Smooth Operator

Hamdi Ulukaya is holding a cup of Greek yogurt that his German shepherd, Panya, is lapping out of his hand. Her nose is dotted with the product that sped her master’s young business from revenue of zero to an expected $1 billion over five years. Ulukaya, svelte and 40, is the owner of Chobani, a start-up reared on small-business loans among crumbling barns and sleepy towns in central New York.

When Ulukaya sold his first cups of Chobani, at a Long Island grocery store in 2007, Greek yogurt accounted for a piddling 2% of U.S. yogurt sales. By last year, it was generating a quarter of all revenue in the $7.6 billion industry. Ulukaya isn’t just riding the wave; he’s dominating it. Over the past few years, Chobani has expanded at warp speed, capturing half of the Greek-yogurt market and beating out behemoths like General Mills and Dannon. “It’s clearly a winner,” says Nielsen consumer-insight analyst Todd Hale of Greek yogurt.

So what exactly is so irresistible about Ulukaya’s creation? It has nothing to do with Greek roots. Greek yogurt is no more Greek than French fries are French. The name simply tells consumers that it’s strained yogurt, standard fare across Europe and Asia, the land where Genghis Khan is said to have fortified himself and his fellow pillagers with fermented milk. The appeal of strained yogurt is its thicker texture, higher protein level and typically tangier taste than the sweetened yogurt common in American dairy aisles. In the U.S., consumers can also count on its being about 90% more expensive than the non-Greek stuff.

Chobani–the name is derived from the word for shepherd in Ulukaya’s native Turkish–pegs itself as all natural and low fat. Ulukaya, who grew up on a farm in Turkey before moving to the U.S. as a college student, sticks to a short list of ingredients: only milk and cultures, proprietary blends of bacteria that ferment the liquid into something spoonable and mouth puckering. Many Greek-yogurt brands–like the Greece-based company Fage, which started sending its yogurt to American specialty stores over a decade ago and currently accounts for 15% of the U.S. market–claim similar characteristics. Ulukaya says Chobani’s outsize success comes down to his belief early on that the product could appeal to a broad range of customers, not just those shopping in specialty stores. Within its first three years on the market, Chobani trounced Fage (pronounced Fay-yeh) by heading straight into deals with big grocery chains like Giant and ShopRite. A lower price point than that of other Greek yogurts and a larger container also appealed.

Word-of-mouth buzz and social media rather than big advertising–the company has aired only a single ad campaign–have been a boon for the segment. At Chobani HQ, in New Berlin, N.Y., the walls are decorated with consumers’ unsolicited Twitter love notes. “Consumers are sharing the fact that they like this product,” says Hale. That’s especially true of women, he says, who drive 63% of grocery sales and like that even expensive yogurt seems cheap compared with other health foods. Greek yogurt’s popularity among celebrity chefs and its frequent cameos on cooking shows haven’t hurt. “There really was a need for a nice, thick, rich, simple ingredient in a plain flavor,” says Susan Stockton, who oversees recipes at the Food Network. Stockton views Greek yogurt’s popularity as part of a larger trend: Americans expanding their palates, venturing away from sweets toward sours. She believes the versatility of Greek yogurt–which can substitute for sour cream and mayonnaise–will help guarantee its status as a staple.

Of course, American tastes are fickle, and health fads come and go. Chobani is hedging its bets with fruity flavors that pack in nearly as much sugar as the old fruit-on-the-bottom yogurts. “People were adding their fruit, their cereal, their honey,” Ulukaya says of his early days in the business, so why not give it to Americans ready-packed? “That’s the way yogurt is enjoyed here,” he says.

The Chobani-led boom has inspired other small creameries in New York State, where dairy farms abound, New York City consumers are close by and local governments are doling out incentives to promote the industry. Local producers have benefited from the presence of Chobani’s and Fage’s New York plants, since it takes much more milk to produce Greek yogurt than the regular stuff. About three hours from Chobani, a couple running a fourth-generation dairy farm is crafting its own whole-milk Greek yogurt with local flavor: maple syrup from a neighbor’s farm. “We have customers who call it ‘crack yogurt,'” says Marge Randles, who works 15-hour days with her husband. They’ve been making their Argyle Cheese Farmer products for five years. “We got on the wave early,” says Randles, who targets foodies at farmers’ markets and farm-to-table restaurants that will pay higher prices for something niche and exotic.

Lagging brands like Yoplait have also gone Greek to boost profits, and Dannon’s Greek yogurt is gaining speed. So far Ulukaya has stayed ahead; he recently invested $250 million in a sprawling plant in Idaho to better access customers across the country. He believes that if the U.S. is still spending just one-third the amount Western Europe spends on yogurt, there’s plenty of room to grow alongside other brands. “We believe that the yogurt story in this country hasn’t even started yet,” he says. “This is a product like bread and cheese … You must have it. You’ll always have it.”