Class Assignment 1 (First Half – January-February)

Total Marks: 60 (contributes 5% to the final grade)

Due Date: 11.59pm, Wednesday, February 1

Chobani: Making Greek Yogurt a Household Name

“Everybody should be able to enjoy a real-good, simple yogurt. And that’s what Chobani is,” says Hamdi
Ulukaya, founder and chief executive officer of Chobani, Inc., in summarizing his vision for the company.
As the winner of the 2013 Ernst & Young World Entrepreneur of the Year award, his words and success
story carry great credibility.

The Idea

Hamdi Ulukaya moved to the United States in 1994 to learn English and to study business. He started a
feta cheese company, Euphrates, when his visiting father complained about the quality of American feta
cheese. In 2005, Kraft Foods closed its New Berlin, New York, plant that had been built in 1885. While
tidying up his office, Ulukaya stumbled upon a postcard about the sale of the shuttered Kraft plant and
tossed it. After sleeping on the decision, he fished it out of the wastebasket, visited the plant, and
purchased it with the help of a U.S. Small Business Administration loan.

© Diane Bondareff/Invision for Chobani/AP Images

Ulukaya had no real experience in the business. He grew up milking sheep at his family’s dairy in eastern
Turkey and eating the thick, tangy yogurt of his homeland. Describing the regular yogurt he found on
shelves, he has one comment: “Terrible!” In his view, it is too thin, too sweet, too fake. So he decided to
produce what is known as “Greek yogurt”—an authentic strained version of yogurt, with a thick texture,
high protein content, and with little or no fat. With the help of four former Kraft employees and Yogurt
Master Mustafa Dogan, Hamdi worked 18 months to perfect the recipe for Chobani Greek Yogurt.
The very first cup for sale of Ulukaya’s Greek yogurt appeared on the shelves of a small grocer in Long
Island, New York, in 2007. The new product launch focused on the classic four Ps elements of marketing
mix actions: product, price, place, and promotion.
Product Strategy

From the start, Ulukaya’s Greek yogurt carried the brand name Chobani. There was no room for error,
and the product strategy for the Chobani brand focused on the separate elements of (1) the product itself
and (2) its packaging.
The Chobani product strategy stresses its authentic straining process that removes excess liquid whey.
This results in a thicker, creamier yogurt that yields 13 to 18 g of protein per single-serve cup, depending
on the flavour. Chobani is free of ingredients such as milk protein concentrate and animal-based
thickeners, which some manufacturers add to make “Greek-style” yogurts.
Chobani uses three pounds of milk to make one pound of Chobani Greek Yogurt. Some other features
that make Chobani Greek Yogurt “nothing but good”—to quote its tagline:
 Higher in protein than regular yogurts
 Made with real fruit and only natural ingredients
 Preservative-free
 No artificial flavours or artificial sweeteners
 Contains five live and active cultures, including three probiotics

Then, and still today, Ulukaya obsessed about Chobani’s packaging of the original cups. In 2007, Ulukaya
concluded that not any cup would do. He insisted on a European-style cup with a circular
opening exactly 95 mm across. This made for a shorter, wider cup that was more visible on retailer’s
shelves. Also, instead of painted-on labels, Ulukaya chose shrink-on plastic sleeves that adhere to the
cup and offer eye-popping colours.
“Our packaging people would say, ‘You’re making it all look different and why are you doing that?’” says
Kyle O’Brien, executive vice president of sales. “If people pay attention to our cups—bright colours and all
—we know we have won them, because what’s inside the cup is different from anything else on the shelf.”

Price Strategy

To keep control of their product, Ulukaya and O’Brien approached retailers directly rather than going
through distributors. Prices were set high enough to recover Chobani’s costs and give reasonable
margins to retailers, but not so high that future rivals could undercut its price. Today, prices remain at
about $1.29 for a single-serve cup.

Place Strategy

The decision of Ulukaya and O’Brien to get Chobani Greek Yogurt into the conventional yogurt aisle of
traditional supermarkets—not on specialty shelves or in health food stores—proved to be sheer genius.
So today, Chobani sees its Greek yogurt widely distributed in both conventional and mass supermarkets,
club stores, and natural food stores. On the horizon: growing distribution in convenience and drug stores,
as well as schools. Chobani is also focused on educating food service directors at schools about Greek
yogurt’s health benefits for school kids.
The Chobani growth staggers imagination. From its first order of 200 cases in 2007, 2013 sales grew to
over 2 million cases a week. To increase capacity and bring new products to market faster, in 2012,
Chobani opened a plant in Idaho that is nearly 1 million square feet in size. Built in just 326 days, it is the
largest yogurt manufacturing facility in the world.
Along the way, Chobani faced a strange glitch: Demand for Chobani’s Greek yogurt far surpassed supply,
leading to unhappy retailers with no Chobani cups to sell. So Kyle O’Brien launched Operation Bear Hug.
“Instead of hiding behind letters to retailers, we decided to communicate with them within 24 hours about
the problem and what we proposed to do about it,” says O’Brien. “So we found it critical to be very
transparent and open with our communication at times like that.”

Promotion Strategy

In its early years, Chobani had no money for traditional advertising, so it relied on word-of-mouth
recommendations from enthusiastic customers. The brand harnessed consumer passion on social media
channels early on and found that people loved the taste of Chobani once they tried it. So in 2010,
Chobani kicked off its CHOmobile tour. A mobile vehicle with samples of Chobani yogurt visited events
across the country, and consumers were encouraged to taste Greek yogurt for the first time. As Chobani
grew, it launched new promotional activities tied to (1) traditional advertising, (2) social media, and (3)
direct communications with customers.

© Mike Hruby
In 2011, Chobani launched its first national advertising campaign: “Real Love Stories.” The only problem:
Apparently, it was too successful! The resulting additional consumer demand for Chobani Greek Yogurt
exceeded its production capacity, leaving retailers unhappy because of complaining consumers. What did
Chobani do then? It stopped the advertising campaign and sent in another Operation Bear Hug team to
communicate with retailers. Since then, it has run other successful national advertising campaigns, and it
was also a sponsor of the 2014 U.S. Olympic team.

“Social media is important to us because Chobani is a brand people love to discover and to share their
discovery experience with others,” says Nicki Briggs, Chobani’s chief communications officer. She
stresses the importance of the Chobani “high-touch model” that emphasizes positive communications with
its customers. She points to its Customer Loyalty Team, which makes this happen.
Today, Chobani’s Customer Loyalty Team receives about 7,000 inbound customer e-mails and phone
calls a month and is able to make return phone calls to most of them. Consumers also get a handwritten
note. “We launched our Go Real Chobani campaign in 2013, stressing that we’re a real company
making real products with real conversations with our consumers,” says Briggs.
Besides Facebook, the company interacts with its consumers through Twitter, Pinterest, Instagram,
Foursquare, and other social media platforms. Chobani Culture (www.chobani.com/culture) is an online
resource with recipes, videos, and tips on how to use its Greek yogurt in favourite recipes.

Aggressive Innovation + Positive Social Change

Dannon, Yoplait, and PepsiCo were shocked by the success of Chobani Greek Yogurt. Each now offers
its own competing Greek yogurt. With giant competitors like these, what can Chobani do? Chobani’s
focus: Innovate!—with creative, new Greek yogurt products!
These products emerge from Chobani’s Innovation Team, which reports directly to Ulukaya and works
closely with all other teams. “We are a separate group altogether, more like a Google Lab than a grocery
products company, in terms of our extreme focus on innovation,” says John Heath, senior vice president
of innovation. “We’re searching for ways to reach new market segments that have special motivations and
needs,” he adds.
Today, Chobani offers its hallmark Chobani® Greek Yogurt in single-serve and multi-serve sizes, while
expanding its authentic strained Greek yogurt to new occasions and forms. Its recent new-product
offerings include:
 Chobani Bite®. These 3.5-ounce four-packs reach the new “indulgent” segment of Chobani
customers—those wanting a healthy afternoon or evening snack. Sample flavour: Raspberry with
Dark Chocolate Chips.
 Chobani Champions®  Tubes. Made for kids, the 2.25-ounce Tubes offer low-fat, blended Chobani
flavours with fruit in grab-and-go packaging. Sample flavor: Jammin’ Strawberry.
 Chobani Flip™. This 5.3-ounce, two-compartment package lets consumers bend or “flip” mix-ins such
as granola or hazelnuts into the Chobani Greek Yogurt compartment. Sample flavour: Almond Coco
Loco, a coconut low-fat yogurt paired with dark chocolate and sliced toasted almonds.
These new products illustrate the Innovation Team’s focus on reaching consumers having special
motivations or needs that John Heath described.
Chobani gives 10 percent of all profits to its Shepherd Gift Foundation to support people and
organizations working for positive long-lasting change. The name comes from the “spirit of a shepherd,”
an expression in Turkey used to describe people who give without expecting anything in return. To date,
the foundation has supported over 50 projects—from local ones to international famine relief efforts.

Where to Now?

International operations and a unique test-market boutique in New York City give a peek at Chobani’s
future.
International markets provide a growth opportunity. Chobani is currently sold in the United Kingdom and
Australia, and opened its international headquarters office in Amsterdam in 2013. Other countries have
far greater annual per capita consumption of yogurt than that for U.S. consumers. For example, some
Europeans eat five or six times as much on average compared to American consumers. So while the
entrenched competitors exist in many foreign countries, the markets are often huge, too.
How do you test ideas for new Greek yogurt flavours? In Chobani’s case, it opened what it calls a “first-of-
its-kind Mediterranean bar”—called Chobani SoHo—in a trendy New York City neighbourhood. There,
customers can try new yogurt creations—from Strawberry + Granola to Toasted Coconut + Pineapple.
Heath’s Innovations Team harnesses consumer feedback at Chobani SoHo, which helps in determining
future Chobani products.

But What Happened to Chobani in Canada?

Chobani executives believed their product would be successful in Canada, a market that consumes twice
the amount of yogurt per capita than the U.S. Thus, Chobani applied for and received a one-year test
market import permit from Canada’s Minister of International Affairs. In 2012, it began selling its product
at 65 Loblaws stores in greater Toronto and Hamilton. The 65-store federal permit allowed Chobani to
pay a reduced duty of 5 percent rather than a standard dairy import permit of 240 percent during a one-
year “bridging” phase until Chobani could built a processing plant in Ontario.
But then, its growth plan for Canada hit a snag. Competitors, including Danone, Yoplait, and Asana, filed
court applications to have Chobani’s import permit struck down. At the same time, the Ontario Dairy
Council, a coalition that includes multiple large dairy processors, appealed the granting of a permit by the
Ontario Ministry of Agriculture, Food and Rural Affairs allowing Chobani to build in a processing plant in
Ontario. Moreover, the provincial milk marketing board in Ontario stopped allowing processors to access
as much milk as needed to make yogurt. Instead, the system was capped. This policy, in effect, means
even that if Chobani builds a plant here, it might not be able to get a milk supply to make yogurt.
According to Nico Beyers, vice president of international development for Chobani, “It is very clear that
our existing peers in the market are trying to cut us out. They are afraid. They are so afraid of letting
Chobani in with its track record in the U.S. market.” According to industry critics in Canada, this would not
be happening were it not underpinned by the densely woven regulatory fabric of this country’s supply-
management system, which they argue stifles innovation, obstructs new competition, and keeps prices
artificially high. For example, Ian Lee, professor of strategic management at Carleton University, states, “It
is protectionism—rank, outrageous protectionism. Farmers would be much better off in a competitive
market.”
Created in the 1960s to protect Canadian farmers against volatile prices in the market, supply-
management regulations apply to milk, cheese, yogurt, chicken, and eggs. While U.S. and European
dairy farmers receive government subsidies, in Canada, provincial marketing boards set prices, allocate a
quota for dairy producers, and levy duties on dairy imports. Supply management’s aim is to match milk
production to consumer demand and minimize production of surplus milk.
Under supply management, a dairy company wanting to sell yogurt nationally in Canada has to use
Canadian milk supply and process it here. Otherwise, they sell at a steep import duty of 240 percent, a
levy set to make up for the disparity in prices with lower-priced U.S. dairy products.
Critics from inside and outside the industry say that supply management is a deeply flawed system that
prevents any real business growth at the provincial level due to the quota system. And Chobani’s
roadblocks to entry, they say, are a classic example of how the supply-management system can be used
to keep out competitors.

“Supply management is classic exploitation of consumers by a very small minority,” says Professor Lee,
who believes the system hurts dairy farmers and Canadian consumers, particularly those with lower
incomes who spend a greater proportion of their net income on food. Canadians pay close to twice as
much at the supermarket for milk and cheese than Americans. “[The industry] argues it is not getting any
subsidies. Instead, these bureaucrats get a monopoly from the government that allows them to keep out
foreign competition, and then they jack the prices through the roof.”
Given the legal and regulatory situation, including the prospect of no guaranteed milk supply in Canada,
Chobani has put the plans for a plant in Canada on hold, and the product is no longer available in
Canada. Many consumers, including Chelsea Allen, a registered dietician, are not happy about the
situation. According to Allen, “I understand where [the Canadian companies objecting to Chobani’s entry]
are coming from. No company wants to have competition, but Chobani has every right to be here. They
have people who want to buy their yogurt, and I think you can’t keep a product from coming on the
market.”

This class assignment will be completed individually.

Written Part:
QUESTIONS

1.  From the information about Chobani in the case, (a) who did Hamdi Ulukaya identify as the target for
his first cups of Greek yogurt, and (b) what was his initial four Ps marketing strategy? (100 to 150 words
approximately) (5 marks)
2.  (a) What marketing actions would you expect the companies selling Yoplait, Dannon, and PepsiCo
yogurts to take in response to Chobani’s appearance, and (b) how might Chobani respond? (100 to 150
words approximately) (5 marks)
3.  What are (a) the advantages and (b) the disadvantages of Chobani’s Customer Loyalty Team that
handles communications with customers—from phone calls and e-mails to Facebook and Twitter
messages? (100 to 150 words approximately) (5 marks)
4.  As Chobani seeks to build its brand, it opened Chobani SoHo, a unique retail store in New York City.
Why did Chobani do this? (100 to 150 words approximately) (5 marks)
5.  (a) What two or three new countries might Chobani enter, and (b) why did you select these? (250
words approximately approximately) (10 marks)
6.  What does Chobani’s withdrawal from the Canadian market say about our country in terms of macro-
and micro-marketing issues that global companies need to understand? What is your position in how
Chobani was treated in Canada? (250 words approximately approximately) (10 marks)
Case: This case was written by William Rudelius, based on personal interviews with Chobani executives Joshua
Dean, Sujean Lee, and Kyle O’Brien. Other sources include “The Chobani Story,”MEDIA@CHOBANI.COM, 2013; Megan
Durisin, “Chobani CEO: Our Success Has Nothing to Do with Yogurt,” Business Retail Insider, May 3, 2013, p. 1; and Sarah
E. Needleman, “Old Factory, Snap Decision Spawn Greek Yogurt Craze,” The Wall Street Journal, June 21, 2012, pp. B1,
B2.
Presentation (Recorded Video Presentation):
Prepare a PowerPoint presentation summarizing your stand after analyzing the issues
presented in the above questions. Deliver a 10-minute presentation on Power Point and
upload it to the Discussion Board area designated for this, where your classmates can
see your presentation. I will create a discussion board forum for this:
(i) Please be reminded it is an individual presentation.
 (ii) Your web cam must be on when you are presenting, and the presenter must
be clearly seen in the video.
(iii) Your sound must be working.
(iv) You will video record yourself on your PowerPoint slideshow to complete this
presentation.
(v) Therefore, you don't have to be in class to complete the presentation. You
can be at your home or in any remote location to complete the presentation
on PowerPoint, record it, and upload it to the discussion board. You will be
given Wednesday, February 1 class time to complete it.
(vi) You will upload your completed written part to the assignment Dropbox on
Blackboard.
(vii) Your recorded video presentation on PowerPoint must be uploaded to the
discussion board.
(viii) You must be in formal attire for the presentation.
(ix) You MUST present to get marks in this assignment. If you don’t present, you
will not get any marks in the assignment (neither in the written part or in the
presentation)

Marks for the presentation:

(a) PowerPoint (content, creativity and how well it addresses and summarizes the
issues in the given questions) - 10 marks
(b) Presentation Delivery - 10 marks.

Rubrics: A grading scale of 1 - 5 (1: Lowest; 5: Highest) and 1 – 10 (1: Lowest; 10:
Highest) will be used for individual questions or presentation parameters.
The Professor reserves the right to ask for medical documentation in case of absences
due to medical reasons or other supporting documents in case of absences for non-
medical reasons.
Late submissions will get 20% marks deducted for each day the assignment is late.
After 5 days, it will be considered as zero.