The Anti Innovator: Chobani
$0 to $1 billion in revenue in 5 years and it’s not a Silicon Valley tech startup; in fact Chobani is a Greek yoghurt producer. Growth in those numbers is generally associated with Facebook and Google style companies or also known as the innovators.
Greek yoghurt has very limited innovation prospects that for sure yet Chobani was able to not only grab market share from packaged food giants, it was also able to grow without any advertising spending or new found innovative formulas for recipes.
Chobani can be considered an Anti-Innovator as right from the business plans conception the company and its CEO, Hamdi Ulukaya stuck with what would now be considered pre-historic tactics for the new CEO’s of today.
- Bank loan for startup cash
- An old, tried and tested market
- To this day maintaining 100% ownership of the company
- Not a VC in sight
- No MBA
- An 85 year old factory
Safe to say Ulukaya has gone completely against the grain when it comes to startup funding and growth yet the formula has worked incredibly well for him and the Chobani Company.
Most new founders and CEO’s are now stuck in the ideology that in order to make the big profits or see a quick exit they need to create the next big thing. The thing with innovation is, especially now when everyone is seeking it, is that markets move forward and they tend to leave a trail of products that see less and less upkeep or even yearly refreshes.
When the Chobani Company was being started it had to go up against packaged food giants, two of which had the combined market share of 71% – Greek yoghurt representing just 2% which was primarily owned by Fage. For most start-up founders the idea of going into a market like this would make little to no sense, if juggernauts have such dominance in the market and innovation prospects are limited then the cash isn’t going to be present.
In 2012 Chobani not only had 40% of the Greek yoghurt market but it also was the market leader in the whole yoghurt market too. Considering that it hasn’t gone down the conventional route that many start-ups take it’s incredibly good going.
Focus on Basics
As Chobani was going out into stores it had the problem of having no budget for advertising, having to contend with the giants was going to make it an uphill battle. Again rather than spending money on advertising, not by choice, they took the fight to the point of sale in the stores.
Ulukaya decided to focus on the yoghurt pot itself as the source marketing and advertising that be responsible for directly influencing purchases thoughts. Ulukaya opted for Euro style yoghurt pots which were shorter and stubbier then the competitions, which meant rather than going into R&D expenditure Ulukaya could again use a tried and tested idea to help push the Chobani brand ahead of the competition.
One of the biggest problems with yoghurt, which ultimately made Ulukaya enter the Greek yoghurt market, was that the large brands were offering watered down and over sugared products – in comparison to traditional Greek yoghurt it didn’t even come close. The only “innovation” that Chobani really showed was to go backwards and to the roots of Greek yoghurt.
By focusing on the recipe and ingredients Ulukaya could now create the perfect example of Greek yoghurt, which recently has seen an incredible increase in consumption and demand. By being the first to spot the problem and perfect it Ulukaya was able to set up Chobani right at the starting gates of an increase in demand and popularity in yoghurts and essentially Greek yoghurt.
Innovation does create new markets and opportunities however there are even more markets that are tried and tested which fail to see any massive overhauls or the introduction of new competition. Ultimately the market leaders maintain a lead and offer a mediocre product which customer enjoy because they’ve not experience anything else.
Chobani is the perfect example of how business is done the “old school” way without the big VC firms or the latest and greatest equipment. More companies and CEO’s should be focusing on markets that are sitting dormant rather than trying to innovate, costs would be cheaper and market share can increase exponentially by leveraging existing products and awareness together.
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