Times Union: NY yogurt industry uses clout

Read Story in Albany Times Union
Reprinted here with permission

NY yogurt industry, including Chobani, plays its D.C. cards

Chobani, other makers, have friends in high places in jobs move
By Dan Freedman, Times Union
Saturday, July 4, 2015

Excerpt:

And although Greek yogurt by itself isn’t enough to totally lift New York’s dairy industry out of the doldrums, its milk-intensive production process has given farmers and milk producers a needed cushion against the vagaries of supply and demand.

In the key period between 2008 and 2013, milk used to make yogurt in New York went from 158 million pounds to 1.2 billion pounds, a seven-fold increase. The state saw a 2 percent rise in milk production last year, and it went from being the nation’s No. 4 dairy state in 2012 to No. 3 today.

Washington

When Russia blocked delivery of creamy Chobani Greek yogurt to the Sochi Winter Olympics last year, both of New York’s senators swung into action.

Chuck Schumer and Kirsten Gillibrand phoned anyone and everyone who could help free up the 5,000 single-serve containers in cold storage atNewark Liberty Airport in New Jersey.

“Chobani Yogurt is safe, nutritious and delicious and the Russian authorities should get past ‘nyet’ and let this prime sponsor of the U.S. Olympic Team deliver their protein-packed food to our athletes and media workers,” Schumer said in a news release.

Yogurt factory worker upstate New York

(Brady Dillsworth/Bloomberg)

Ultimately, time ran out and the yogurt was donated to food banks in the New York metropolitan area. Schumer called it “a silver — or gold — lining.”

Although unsuccessful, the effort illustrated the appeal of upstate New York’s Greek yogurt industry in general, and Chobani founder Hamdi Ulukaya in particular, to Washington’s political world.

Practically unheard of a decade ago, Greek yogurt has taken the dairy-consumer world by storm, from about 2.5 percent of yogurt sales in 2008 to nearly 36 percent this year. And the bulk of the industry is in the upstate dairy belt. Among them: Chobani in South Edmeston, Chenango County; Fage in Johnstown, Fulton County, Muller Quaker Dairy in Batavia, Genesee County; and Buffalo-based Upstate Niagara Cooperative Inc., which markets as Upstate Farms.

For the state, Greek yogurt is more than just a success story. It’s a win-win tale of economic redemption, the industrial phoenix risen from the ashes of closed-down factories in small- and medium-sized towns and cities across the state.

From 2011 to 2014, the job count at New York’s dairy manufacturers rose by 1,500 to 9,570, according to data from the state Department of Labor. In the same time frame, overall manufacturing jobs in New York dropped by 1 percent. Chobani employs more than 1,000 at its plant and in an office suite in nearby Norwich.

And although Greek yogurt by itself isn’t enough to totally lift New York’s dairy industry out of the doldrums, its milk-intensive production process has given farmers and milk producers a needed cushion against the vagaries of supply and demand.

In the key period between 2008 and 2013, milk used to make yogurt in New York went from 158 million pounds to 1.2 billion pounds, a seven-fold increase. The state saw a 2 percent rise in milk production last year, and it went from being the nation’s No. 4 dairy state in 2012 to No. 3 today.

Ulukaya’s own story embodies the entire industry’s aspirations, and goes a long way toward explaining the 43-year-old Chobani founder’s appeal to political figures.

Yogurt truck at milk tanks, upstate New York

Heather Ainsworth/The New York Times)

An ethnically Kurdish immigrant from Eastern Turkey, Ulukaya arrived in the U.S. in 1994 with little other than ambition to live the American dream and memories of the thick, delicious yogurt he grew up eating. In 2005, he received a junk mail flier advertising sale of a closed Kraft yogurt plant in the South Edmeston-New Berlin area. An $800,000 loan from the Small Business Administration’s Albany office helped him buy the plant in 2005 and he began testing and marketing his Greek-style yogurt.

He named it Chobani, Turkish for “shepherd,” and shipped the first batch to supermarkets in 2007. Five years later, Chobani was booking more than $1 billion in sales.

Suddenly, everyone wanted to get in on the act.

“This is a new day,” said Gov. Andrew Cuomo in convening a “yogurt summit” in Albany in 2012. One booster, state Farm Bureau President Dean Norton, said the “yogurt empire” was New York state agriculture’s answer to California’s Silicon Valley.

“It’s an astonishing story … it’s an amazing story … it’s breathtaking,” effused former President Bill Clinton during a 2013 Clinton Global Initiative panel discussion featuring Ulukaya.

In the discussion, Ulukaya extolled the virtues of starting up a manufacturing plant in small-town New York. “If you’re a start-up, you don’t have to be in a big city” like New York of San Francisco, he said. “You could be in small town and still be cool.”

worker inspecting yogurt containers in upstate New York

(Heather Ainsworth/The New York Times)

Workers in the South Edmeston-New Berlin area “are proud of the product they’re making,” he said. “They’re part of the story.” Chobani boasts of giving 10 percent of its profits to charitable causes and funding projects, from a local little league ball field to assistance for refugees from the conflict in Syria and Iraq.

Andrew Novakovic, an agricultural economics professor at Cornell University who has studied Chobani and the Greek yogurt industry, said, “It’s a genuine American story that a Turkish-Kurdish immigrant could become rich selling Greek yogurt. The cultural ironies of that are amazing.”

With encouragement from Schumer and Gillibrand, Ulukaya and other New York Greek yogurt players entered the Washington fray in 2012. They wanted to get into the USDA’s $15 billion school lunch, breakfast and summer food programs.

But access to those programs is more than just a matter of a senator making a phone call to the secretary of agriculture. Federal regulations spell out a lengthy bureaucratic process for gaining admission.

Ulukaya and Chobani took the lead, enlisting a lobbying firm, Cornerstone Government, and the National Yogurt Association to help them through the technicalities. Agriculture experts on the staffs of Gillibrand and Schumer pitched in as well.

Collectively, they helped Chobani and the industry as a whole navigate through requirements such as getting a “Commercial Item Description” for yogurt.

Ultimately, the process yielded an 11-page document that doesn’t include the word “Greek” but does specify a “high-protein” style that is “strained” —a reference to Greek yogurt’s process, which requires 3 pounds of milk for every pound of yogurt, which is triple the ratio for regular yogurt.

As chronicled in Schumer’s news releases, the USDA in 2013 committed to a pilot program in New York and three other states to testing Greek yogurt’s acceptance in subsidized school-meal programs.

In 2014, USDA expanded the pilot to a total of 12 states. In April, it announced Greek yogurt would be an option for schools nationwide.

Schumer and Gillibrand are accustomed to advocating for New York businesses. But each said that Greek yogurt represented a special case of a nutritious product gaining wide acceptance and bringing employment to economically depressed portions of upstate, as well as a lifeline to dairy farmers.

“When Greek yogurt first appeared, I said to myself, ‘This is an opportunity to help dairy,'” Schumer said. “I met with the heads of Fage and Chobani and said, ‘What (can) I do to help?'”

yogurt factory production line worker

(Brady Dillsworth/Bloomberg)

Gillibrand, a member of the Senate Agriculture, Nutrition & Forestry Committee who’s well-versed in the intricacies of dairy, said the Greek yogurt story appealed to her as the mother of two young children.

Gillibrand said her oldest child, 11-year-old Theo, takes a Chobani serving to school as part of lunch; she stocks it in her Senate office refrigerator.

“If you travel across upstate, you’ll see we’ve lost a lot of small dairies over past decade,” she said. “This is one answer to that reduction. Greek yogurt is very much a symbol of ‘Made in America.'”

Not all of Greek yogurt’s attempts to penetrate Washington’s walls have been successful. The two senators plus the Yogurt Association and Cornerstone have worked on getting USDA to recognize Greek yogurt’s protein boost and give it more generous crediting toward fulfillment of the school programs’ nutrition requirements.

The formula is complicated, but with a “crediting standard” adjustment to reflect its higher protein content compared to traditional yogurt, Greek yogurt would prove to be more affordable for school food service managers.

So far, the USDA has turned them down.

In a letter to Gillibrand last year, the USDA said giving Greek yogurt extra credit for higher protein would be “inconsistent” with crediting “similar foods in a uniform manner” — in other words: If they do it for one, they’d have to do it for all.

For Chobani, access to USDA school meal programs so far has not been hugely profitable.

“We did not put it through the lens of profit and loss, black and white, like a big food company would do,” said Peter McGuinness, chief marketing officer for Chobani. “We looked at it as the right thing to do for kids in America.”

By some accounts, Chobani has become the victim of its own success. Industry titans like Dannon and Yoplait have responded with Greek yogurts of their own, diminishing Chobani’s market domination.

Chobani got financing from a private equity fund that, according to some news reports, was pressuring Ulukaya to step aside for a new CEO more accustomed to running a worldwide operation.

McGuinness dismissed the stories and said, “Our best days are yet to come.”

Chobani’s growth is up year-by-year and its curve this year is ahead of projections, he said. The company plans to unveil 15 new products in the next two weeks.

Ulukaya “remains and will continue to be chairman and CEO,” McGuinness added.

According to lobbying disclosure reports on file on Capitol Hill, Chobani since 2012 has spent $420,000 on Cornerstone, which bills itself as a bipartisan firm whose lobbyists have deep experience in federal agencies and congressional offices.

But just last month, Chobani abruptly severed its ties with Cornerstone.

“While we are disappointed to no longer be representing Chobani, the Cornerstone team, in addition to thoroughly enjoying the consumption of Chobani’s fine products over the last three years, is proud of our work assisting the company in advancing their public policy goals,” said lead Cornerstone lobbyist Jim Richards, who previously served in the USDA during the George W. Bush administration and worked for Republican chairmen of the House Appropriations agriculture subcommittee.

Renovating the Lobby

Since 2013, Chobani also has spent $90,000 on Liz Robbins Associates, whose namesake is a veteran lobbyist best known for her close ties to the Clintons. Robbins has donated between $10,000 and $25,000 to the Clinton Foundation and accompanied Bill and Chelsea Clinton on a nine-day trip in April to Africa.

The Clintons have been guests at Robbins’ home in East Hampton on Long Island, and Bill and Hillary Clinton gave Robbins hugs at a 2013 SeriousFun Children’s Network event honoring her.

It is not clear what, if any, lobbying work Robbins has done for Chobani. A log of Gillibrand’s visitors in Washington shows a 2013 meeting with Chobani CFO Jim McConeghy, in which Cornerstone’s Richards also participated. The same log yielded no comparable meeting involving Robbins.

Robbins did not respond to interview requests.

Asked whether hiring Robbins was a way to maintain relations with the Clintons, McGuinness said, “There’s no connection there.”

But others in New York’s political circles say ultimately that link could prove beneficial.

“What smarter move is there than hiring someone close to the Clintons?” said Hank Sheinkopf, a veteran lobbyist and political consultant based in New York City.

“Being effective requires relationships and she has the one the company will need should Secretary Clinton become president.”

dan@hearstdc.com • @danfreedma