Business Strategies / Process and Operations / Capital Spending / Dairy, Cheese, Eggs

2012 Processor of the Year: Evolving From an Ancient Yogurt Factory

Chobani as a manufacturer began with a winding-down Breyers plant and a Small Business loan.

By Dave Fusaro, Editor in Chief

The phenomenal story of Chobani the manufacturer starts with a classified advertisement for a winding-down yogurt factory. Having sold its Breyers brand, Kraft was getting out of the yogurt business in 2004, and the ancient factory in South Edmeston, N.Y., was no longer needed.

As a plant making one form of dairy or another, the site dated back to 1885. The original plant burned down five years later, but parts of the current buildings dated back to 1901. There was just a skeleton crew still hand-packing Breyers yogurt and starting to shut down the plant.

In the midst of the peeling paint, dripping water and rusting equipment, Hamdi Ulukaya saw opportunity. With the help of a Small Business Administration loan, Ulukaya bought the plant. Eight years, numerous renovations and $250 million later, the South Edmeston plant is about as efficient as most yogurt plants get – but not as modern as the one Chobani is constructing in Twin Falls, Idaho (more on that later).

The South Edmeston plant was built to make "American-style" cup-set yogurt. Gradually, as Ulukaya and his "master yogurt maker" Mustafa Dogan fine-tuned the recipe for strained yogurt (ultimately to be called Greek yogurt), equipment was added, especially separators to remove the liquid whey.

"Much of the equipment has been specially fabricated. Most of it is customized in some way," says Halil Ulukaya, vice president of operations and the founder's nephew. Halil first signed on to help his uncle run Euphrates Inc., a nearby feta cheese factory Hamdi Ulukaya bought in the mid-1990s.

Chobani Yogurt silos
Seventy trucks of milk arrive daily and are stored in four tall silos  at the South Edmeston facility

Seventy trucks of milk arrive daily at the South Edmeston facility, with the milk being stored in four tall silos. "We can store 5 million lbs. of milk – which sounds like a lot, but that's only about a one-day supply for this plant," Halil Ulukaya explains, noting that the output is 1.7 million cases a week.

Milk is separated into skim/fat-free, which is used for all Chobani recipes. Cream is stored for use at the end of the process or resold. The skim milk is pasteurized and transferred to batch tanks, where the cultures are added. The mix spends six hours in the batch tank.

The pH drops as the milk coagulates. Whey is separated. "It's now yogurt, and Greek yogurt specifically," he explains. It's then pumped to storage tanks where it is combined with ingredients or flavors. Some inline blending is used.

Some of the yogurt will remain plain, to be sold that way, or combined with fruit on the bottom or the recently popular two-compartment containers – Chobani calls this Chobani Flip -- where the consumer mixes in pureed bananas to honey yogurt or raspberries to vanilla chocolate chip yogurt.

From there the batches of yogurt go to fillers, which fill up to 640 of the 6-oz. cups per minute. Other sizes are 3.5, 16, or 32 oz.

Before a 2009 expansion, cups were brought from overseas. Now they're sourced in nearby Pennsylvania and sleeved onsite. "We're considering forming them here in the future," Halil Ulukaya adds. Then the cups are lidded, packed 12 to a case and begin a cool-down.

Part of the cool-down occurs in transit. Because of the sprawling nature of this plant, pallets of yogurt are elevated up to a bridge that crosses County Road 25 to the 2009 addition, where they are stored in refrigeration in a 150,000-sq.-ft. refrigerated warehouse. The yogurt spends 5-7 days in refrigeration before being shipped.

'Dream plant' in Idaho

While Chobani originated and grew within the contours of the hills and highways of central New York, a new plant in Twin Falls was designed from a blank slate, to be the ideal Greek yogurt plant. Chobani claims it is the world's largest and most modern plant making yogurt of any type. A dedication was scheduled for Dec. 17.

When a second plant became a necessity, milk supply and a western location were the main considerations. Idaho ranks third in the country in milk production (behind California and Wisconsin) and has a considerable dairy processing industry. Twin Falls already has a Glanbia plant that makes cheese and whey, and there are more dairy plants in nearby Jerome and Gooding.

"There is a lot of dairy knowledge in that area," says Uwe Sacher, who was brought on as a consultant and holds the temporary title of COO, although designing and starting up the Twin Falls plant was his main charge.

"Chobani made the best of the South Edmeston plant," says Sacher. "Now it has picked the best location in Twin Falls."

The company has invested about $450 million to build the facility, which is approximately 1 million square feet on 200 acres. "We need to go from 1.7 million cases of yogurt a week to 2.4 million in the first quarter of 2013," says Halil Ulukaya, based on current projections and sales commitments. "A new plant was the only way to make that number, and to continue growing beyond that."

The South Edmeston plant probably will always make Chobani's first-generation product. But Twin Falls is planned to make several new products, which company officials would not specify yet.

Chobani worldwide

With Chobani being a private company, it was low key about establishing two other beachheads, which will help Chobani conquer the world.

In June 2011, Chobani bought Bead Foods, an Australian dairy processor and distributor and owner of the Gippsland Dairy brand, which included an organic yogurt. Chobani invested $30 million toward a new yogurt factory in Dandenong and has begun producing Greek yogurt there.

An international team is growing in Amsterdam, looking for opportunities to grow the brand and manufacture strained yogurt worldwide. Most recently, Chobani launched in the UK in select Tesco stores.

After being resource-constrained for most of its history, Chobani now appears to have the capacity and the reach to bring Greek yogurt to most of the people and markets who want it. While there are no concrete plans for additional locales yet, company officials won't rule them out.

That appears to be the golden rule at Chobani is: Nothing gets ruled out.