Two thousand yogurt plant employees at Chobani recently became partial owners of the $3 billion dollar enterprise. The owner, Hamdi Ulukaya, a Turkish immigrant who opened the first plant in 2005, surprised Chobani employees by handing over 10% of the greek yogurt company’s shares in April.
“Starting today, I will have 2,000 partners at Chobani. This is one of the finest moments in my life!” Ulukaya on Twitter
Hamdi Ulukaya founded Chobani in 2005, purchasing a run-down Kraft yogurt plant with a Small Business Administration loan, and taking two years to perfect his recipe for Greek yogurt. Many of the employees that received ownership stakes last month have been with the company for years, helping to refine the recipe or manufacturing the first batches of yogurt to hit the shelves.
According to Mr. Ulukaya, the goal of this program was to help pass along the wealth that they have all helped build in the past ten years. With the current valuation of the company between $3 and 5 billion, the ten percent stake, allocated based on seniority, could make some of his employees millionaires, with the average employee payout expected to be around $150,000.
Programs like Chobani’s – often called employee stock ownership plans (ESOP’s) – are relatively rare, especially in the food industry. Tech start-ups are known to give employees shares in the company, but those are often given in the early days of the enterprise’s growth and often take the place of a salary before the company can afford to pay it’s employees. Mr. Ulukaya is giving his employees part of a company that has already established a high value, allowing them to hang onto the shares if they leave or retire, or the company will buy them back.
Across the United States, about ten percent of the private sector workforce is enrolled in some type of ESOP. Some food companies, like Schreiber foods or Bob’s Red Mill, have handed over 100% ownership to employees, but even in much smaller increments, these plans have huge benefits for the company and the employees.
Companies who use ESOP’s report a huge cultural shift once they are in place – effectively, they act to align employee incentives with that of management. Employees feel like they have a bigger stake in the game, and nearly all companies with ESOP’s report increased productivity and motivation among the workforce. In turn, these changes have a positive impact on profitability, revenues and stock price. According to the Employee Ownership Foundation’s 21st Annual Economic Survey of ESOP Companies, the year after ESOP’s were introduced, over 70% of companies reported profitability increases, 76% noted revenue increases, and 80% observed their stock price valuations increase. These are tangible gains that are being seen on the business side, because of positively rewarding and compensating employees.
This isn’t the first step that Chobani has taken to distinguish their business model. The founder, Ulukaya, is an outspoken proponent of corporate social citizenship, donating ten percent of profits to charity, and hiring refugees, which now make up one-third of Chobani’s workforce. Taken together, Chobani’s actions are differentiating this yogurt maker among its competitors – something the employees would now firmly stand behind.