant back to life for the good of the town. And the community didn't see him that way either. They would look at me and say, Uh Craft just left and This guy You know. How much planning should I make with my life looking at this guy what he's driving and
But his capability and resources. So there's not much trust there. But Hamdi was also struck by their attitude. They were just head up and doing their best part to close this factory. And There was no screaming, there was no
Cursing or anything. They were just sad and quiet and supporting each other. And I'm looking at him's perspective, I'm saying. Well if they are like this when they're closing the factory, what would they do if you open it? So I really thought that was strikingly amazing. Initially, Hamdi could only afford to hire five of the 55 strong workforce for this new company, which he named Chobani, from the Turkish for Shepherd. It took them a year and a half to get the plant running. And
To perfect the recipe for the yogurt. Hamdi then managed to convince the manager of a local supermarket to stock them. And then two weeks later he called us and he said, I don't know what you're putting into these yogurts, but I cannot keep it on the shelf. That is l maybe late two thousand seven, early two thousand eight. And in that moment
I realised That this is not going to be about selling. This is going to be about Can I make it enough? And that is the moment I realized
That My life is gonna be in this factory. For a while. And that's what I did. I mean, I think from two thousand seven to two thousand twelve I never left that factory. Soon.
Hamdy invests more in the community. Hiring back the plant's previous employees. They had seen how Hamdi had worked tirelessly. And they knew how together they could reinvigorate their community by making the plant a success.
It gave them a binding sense of co ownership in the mission. As the business rapidly scaled, Hamdi looked farther afield for more people to join the team. In the nearby city of Utica. He discovered a community that was in desperate need of investment. It was also a community he related to on a very personal level.
I learn that there are people were settling legally as a refugees in this town from all over the world and they were having a hard time finding jobs. And I went to the settlement agency and there was this amazing lady and I said, What is the problem? And She said, Well, there's language problem, they don't speak the language, then there is transportation problem, they just arrive, they don't have cars, and then there is training problem because they don't know the jobs that are available around here. But above all There is a stigma, there is this shyness to getting close to them.
The refugee population was finding it hard to integrate in the local community. Not because they were unwilling to But because of the many barriers thrown up in their way. They were displaced people. who desperately wanted to become part of the community.
An experience. Homdi was intimately familiar with. I said okay, let's start let's get translators Let's get Buses and cars let's get them trained in the plant. And I get my HR price and
Why bother? We can hire others and well. These are people in our community Let's give a chance to everyone. And It was not a refugee work at the time. I never called a refugee work. It was a community work. People in the community looking for work and different background.
And we are opening our doors and giving opportunities to everyone. Hamdi was doing more than providing jobs. He was investing in the refugee community. And I look at my experiences of okay, these are refugees as settled, but it really made them back to life Two jobs. And I said that the minute they get a job, that's the minute they stop being a refugee.
The central role that business and economic activity plays in building community is often overlooked. But it is something I am a big believer in. And this story is a prime example of how business helps build integration. Understanding. And prosperity.
It shows that bridging gaps between communities can bring new perspectives and experiences together. This is something that Abbey Falls has immense experience in. Abby is the founder of Global Citizen Year. A nonprofit that organizes eight months
Immersive experiences overseas for promising future leaders. Our fellows are not development workers. They are there as apprentices, supporting a local project in education, climate, public health, economic mobility. And what that means is that they are humbling themselves. by being challenged to see themselves and the world through a completely New. Lens.
This radical exposure to different lived experiences gives the fellows the awareness and insight to make positive change in their own communities. It's about teaching them to understand what community they're a part of and how to be an impactful and appropriate contributor. to community work wherever they find themselves. Many of our students come back. with a sense that the most appropriate place to start having an impact is closer to home in their own communities. Whether that's running for a local school board
Whether it's starting an enterprise You know, making sure that kids in their community have internet access. So it's that shift from confidence to humility, from knowing the answers to carrying the questions, from managing through brute force to sort of a more organic and community centered way of leading. And frankly from just sort of Managing from our heads to a sort of integrated head and heart, which I think is what the world needs most and we don't have enough of yet. I love the way Abby lays this out.
What every community needs most is a shift from just managing with our heads to an integrated Head. And heart. In the case of Chabani Hamdi's community centered approach was rapidly driving the company to scale.
So you go from twenty five million dollars to hundred and fifty million dollars to four hundred million dollars to seven hundred million to a billion. I mean, these are massive scale On equipment and capability. And then comes to a shoulder of
This Nomad and everybody else in that town. And thinking that Is this real? We had almost no resources, we had no money. And we raised no capital, we didn't raise any penny from anybody.
Homdi relied on the community he'd invested in, rather than outside financial investment, to keep up with demand. I kept this very simple because I really wasn't a sophisticated business person. I joke about this and I said Chobani was on QuickBooks until he was six hundred and fifty million dollar business. Because it was simple. I had no board. I had no committee. I would talk to Kyle.
My head of sales is kind of What do you think the next year sales is gonna be like? How much more do you think we will have demand? And he would make a simple Calculations I am the I think it's going to be This number.
This scrappy. Just in time management style is the classic entrepreneurial approach. It feels precarious. Because it is. One way.
To bolster your chances of success is to build a strong community. and sense of co ownership from the outset. Doing this. flowed naturally from Hamdi's nomadic instincts. I
really did not organize the business at all. It was a nomadic like business style And I am a plant person. I always love factory. I love factory floor. And I had this very early believed that if that's was is going to work It was gonna work because of those factory workers and people on the floor.
And they are the one who's going to come up with the solutions. They are the one who's going to say, you know what, let's go to next level. Let's go to next level. They're the one who's going to drive it, not me, not people who asked them to So I really made sure that I was on the floor I was in the line. I was doing everything what they were doing. Homdi put himself on the front line with the rest of his workers.
It kept the sense of co ownership. Very strong. and it emboldened everyone to give their all to the mission. And actually That was my
I would never ask anyone to do anything unless I do it first. So people would often see me in the first three, four years on the floor packing Driving the forklift, filling the trucks until At some point that people said, I think you should be well Served if you're doing
some other work somewhere else we got discovered. Yeah. I mean that was My very strong belief that It was gonna be solutions were gonna be on the floor. With the people on the floor. Not dictated from the offices.
As a leader, your job isn't simply to yell. Charge. And then run ahead of your team. It's to inspire your team to run faster than you. And we were elevated for some reasons. We were just in
unreal environment up in that little town in upstate New York. And saying We're going to show the world What we are made of, what these plant people are made of, what this town is made of. I look back and some of it's silly, but
We were having the best time of our life and the most difficult time of our life in those five, six years up there. Hamdi had put Chobani at the heart of the Of that little town in upstate New York. His investment in that community was propelling the company to scale. His next challenge.
Would be repeating this feat all over again. On the other side of the country. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity.
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Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives.
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We're back with Hamda Ulikaiah. Founder of Chubani. You can share this episode using the link masterthe scale dot com slash Ulikaia. That's U L U K A Y A.
And to hear the complete unedited conversation between me and Hamdi, become a Master of Scale member at masterfale.com/slash membership. Before the break. Homdi had founded Chobani in a derelict plant and made it one of the country's fastest growing food brands. And also popularize Greek style yogurt in the US. Now Hamdi wanted to expand Chobani's operations.
So you keep up with demand. And also branch into new products. That old factory had come a long way. But he needed a new, bigger plant for the next leap in scale. But what I want to really do is create the next generation food company.
And using yogurt as a vehicle to be able to build all the infrastructures and necessary disciplines, necessary supply chain capabilities, hire people from industry and train them And create the web all across the country that we can supply and introduce this food making in very wholesome natural way, but in a large scale that can reach to everywhere. And they keep the cost. As accessible which has been our
Number one from the beginning. So in two thousand twelve, Hamdi took a gamble and built a huge new one million square foot plant in Twin Falls, Idaho. Costing four hundred and fifty million dollars. It was a transformative investment for that community. And again. Hamdi reached out to refugee residents.
Initially. Things went to plan. But then. Hamdi started to have difficulty making his management style work. After
The leap in scale. I didn't understand that running one plant and founder that and staying in the factory and being involved with every single thing. I didn't realise that that plan wasn't gonna work. A lot of people really ran out of their capability and capacity because company was growing a lot faster than all of our capability, including myself. Homdi was still following the same management model of his first factory.
However. He hadn't built the same sense of community and co ownership in Twin Falls. Without those key ingredients. Getting the new plant working was a struggle. Problems compounded.
Cost went up. And Shabani struggled financially. I faced the hard truth in twenty thirteen. I said, I guess I'm not gonna be able to build the perfect system to run this company, but what I can do, I can move to Idaho and fix the planet. So I took my two dogs and rent a house and to Falls Idaho and Moved here and I never left the factory until it was operational running good and now we have something going Just as he had done in the first plant.
Homy led by example. Building up the sense of community and self ownership. At Twin Falls. Once this began to take shape, he could turn his attention to gearing the company towards its next stage of scale. Then the following three, four years I try to work on all the necessary changes in the company to be able to
Say I built Tobani to be able to comfortably grow bring other products and supply and give enormous amount of trust to people who consume the product and the trust to men you know the retailers that who are buying our products. And it took us some time, but it was a wake up call. That experience was a
Probably one of the biggest pickup call for me. And say Everything you did in good in the last Three, four years doesn't mean everything's gonna go great, you know, next three, four, five years. Every day is evolving, is changing, and you have to not get drunk with it. Yeah, this is one of the fundamental rules of scale is what gets you here isn't what gets you there. Almost always. That's awesome. Yeah. That's perfect. I lived through it. Yeah. Totally through it. Yeah. And if I go back to one thing, is one most difficult thing in this journal read is would be
Building those disciplines is the hardest thing to do. A lot of people will use some other Big companies. systems, IT systems, distribution systems and all that kind of stuff. We wanted to build it. Um
You know, I would say In the journey that was the hardest thing that I have faced. Building out these support systems as you scale is vital. And your success in doing so is a function of the community you build. But if there's no sense of shared ownership, then people won't be fully engaged in the shared mission.
And that means making these new systems and processes work will be an uphill struggle. It's not just the way your business works that needs to change as you scale. You also Need to change the way you lead. I have a style that I know
That is effective, that I know works for me. But I realize that sometimes business needs were a lot deeper and greater than myself. I stay this founder guy, I stayed this dreamer guy, and instead of you know, I stay in this let's break this machine and put it in there and then you know, things will work out type of guy. I didn't have a huge Appetite on All those detailed plannings and all that kind of stuff, which is essential and and I think it's needed.
Don't get me wrong. Being a dreamer is a key trait for founders. But in Homdi's case, his dreamer tendencies meant he overlooked some of the nuts and bolts issues of making a business work at scale. I would also argue that this was compounded by Hamdi's style when it came to building a strong community. He was in the thick of things on the plant floor.
Day in, day out. This meant he built a strong sense of co ownership among his team. But it also made it easier for him to miss out on the strategic Wide angle view. That a leader must take.
This leadership challenge of balancing the wide angle view. With a zoomed in perspective is something that Etsy CO Josh Silverman also grappled with. As he told me in his own episode of Masters of Scale. Yeah, I was really a micro manager.
After every inflection point in my career, I can look back and tell you ten things I would have done differently. But the number one thing is realize that the job of a leader is not to come up with solutions. It's to define success and define constraints. And then the team come up with the solutions. Yeah. And also make sure that the team in doing that Like they say this is a solution. You're like, Well, it may not be a solution yet. Yes. So my job is to make sure they're super clear about what success looks like, they're super clear about the constraints, and then removing roadblocks for them.
The main thing is keeping the main thing the main thing. Like Josh and many other leaders. Hamdi also struggled to make the transition. From micromanager. to roadblock remover.
I was little protective of Shobani. I always thought Yeah, it's like a baby and you need to be around and you need to be nourishing, you need to be protecting and until the quality of it. I had a very strong opinions what this company should be doing and what this company should solve. Hamdi did of course.
Make that transition. And I would argue that the sense of community and ownership that he instilled in Chobani made the process easier for him. He knew that everyone else was just as invested in the shared mission as he was, and that they would work. On innovating. And solving.
Just as hard as he would. To enhance the sense of community and shared ownership even further. In two thousand sixteen, Hamdi gave equity to his two thousand employees. I said, You know what, this is not a gift, this is just recognition what belongs to you. I think this should be a practice on all manufacturing service industries and globally. I think this is the only way that this injust between income inequality can be somehow start to be
meaningfully adjusted. Because the world is going in a very wrong place, where the rich is getting extreme rich and the poor is getting extreme poor. Hamdi also founded the Chobani Incubator to scale his mission and community beyond the company. I truly believe that this food system in this country needs to be transformed. It needs to be
Disrupted. And we don't have time to waste and we we gotta do it. People are suffering because of it. You know, you have obesity, child healthcare, all that kind of stuff you can think of. This needs to be disrupt, but it's a work. It's a lot of work. The incubator. has been building a community of innovative founders throughout the food industry.
I thought about What are the things that I wish I had known when I studied this whole thing? So I said, I think one of the biggest gift I can give is to sharing my experiences with the others. One of the incubators' aims is to help other food entrepreneurs Avoid the mistakes Homdi made by building strong roots from which they can explore disruptive new ideas.
We need a community, we need these founders, we need these disruptive ideas, the products. And we need to create a community of The new food makers. where we can be impactful of changing this food system. What they do to each other is pretty amazing. So it is a community.
A lot of learnings, a lot of collaborations, it's a lot of good relationships been built through this. In two thousand sixteen. Homdi founded the Tent Partnership. For refugees. Over two hundred companies signed up to the partnership.
With the aim of boosting hiring of people whose own lives have been uprooted. When companies like A B and B and Pfizer and Amazon and Starbucks and Chobani say We are opening our doors. you know, making connections, we are training, we are helping refugee entrepreneurs, we are helping
refugee small businesses by using our supply chain. It really breaks the stigma. It helps the branding. It helps the general understanding that this is a humanitarian issue. It's not a political issue really. And we still have a lot of work to do. For a clear example of the upsides. How many points of the city of Utica? In two thousand eight, nine, ten.
There was a time when everybody was leaving. You go back now. This is one of the Most exciting town. It's because of these new blood coming in and bringing new excitement. Houses are being built and painted, businesses are open, factories are operating. This is not really a Ham this story.
This is a South Edmundston Twin Falls Idaho story. This is the people in these communities and what they are made of, and what kind of values. And what kind of capability they have. They might not know what's needed in the business, but God, they will get it and they'll get it fast. And you'll build a very strong, strong businesses. This is the long term return on community investment in terms of business. But there is an even larger.
More vital return. That has a far wider impact. We have so much work to do. When it comes to social issues, but businesses can solve, especially the right minded businesses can solve a lot of issues in these small towns and communities. I think that is one of the things that it's sometimes is forgotten through our story, but I just wanted to Make sure that
Credit is really belongs to the people in those towns. Close your eyes. Put your hands and a fingers and a map in some town and go there and hopefully it's a town that a lot of people left before. And Sh make connections and start your business and you will see miracle happen.
Taking connections. and turning them into miracles that transform relationships, communities, and society for the better. That's a mission. We should all take ownership of. I'm Reed Hoffman.
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