The Rise of the Greek Yogurt Industry in Central New York - NADO.org

Greek Yogurt:An Economic Driver inCentral New York StateIn today’s world of economic development, job creation typically comes in modest andoften frustrating doses, particularly in rural areas, and even in good economic times.Symptomatic of what many see as a “post-industrial America,” numerous areas haveseen decades of downsizing in manufacturing employment, the result of mechanization,specialization, shifts in consumer patterns, and off-shoring of production. The opportunityto land jobs in sizeable batches in rural communities is generally limited comparedto the time when manufacturing in this country was in its heyday, branch plants wereproliferating, and rural areas possessed the natural resources and the general manpowerto help drive American production.2

These realities have led to an evolution in economic developmentthinking over the years since the “smoke-stack chasing”era of the 1960s and 1970s, to the “small (business) is beautiful”movement of the 1980s and 1990s, when industrial parks becamebusiness or technology parks, and the practice of economicdevelopment was broadened to include more focus on smallbusiness development and incubation in addition to traditionalbusiness attraction and retention activities.In more recent years, emphasis has also been placedon more strategic, bottom-up approaches to generatingjobs, focusing on targeted industry clusters andasset-based development that seek to leverageand enhance a region’s balance sheet and corecompetitive advantages. This reality-based approachmakes a lot of sense, as communitiescan truly spin their wheelsby engaging in a “metoo” strategy of chasingthe flavor of theday without trulypossessing theright asset-mixto compete forthat particularindustry.With this backdrop, the emergence of the Greek yogurt industryin central New York over the past five years is most impressive,if not extraordinary. Two yogurt makers alone—Chobaniand FAGE USA (pronounced Fa-yeh)—have created morethan 1,400 jobs, and have provided an important new outlet forhundreds of dairy farms in New York and surrounding areas. 1(Chobani estimates that it will consume 5 million pounds ofmilk per day by the end of 2012 by itself. 2 )The rise of this industry has provided a much needed economicstimulus to a decidedly rural region, rippling out to thegreater community in terms of additional jobs in transportationand services, and increased local consumer spending fueled bythese expanded payrolls. In economic development jargon,central New York has landed “the big one,” and that is all toorare these days in rural America.As in most cases, there have been a number of contributorsto this success, some of which are state- and communitydriven,and others more a matter of where a region sits on themap. It starts, of course, with a market and the entrepreneurialand business know-how and drive to develop these market opportunities;locational dynamics and logistics (access to supplychains, markets, and workforce); necessary investments in criticalinfrastructure and support systems; and a welcoming businessclimate on the state and local levels.It is also noteworthy that the two major Greek yogurt producersin central New York, FAGE USA, and Chobani, camefrom very different directions. The former is the U.S. subsidiaryof a well-established Greek company that began this story byimporting their product into the U.S. and subsequently decidingto manufacture in Fulton County, 3 New York in order tomeet what they have characterized as the “ridiculously strongconsumer demand” for Greek yogurt in thiscountry. 4 The latter is a start-up business led bya Turkish immigrant who revived a shutteredproduction plant in Chenango County and ina few short years has become the largest Greekyogurt producer in the country and taken theproduct to new levels. In fact, as of 2011Chobani became the number one sellingbrand of yogurt in America, Greek-styleor otherwise. 5Now, another “wave” of yogurt investmenthas hit western New York State,in the Genesee County community of Batavia,as the continued growth of yogurtand Greek-style yogurt inparticular brings otherplayers into the marketincluding Alpina Foods, alarge South American dairycompany, and “Project Wave,” a partnership between PepsiCoand German dairy giant Theo Müller (see Sidebar: Project Waveon page 12). Given the success of this growing Greek yogurtcluster, this story of investment and job creation provides a casestudy on asset-based development useful for regional developmentorganizations and their partners. Just as good yogurtdepends on the right mix of ingredients, so too is the case ineconomic development. And this is a recipe worth sharing.Chobani and FAGE USAalone have created morethan 1,400 jobs andprovided an importantnew outlet for severalhundred dairy farms inNew York and surroundingareas.3

The Greek YogurtPhenomenonand New York’sDairy IndustryThe Rapid Ascent of Greek YogurtFirst, a word on the product: What has become brandedas “Greek” yogurt in this country is more widely known as“strained yogurt” in other parts of the world. This strainingprocess removes excess whey (the watery part of milk), resultingin a yogurt with a thicker texture that is low in fat and highin protein while retaining the distinctive yogurt taste. Strainedyogurt is common in many countries in the eastern Mediterraneanregion and other parts of Asia. 6What is perhaps most compelling about the rise of Greekyogurt is just how quickly it has come on to the scene. The storybegins in 1998 when FAGE began flying product from Greeceinto New York City to introduce its Greek brand to the Americanmarket, enjoyed impressive sales growth, and decided tobuild a U.S. facility. 7 The Chobani brand was subsequentlyrolled out to the U.S. market in 2007, and has since been thedriving force in taking Greek yogurt to a whole new level. 8With Greek yogurt rising on the radar screen, global financial services company UBS issued a research report in March 2011,providing an insightful “deep dive” into the Greek yogurt segment. 9 It notes, “Greek yogurt brands such as Chobani and FAGE havecaptured market share more quickly than almost any segment in a major food ever (13 points in the last 3 years).” The UBS reportgoes on to note that during the previous three years, Greek yogurt had “evolved from relative obscurity (and a 1 percent marketshare) to the segment driving the vast majority of category growth.” To put it in percentage terms, consumer tracker Nielson reportsthat sales of Greek yogurt have surged at an impressive rate of over 100 percent a year, while non-Greek yogurt sales grew in singledigits. 10In the report, UBS assigns Greek yogurt market share for Chobani and FAGE of 48 percent and 22 percent, respectively, for the12-week period leading up to the 2011 report, reflecting the role of the New York yogurt makers as the epicenter of this burgeoningindustry. While FAGE and Chobani pioneered the Greek yogurt revolution, the situation is not static. More recent data (2012)“Greek yogurt brands ... have captured market share morequickly than almost any segment in a major food ever...”UBS Investment Research4

indicate that global giant Danone (makerof Dannon yogurt) is capturing a largershare of the market (up to a 19.7 percentshare as of May 2012), and now holds thesecond position to Chobani, which sits at47.3 percent, with FAGE at 13.9 percent. 11Danone is aggressively marketingits Oikos Greek brand, includinga prominent TV spot during the 2012Superbowl with Greek-American actorJohn Stamos. 12 For its part, Chobani isdoing some high profile promotion ofits own, having signed on as an officialsponsor of the 2012 U.S. Olympic Team.Its first Olympic ad focused on the “Chobanistory,” and how the company with“massive support from our communityand fans” has in five short years grownto become the number one yogurt in thecountry. 13All competitors, however, have theopportunity to capitalize on a risingtide, as the proverbial pie is expected togrow bigger. The UBS report states, “Ouranalysis of Nielson data strongly suggeststhat Greek yogurt has sustainable growthahead from increasing shelf space at retail,geographic expansion (beyond thenortheast U.S.), and increased in-storepromotion activity.” While no one canpredict the future with absolute certainty,Greek yogurt appears to be here to stay.WHY Greek Yogurt?What is driving this “category killer” thatis taking up more and more shelf spacein the dairy section of the local market?Health and nutritional considerationsappear to be a major force behind theascent of Greek yogurt. The word hascertainly gotten around, as the healthbenefits of Greek yogurt have been frequentlytouted in the media as a smarteater’schoice, low in fat and more fillingdue to the high protein content.While many of these stories are directedto women, such as a feature inWomen’s Health that included FAGETotal 0% Nonfat Greek Style among the15 best snacks 100 calories or less, theproduct has a broader appeal. For example,Men’s Health featured Greek yogurt(displaying Danone’s Oikos brand) onits online list of “5 Protein-Packed GymSnacks,” calling it a “lifters dream.” Chobaniis also tapping into the children’smarket with Chobani Champions, thefirst Greek yogurt made with only naturalingredients that is marketed just forkids (and the adults who love them andmake the household purchases). 14This focus on health and nutritionis backed up by the UBS report, whoseanalysis indicates that consumers aredrawn to Greek yogurt as a “convenient,Photo courtesy: Times Union, Albany, NYHealth and nutritionbenefits top the list ofreasons that peopleconsume Greek yogurtfilling, and healthy meal.” The UBS reportnoted that while health and nutritionbenefits top the list of reasons thatpeople consume Greek yogurt, theirdata surprisingly indicated that taste wasnot a major motivator, nor was price, asconsumers were paying a premium comparedto non-Greek yogurt.It’s interesting to note that Greek yogurthas really come into its own over thelast five years, almost in lock-step withthe rise of social media, which togetherwith traditional print and television mediais spreading the word about the benefitsof the product to the American public.Today, word of mouth is leveragedmany times over by the loudspeaker ofsocial media outlets, and the New Yorkyogurt producers are making full useof these new-era marketing tools suchas Facebook and Twitter. Case in point,FAGE has nearly 1 million “likes” on itsFacebook page.5

As for Chobani, it is winning somegold of its own in terms of its marketingcampaign among the Olympic advertisers.Social media company AddThis,which monitors websites and users,tracked social media activity amongOlympic sponsors and other leading advertisersthroughout the London games,including mentions, write-ups, and Twitterfollowers, and awarded gold, silver,and bronze “brand medals” on a dailybasis. Chobani led their overall medalcount for the London games and wascrowned “Brand Champ” by AddThis,beating out such veteran competitorsas McDonalds, Coca-Cola, and VISA—pretty good for a newcomer. 15Yogurt and the NewYork Dairy IndustryA drive through upstate New York revealsa landscape with a sizable dairy industry.New York State had just under5,400 dairy farms as of 2010, based onpreliminary figures provided by the NewYork State Department of Agricultureand Markets. 16 Based on U.S. Departmentof Agriculture data, New York rankedthird among states for milk productionfor several years, dropping to numberfour in 2010 due to steadily increasingproduction in Idaho. 176This may reflect to some extent the impactof the recession on farmers, as theNew York Farm Bureau estimates thatabout 400 farms were lost to the 2009 recession—manymore than normal. 18In addition to milk production,manufacturing of milk-based products isvery important to the state economy. Accordingto 2009 Census Bureau figures,New York trailed only California andWisconsin in terms of manufacturingjobs generated from the dairy sector. 19Yogurt making is an important componentof this value-added activity in NewYork State. A February 2012 press statementfrom Governor Andrew Cuomopoints out that New York has a total of29 yogurt plants (traditional and Greek)that employ more than 2,000 people andproduced 530 million pounds of yogurtin 2011—more than double 2008 levels. 20Much of this growth, of course, has beendriven by the meteoric rise of Greek yogurt,to date driven by FAGE and Chobaniin the state, but soon to have companyfrom western New York.From a macro standpoint, thegrowth of the yogurt industry has alreadyhad a major effect on the dairyindustry in New York and surroundingareas. According to the governor’s pressstatement, New York’s yogurt producersused 1.16 billion pounds of milk in 2011,noting that this is comparable to themilk production of 500 averagesizeddairy farms in New York,based on an average of 115cows per farm. 21Milk consumption for NewYork’s yogurt production should continueto grow, driven by the Greek segment.Greek yogurt requires approximatelythree times the amount of milkthat non-Greek yogurt does to achievethe thick and creamy texture that is itstrademark. In fact, Chobani estimatesthat New York area farmers will needto increase milk supply 15 percent in 2013to meet demand. 22FROM FARM TO MARKETUnderstanding the market, milk pricingand effect down at the micro level, however,becomes more complicated. Forover a century, a complex, hybrid systemhas evolved in the U.S. to deal withproduction and distribution of milk thatis part market-driven and part publiclyadministered through various pricingregulations. 23 Milk is a “flow” commodity,as it is produced each and every day(there is no off switch on a cow). TheFederal government seeks to maintainorderly distribution and to protect thefarmers through milk marketing orders,which among other things set a minimumprice for the fluid milk.For distribution and consumptionpurposes, milk is broken down intogrades and classifications according tofederal rules. The highest “Grade” ofmilk is Grade A, with Grade B milk usedfor non-rated manufacturing purposes.24 Grade A milk is broken down intofour classes for pricing purposes, withClass I used in all beverage milks, ClassII used in fluid cream products, yogurts,ice cream, and other perishable products,Class III used in cream cheese andhard manufactured cheese, and Class IVmilk used to produce butter and driedmilk. 25For many years, farmer-owned cooperativeshave played a central role inthe U.S. dairy industry and in the marketingand distribution of milk. The industrywent through a transformation inthe 1960s and 1970s when dairy cooperatives,through mergers, consolidationsand acquisitions, grew from local to regionalorganizations, with some stretchingacross the country. 26Dairy Marketing Services (DMS) isthe primary supplier of milk to the Chobaniplant in Columbus, New York. DMSis a milk-marketing organization thatwas formed in 1999 through an agreementbetween Dairy Farmers of Americaand Dairylea Cooperative, Inc. Today,

DMS serves the industry “by combiningthe milk supplies of independent farmsand cooperative farms for the purposesof creating efficiency and the reductionof cost of milk assembly, field services,and transportation.” 27 DMS is servicedout of Syracuse, New York, which dispatchesabout 900 trucks of milk a dayto customers throughout the northeast.Dan Guido is a field representativefor DMS, and a veteran of the industrywho has lived in the central New Yorkarea for some time. 28 Guido notes thatNew York sits right in a prime locationnext to the I-95 corridor from Boston toWashington, DC—the largest market formilk in the country. He further points tothe quality of milk that is produced inthe northeast, a further reason for processorsto look to this region for valueaddedopportunities.Guido has witnessed plant closingsand consolidations over the years, andthe surge in Greek yogurt production inhis mind has provided a much neededmarket outlet for Class II milk. This newmarket helps allow the industry to “keeplocal milk local,” rather than relying onmarkets “farther and farther away” andthe increased transportation costs thathave to be borne.Milk pricing is also a complicatedmatter, due to how milk is regulated (toprotect the farmers and set a minimumprice) as well as bought and sold. Theprice of milk is set in the larger marketplace,and not at the local level. Whilefew would question the overall benefitState and local leadersare stepping up to addressthe challenges andopportunities facing thisgrowing industry cluster.of the growing yogurt industry to NewYork State and its farming community, itwould appear that an individual farmerlocated near these production facilitiesmay not necessarily be incented to expandtheir farms in response to this demand.Andrew Novakovic, a Cornell Universityprofessor and agricultural economist,has written a paper on the subject of thismarketing phenomenon: “The ChobaniParadox: Although the dairy industry,generally and instinctively, desiresgrowth, market and regulatory conditionssometimes make the cost of growthappear larger than the benefit.” 29Novakovic notes that this is not areflection of Chobani itself (it’s out oftheir control), but it does provide a goodillustration of this conundrum due to thecompany’s dramatic and concentratedgrowth.The supply of milk was also the focusof a Wall Street Journal article, inwhich Chobani founder Hamdi Ulukayacommented, “We are coming to a pointwhere the availability of milk is becominga challenge,” in reference to a newplant that Chobani is building in equallymilk-rich Idaho and is expected to employabout 400 people in Twin Falls. 30The article, however, also reports that theowners of FAGE are not worried aboutmilk supply in New York and notes thatPepsiCo and Theo Müller are building anew facility near Buffalo, in Batavia, NewYork where they can better access milkfrom the Midwest.State and local leaders are steppingup to address the challenges andopportunities facing this growing industrycluster. 31 In economic development,leadership starts at the top, andGovernor Cuomo certainly has been amajor booster for New York yogurt. Herecently convened the first “New YorkState Yogurt Summit” in Albany to “hearideas from industry leaders, farmers, andother stakeholders to help ensure thatthe yogurt industry continues to growand create jobs in New York.”Among the issues discussed at theevent, the governor announced that thestate will take new actions to help thedairy farmers increase their herds andproduction. The state is proposing toincrease its Concentrated Animal FeedingOperation (CAFO) cap from 200 to300 milking cows, allowing small farmsto expand without having to meet thecostly requirements of complying withCAFO environmental permitting. Thestate also intends to work with farmersand yogurt producers to lower energycosts by incentivizing the use of anaerobicdigesters to convert waste to energy.7

of making Greek yogurt generates morewhey than traditional yogurt, this capacityhelped support FAGE’s location at thePark. Bevington notes that FAGE is nowtheir number one customer, which hashelped stabilize rates for all users.From the federal level, both the industrialpark and wastewater treatmentplant received valuable assistance fromthe U.S. Economic Development Administration(EDA) to help develop thiscritical infrastructure. Fulton County isincluded within the Mohawk Valley EconomicDevelopment District (MVEDD),the EDA-designated Economic DevelopmentDistrict which helps set prioritiesfor the region and develop a regionaleconomic development plan.According to Greg Eisenhut,MVEDD’s chief operating officer, theorganization helped secure a $1 millionEDA grant that supported the 300-acreJohnstown Industrial Park project in1989. 35 In 2008, EDA awarded a $2.2million grant toward an $11 million upgradeof the wastewater treatment facility,focused on anticipated growth in foodprocessing at the industrial park.It is also interesting to note that Euphrates,a feta cheese manufacturer, isalso located in the Johnstown IndustrialPark and has benefited from these investments,as well as revolving loans fromboth MVEDD and FCCRG. Euphrateswas started in the early 2000s by HamdiUlukaya, the entrepreneur who subsequentlywent on to found Chobani, innearby Chenango County. 36Beyond the EDA grant, the wastewatertreatment facility was also quiteentrepreneurial in raising funds towardthe balance of the $11 million treatmentplant upgrade, including a $1.4 millionNew York State Energy Research and DevelopmentAuthority (NYSERDA) grant,and a $6 million Green Innovation Grantfrom the New York State EnvironmentalFacilities Corporation, funded throughthe 2009 American Recovery and ReinvestmentAct. 37 The upgrades also includea cogeneration project that takesadvantage of the growing quantities ofmethane gas being produced from thewaste stream and converts it into electricityfor plant use. Bevington indicatesthat visitors from Beijing to Mexico Cityhave traveled to learn about the cogenerationproject, which in 2011 supplied91 percent of the facility’s power needs.In addition to the more site-specificissues, Reese also points to the efforts ofthe New York State Department of Agriculture’sOffice of Milk Control, whichdeveloped the key initial relationshipwith FAGE when the company was firstimporting its product from Greece intometropolitan New York markets. AsCasey McCue of the Office of Milk Controlexplains, New York State workedwith FAGE as the lead state to developa plan to meet federal requirements underthe Pasteurized Milk Ordinance. 38 Ineconomic development as well as business,it’s all about relationships.New York State government continuesto support FAGE through its most recentexpansion in Johnstown. Accordingto the state, the project cost is estimatedat over $100 million for the constructionof the 80,000-square-foot addition, andincludes a state incentive package valuedat over $1.5 million to support thecreation of 130 new jobs over three yearsand the retention of 160 existing jobs. 39Photos inside the FAGE facility, Johnstown, NY, Feb. 2012 byMarc Schultz, The Daily Gazette, Schenectady, NY9

Growing Jobs fromthe Entrepreneur up:The Chobani Story inChenango CountyChobani founder and CEO HamdiUlukaya accepts the national 2012 SBAEntrepreneurial Success Award Award.Photo by Risdon Photography.While FAGE is a good example of promotingeconomic development withina region through successful business recruitmentand expansion, the emergenceof Chobani in central New York providesa profile in entrepreneurship and homegrownjobs. The Chobani story began in2005 when Hamdi Ulukaya, a feta cheeseproducer in Johnstown, New York, purchaseda yogurt facility approximately 60miles away in Chenango County that hadbeen recently closed by Kraft Foods. 40This 100-year-old property waspurchased with the help of a Small BusinessAdministration (SBA) loan packagethrough the agency’s 504 program (SBAand Key Bank), and the company’s meteoricrise began. Additional fundingwas also secured in 2006 and 2007 fromnumerous local economic developmentfinancing programs as well as a U.S. Departmentof Housing and Urban Devel-10opment Community Development BlockGrant from New York State, providingUlukaya the foundation to build a successfulbusiness model, beginning withthe manufacturing of private label yogurtsat the Chenango County facility. 41Ulukaya, with the help of a “yogurtmaster” from Turkey, also proceededover this time to develop the recipe for astrained yogurt that would be rolled outin 2007 as the highly popular Chobanibrand. In just seven short years fromstart-up, and five years from the Chobanibrand launch, the results have beennothing short of extraordinary, as Ulukayaand his team have proven to be mastermarketers as well as yogurt makers.The company has grown from fivepeople to over 1,200 employees (1,000 ofwhich are in Central New York), and anew facility under construction in Idahoin 2012 is expected to employ an additional400 people. After starting out inthe Northeastern United States, Chobaniproducts are now available nationwideand in Canada, the United Kingdom,and Australia. Sales have grown at adizzying pace since 2007, and Ulukayaexpects to hit $1 billion in annual revenuesby the end of 2012, according toa recent interview. 42 As any experiencedeconomic developer or commercialloan officer can see,this level of success is rarely seen amongstart-ups, where only about half survivetheir first five years.The SBA certainly took note when itawarded Ulukaya the prestigious national2012 Entrepreneurial Success Award,which recognizes business ventures thathave received SBA assistance and haveperformed at the highest levels basedon such factors as sales growth, employment,and financial performance. 43 Insummarizing the award, SBA not onlypointed to the company’s impressivesales growth, but also its accumulatednet worth.Ulukaya also recently received theErnst & Young Entrepreneur Of The YearAward for the New York area as the winnerin the Retail and Consumer Productscategory, selected by his peers in the privatesector. The Bloomberg Billionaire’sIndex estimates that Ulukaya, as thefounder and sole owner, has a net worthof $1.1 billion. 44The success of Chobani has certainlygiven Chenango County and surroundingareas a much-needed shot in thearm. Chenango County sits within theservice area of the Southern Tier EastRegional Planning Development Board(STERPDB), which serves as the EDAdesignatedEconomic DevelopmentDistrict as well as the Local DevelopmentDistrict under the multi-Photo courtesy Commerce Chenango

state Appalachian Regional Commission.According to Dick McCormick,Deputy Director of the STERPDB, the2010 per capita income for ChenangoCounty was $31,792, which is slightlyless than 80 percent of the national average,qualifying the county as “economicallydistressed” under the guidelines ofthe U.S. Economic Development Administration.45 Population in the ChenangoCounty was also projected to decline by2.2 percent from 1990 – 2010, comparedto a 10.5 percent increase in the state as awhole over this period according to dataprovided in the Chenango County EconomicDevelopment Strategic Plan. 46Jennifer Tavares is the economicdevelopment director with CommerceChenango and is charged with connectingcounty businesses with economicdevelopment resources and capitalsources. 47 She has held this position since2007 and thus has been on the front linesof the Greek yogurt boom in ChenangoCounty. As Tavares outlines, the impactshave been substantial. 48 Based on April2012 data, the company has madeapproximately $193 million in capitalinvestments at their Chenango Countylocations, including the constructionof a new state-of-the-art distributionfacility in Columbus and the purchaseof the corporate campus in Norwich,both in 2010. 49 These facilities have afar-reaching impact, drawing over 1,000Chobani, Inc.: Total Benefits/Assistance as of July 31, 2012Funding Name Funding Type Funding Amount Funding Agent YearDevelopment Chenango BALF Loan $100,000 Local 2006Chenango County RLFLoan $75,000 Local2006Broom County IDA-STEED Loan $168,000 Local 2006Empire Zone Tax credits $9,388,877 State 2007-2010CDBG Loan/Forgivable Loan Loan/Grant $590,000State/County2007IDA Tax Abatement $1,001,200 State 2010IDA Tax Abatement $2,445,286 Local 2010IDA Phase III Tax Abatement $3,837,297Local/State2011-20122011 CDBG Loan/Forgivable Loan Loan/Grant $984,000 State 2011NMTC (cash) Grant $2,000,000 State 2011NYSERDA Grant Grant $3,000,000 State 2011Empire State Development Grant Grant $1,500,000 State 2011-2012Excelsior Tax Credits Tax credit $8,500,000 State 2011Total:employees from a 17-county region withan annual payroll estimated at around$30 million.Chobani also purchases vast quantitiesof milk to make its yogurt, as approximately4.5 million pounds of milkis delivered each day to the New Berlinplant, benefiting farmers throughout thestate. 50 “Through the enormous increasein demand for Class II milk, prices have$33,589,660- Funding amount is estimated, the actual funding received may differ.- Some funding is still in process and funding has not yet received.NOTESPercent loans: 2.43%Percent tax credits: 51.72% Eligible until 2015Percent grant/equity: 24.80%Percent tax abatements: 21.06%Until 2021$840,000$17,888,877$8,577,000$7,283,783Source: Commerce Chenangoincreased, thereby providing farmerswith greater income and larger marginon their product,” according to CommerceChenango.For their part, the state and localauthorities have certainly kept up theirend of this private-public partnership, asoutlined by Commerce Chenango in thetable above of state and local benefits andassistance provided to Chobani since itsinception through the end of April 2012.The package includes potential benefitsof up to $33.6 million, consisting of variousforms of tax relief, grants, and loansfrom different entities and programs.Based on an estimated 1,200 jobs createdto date, this represents about one jobcreated per $28,000 invested, assumingChobani realizes the full value of all theprograms—an exceptional deal underany economic development return-oninvestment(ROI) standard. 51Chobani groundbreaking (above) for new warehouse and distributionfacility, 2010. Photo courtesy Commerce Chenango11

Sidebar:Project Wave HitsWestern New YorkThe 211-acre Genesee Valley Agri-Business Park has a 363,000-squarefootMuller Quaker Dairy (MQD) facility under construction on theleft, and Alpina’s 42,000-square-foot facility under construction inan adjacent lot on the right. Alpina is scheduled to open in the fall of2012 and MQD in the summer of 2013. Bottom photos highlight variousstages of construction. Photos courtesy of GCEDC.12

The expanding market for Greek-style yogurt is bringing new players to thetable, with a second “wave” of investment hitting the state in the western NewYork town of Batavia, located in Genesee County, strategically nestled betweenRochester and Buffalo on I-90. The project was initially known locally only as“Project Wave,” until February 2012, when Governor Cuomo announced thatPepsiCo, the world’s second largest snack and beverage operation, and TheoMüller, Germany’s largest privately held dairy business, had chosen New YorkState and Batavia as the site for their first yogurt production facility in the U.S. 52Their joint venture company, Muller Quaker Dairy (MQD), is spending an estimated$206 million to build a 363,000-square-foot, state-of-the-art productionplant at the 211-acre shovel-ready Genesee Valley Agri-Business Park in Batavia,creating 186 new manufacturing and support jobs, a major boost to thecommunity and surrounding area.Wave considered other sites both inside and outside New York, and tookinto account such factors as access to dairy resources, water supply, and distributionroutes to key markets in making its final selection. Further, the statestepped up with $13.3 million in tax credits, and $1 million from the New YorkState Homes and Community Renewal program, while Genesee County is alsoproviding an estimated $12 million in sales and property tax relief.The driving force at the local level is the Genesee County Economic DevelopmentCenter (GCEDC), headed up by President and CEO Steve Hyde. 53GCEDC worked with state and local officials to assemble the incentives package,attend to the company’s site location needs, and meet the projects’ ambitioustimetable. As Hyde notes, Genesee County is a good choice for dairymanufacturing, as about 40 percent of the state’s milk production is situated insurrounding counties, plus Batavia is about a 10-hour drive to a population of125 million people—hardly remote.The development of the Genesee Valley Agri-Business Park, over nineyears in the making, offers fully-serviced sites catering specifically to the foodproducts industry. 54 This effort appears right on target, given the strong growthin the nutritional dairy market, as evidenced by the growth of Greek yogurt. TheWave investment comes on top of the announcement of Alpina Foods in 2011,which is expected to open its new 42,000-square-foot yogurt production facilityin the 211 acre Agri-Business Park in 2012, in close proximity to the site ofthe MQD facility. That project is expected to create an initial 50 jobs accordingto Hyde, making 2012 a major year for economic development in the region.13

Image from NASA/courtesy of nasaimages.org. Data courtesy Marc Imhoff (NASA/GSFC) and Christopher Elvidge (NOAA/NGDC). Imageby Craig Mayhew (NASA/GSFC) and Robert Simmon (NASA/GSFC).14The region issituated betweentwo powerfuleconomic corridorsthat representupwards of 40percent of theGross DomesticProduct in the U.S.and Canada.Location,Transportation& LogisticsCentral New York— Blinded by the LightIf “location, location, location” is the mantra of real estate, “location, transportation,and logistics” is the driving force in economic development. Business site location decisionstend to be shaped by proximity to markets and supply chains (raw materials,intermediate goods, labor accessibility, and services), and access to the transportationand logistics systems needed to move goods, services, and people in a timely and costeffectivemanner, smartly managed over different modes as needed.Most people would agree that the countryside of central and upstate New York ispicture postcard material. But, as the NASA photo graphically illustrates, the regionis rural, but far from remote. The region is situated between two powerful economiccorridors that represent upwards of 40 percent of the GDP in the U.S. and Canada:the Boston to Washington (I-95) corridor to the south, and the Chicago to Quebeccorridor (St. Lawrence/Great Lakes) to the west. 55 If a company’s objective is nationalmarket penetration, then this jumping off spot is a pretty good start, as central NewYork is nestled between several major cities only a few hours away, including Boston,Montreal, Buffalo, Cleveland, Philadelphia, and, of course, the Big Apple: New York City.

Connecting to Markets and SuppliersThe New York State Department of Transportation (NYSDOT)has a good appreciation of the importance of its transportationsystems to business and economic success, both transportingwithin the state as well as links to national and internationalmarkets. NYSDOT, in conjunction with the New York StateThruway Authority and New York State Canal Corporation,have over the last two years conducted an extensive study of the“Mohawk-Erie Multimodal Transportation Corridor,” whichextends 400 miles through the heart of upstate New York andrepresents one of New York’s critical trade gateways for tradebetween the east coast and the Midwest, as well as Canada. 56NYSDOT’s study covers multi-modal transportation investmentsand strategies that will support the economic future ofthe corridor, focusing primarily on the transportation needs ofthe economic drivers (key businesses) in the corridor. Accordingto David Rosenberg of NYSDOT, the study has been guidedby a Corridor-wide Project Advisory Committee (CPAC), plusfour Regional Project Advisory Committees (RPACs), includ-ing one in the Central New York/Mohawk Valley region. 57 Allfour RPACs identified both agriculture and manufacturing asamong the economic drivers in their regions. The economic developmentcommunity was also involved, including the input ofthe Empire State Development Corporation as a member of theProject Advisory Committee.Rosenberg indicated that, through the Project AdvisoryCommittee input, NYSDOT heard that overall the transportationsystem was generally working well and serving industryneeds in the corridor. He pointed to the Interstate system, severalClass I railroads serving the state (including Canadian Pacific,CSX, and Norfolk Southern), and the accessibility to major U.S.,Canadian, and most international markets within 24 hours.Ray Hessinger, acting director of the Rail Bureau of NYS-DOT, notes that neither Chobani nor FAGE are currently onrail. However, the Chobani facility could be in the future, as therail line servicing that area was washed out in a flood in 2006,and there have been some local discussions regarding resurrectingthe line. 58Flickr user: SNarvasaChobani integrates social media with traditionalmarketing in a billboard (above).Trucks come and go at the company’s yogurtplant (right). RailEx provides expressrefrigerated rail service between Rotterdam,NY and the West Coast (below).Photo by Laura GlazerPhoto courtesy of RailEx15

To support yogurt production, milk is shipped from hundredsof dairy farms in New York and surrounding areas.Hessinger also points to RailEx, an express rail servicewhich operates refrigerated unit trains between the U.S. WestCoast and Rotterdam, New York, which is near Albany. Themajority of goods on the line are come from west to east fromWalla Walla, Washington, and Delano, California, thus providinga good back-haul opportunity for those in the Northeastregion that need access to West Coast markets. According toRailEx, yogurt (including Greek-style) has been shipped to theWest Coast over their system. 59 RailEx uses short haul trucksto pick up goods from area shippers and bring them to their225,000-square-foot consolidation/deconsolidation facility inRotterdam for five-day shipment to the West Coast. 60 RailEx offersa green alternative, as its saves over 200,000 gallons of fuelper week and results in three times fewer emissions versus longhaultrucking.The workhorse of any state transportation system is thehighway system, with the federal Interstate acting as the backbone.New York State is well served by the Interstate system interms of access to regional and national markets. I-90 passeseast-west through the heart of central New York and connectsto Boston via the Massachusetts Turnpike to the east, and Buffaloand Cleveland to the west. I-81 runs north-south throughthe center of the state, from the Canadian border to the north,to the Mid-Atlantic region (Pennsylvania and Virginia) tothe south running parallel to the I-95 corridor, and generallyproviding a less congested alternative to that busy route. NewYork City can be accessed from central New York via I-90 eastand I-87 south, and for more southerly locations I-81 south toScranton, Pennsylvania, and I-80 from east into New York City.16First mile challengesBeyond the major arterials that serve a region, it is not unusualfor some rural locations to face “first mile challenges” (figurativelyspeaking), in terms of accessing the larger system. Inthe case of the Chobani facilities, they are situated in a very ruralarea, as the 2010 population for all of Chenango County was50,477, with 7,190 people living in the City of Norwich (whereChobani’s offices are located). 61 From a highway standpoint,the business is located within the interior of a triangle formedby I-90, I-88, and I-81, putting the plant roughly about 30 – 45minutes from the Interstate system, depending on the direction.Accordingly, Chobani depends on the non-Interstate systemto a greater extent to move over 1,000 area employees whocommute from 17 surrounding counties, bring in approximately4.5 million pounds per day of milk, and will soon ship outover 2 million cases of product a week. 62 New York State Route8 to Utica in particular is an important corridor, as many employeescommute from that direction. Utica is about 45 minutesaway, and is a primary connection point with I-90, the majoreast-west highway serving New York State.In 2012, local residents near the production facilities raisedconcerns regarding the impacts of commuter and truck trafficon the community. 63 It is hard to imagine there not beingsome growing pains for any company that has seen such rapidgrowth as Chobani’s, particularly in a small town environment.Chobani has met with residents of South Edmeston, which liesacross the river in Otsego County, with much of the truck trafficpassing through this village on the way to the plant. Elected

officials, planning and development staff, and a representativeof NYSDOT Region 9 also attended the meeting to discussconcerns.Jack Williams is the Regional Manager for NYSDOT forRegion 9 and has responsibility for the state highway systemthat serves these local communities and the Chobani facilities. 64Region 9 engineers are working with all parties concerned toassess the needs and address traffic and safety concerns on thesystem, including a review of intersections and signing alongRoute 8, as well as the need for warning and advanced-warningsignage. According to Williams, much of the system in the areacomprises rural, two-lane roads, with narrow shoulders and acurvilinear alignment, most of which has pavement in fair togood condition. He doesn’t anticipate any major capacity improvementsthat will be needed to accommodate Chobani’sgrowth at this time.While the extraordinary growth of Chobani has createdsome additional challenges for the system, Williams also seesthe new jobs as beneficial for the area: “How can you not beexcited?”Concluding Remarks:A Yogurt Empire?The extraordinary growth of Greek yogurt manufacturing incentral New York is impressive, to say the least. Credit mustgo to the businesses—FAGE and Chobani—that pioneeredthe market opportunity and made this region their base ofoperations to capitalize on the public’s demand for healthy,nutritious, and tasty food options. Proximity to markets andan extensive milk-shed were built-in advantages for NewYork State, but timely local, state, and federal assistance, and awelcoming business climate on all levels have also supported thestate’s yogurt industry. New players arriving in Western NewYork provide further affirmation of the state’s role in the yogurtindustry, anchored by the Greek segment.Recognizing that the yogurt tide has and will continue tohave the potential to lift many ships, stakeholders are workingtogether to ensure its ongoing growth. There are always challenges,of course, in this case milk production and keeping pacewith ever-upward demand fueled by the Greek phenomenon.Collaboration and alliances are the watchword for successfulindustry clusters, and the August 2012 New York State YogurtSummit held in Albany brought together all the right players totackle these challenges and opportunities.Dean Norton, the president of the New York Farm Bureaucommented at the summit that yogurt could provide New Yorkwith an agricultural version of Silicon Valley, becoming the“yogurt empire.” 65 While some may see this as thinking large,Greek yogurt was not even on the radar screen a few years ago,and other currently unknown opportunities may exist for dairybasedproducts in the expanding nutritional food market.Greek yogurt seems to be everywhere these days, and NewYork State should continue to benefit from this positive brandimage while stakeholders work together to further grow this industry.New York State has featured FAGE among other companiesin its recent business attraction advertising campaign,narrated by no less than acting legend Robert De Niro. And,Chobani’s community-focused ads during the 2012 LondonOlympics were certainly great promotion for the Empire Stateas well, and had to be a source of pride for people all across thestate. All a story worth sharing!David Lainchbury of The Dannon Company, left, and JamesMcConeghy of Chobani speak during the Governor Andrew M.Cuomo New York State Yogurt Summit in Albany, NY, WednesdayAugust 15, 2012. (Michael P. Farrell/Times Union)Governor Andrew Cuomo, joined by PepsiCo Chairman andCEO Indra Nooyi and Theo Müller Group CEO Heiner Kampsin the Genesee Valley Agri-Business Park, for the 2012 MQDgroundbreaking in Batavia. Photo courtesy of GCEDC.17

End Notes1 Accessed at http://www.chobani.com andhttp://www.fageusa.com2 Personal communication with Kelly LaCorte,Chobani, September 25, 20123 Accessed at http://www.fageusa.com/ourgreek-heritage/the-fage-story4 Accessed at http://www.fageusa.com/our-newlocation-fage-to-open-state-of-the-art-us-plant/5 Accessed at http://chobani.com/who-we-are/6 Accessed at http://en.wikipedia.org/widi/Strained_yoghurt7 Accessed at http://www.fageusa.com/ourgreek-heritage/the-fage-story8 Accessed at http://chobani.com/who-we-are9 “The Rise of Greek Yogurt,” UBS InvestmentResearch, March 22, 201110 “Greek Yogurt Causes a Stir with Triple DigitGains,” Chicago Tribune, March 16, 201211 “Who’s Winning the Greek-Yogurt ‘Revolution’?,”Ad Age, June 6, 201212 Ibid.13 “Proudly With You,” Chobani Olympic TVcommercial, published by Chobani Yogurt, July26, 2012, accessed at http://www.youtube.com/watch?v=oeKNvaU3W6814 Accessed at http://chobanichampions.com15 Accessed at http://www.addthis.com/insights/olympics#.UCwAp6OotLM16 “New York State Dairy Summary,” New YorkState Department of Agriculture and Markets,201017 “2010 Milk Production,” U.S. Department ofAgriculture (USDA) Marketing Service Bulletin18 “Dairy Farms Toast Prices,” timesunion.com,May 2, 201219 “Yogurt Boom Leaves Dairy Farmers Behind,”Wall Street Journal, June 26, 201220 “Governor Cuomo Announces that PepsiCoand Theo Muller Choose NYS to Launch TheirJoint Venture into Yogurt Business,” media release,Office of the Governor, Feb. 24, 201221 Ibid.22 Personal communication with LaCorte;“Greek Yogurt Gives Boost to Flagging DairyIndustry,” Buffalonews.com, July 9, 201218the United States/AIB-761, ERS, USDA25 Accessed at http://www.ers.usda.gov/topics/animal-products/dairy/definitions.aspx26 “U.S. Dairy Industry in Brief ”27 Personal communication with Jennifer Huson,Dairylea Inc. and Dairy Farmers of America,September 7, 201228 Personal communication with Dan Guido,Dairy Farmers of America, May 4, 201229 Andrew M. Novakovic, “The Chobani Paradox,”Cornell University, March 201230 “Yogurt Boom Leaves Dairy Farmers Behind,”Wall Street Journal, June 26, 201231 “Governor Cuomo Hosts First New YorkState Yogurt Summit,” media release, Office of theGovernor, August 15, 201232 Accessed at http://www.fageusa.com/ourgreek-heritage/the-fage-story33 Personal communication with Mike Reese,president, Fulton County Economic DevelopmentCorporation, April 11, 201234 Personal communication with George Bevington,general manager, Gloversville-JohnstownJoint Wastewater Treatment Plant, April 10, 201235 Personal communication with Greg Eisenhut,chief operating officer, Mohawk Valley EconomicDevelopment District, April 13, 201236 Personal communication with Reese andEisenhut37 Annual Reports, Gloversville-Johnstown JointWastewater Treatment Facility, 2008 – 201138 Personal communication with Casey McCue,Office of Milk Control, New York State Departmentof Agriculture and Markets, May 30, 201239 “Governor Cuomo Announces Launch ofStatewide Business Ad Campaign,” media release,Office of the Governor, June 21, 201240 Accessed at http://chobani.com/who-we-are41 Commerce Chenango42 “Old Factory, Snap Decision Spawn Greek-Yogurt Craze,” Wall Street Journal, June 20, 201243 Accessed at http://www.sba.gov/about-officescontent/2/3136/success-stories/14439144 Gourmet News, June 22, 2012; “Hidden ChobaniBillionaire Emerges as Greek Yogurt Soars,”Bloomberg, accessed at http://www.bloomberg.com/news/2012-09-14/hidden-chobani-billionaire-emerges-as-greek-yogurt-soars.html46 Chenango County Economic DevelopmentStrategic Plan, 2006, page 2047 Personal communication with Jennifer Tavares,Commerce Chenango, April 2, 201248 Personal communication with Tavares, includingChobani Economic Impacts, and Chobani,Inc.: Total Benefits/Assistance to Date, April 2,2012, April 30, August 28, 201249 Accessed at http://chobani.com/who-we-are50 Personal communication with Tavares,LaCorte51 Author’s calculation, based on data fromCommerce Chenango52 “Governor Cuomo Announces PepsiCo andTheo Muller Choose NYS”53 Personal communication with Steve Hyde,president of the Genesee County Economic DevelopmentCenter54 Accessed at http://www.gcedc.com/index.php/sites/genesee-valley-agri-business-park55 “Northeast CanAm Connections: Intergratingthe Economy and Transportation,” presentation tothe Conference of New England Governors andEastern Canadian premiers, September 16, 200856 Accessed at http://www.dot.ny.gov/mohawkerie-study57 Personal communication with David Rosenberg,New York State Department of Transportation(NYSDOT), April 19, 201258 Personal communication with Ray Hessinger,NYSDOT, June 24, 201259 Personal communication with Fellicia Thompson,account manager, RailEx, July 15, 201260 Accessed at http://www.railexusa.com/site61 Personal communication with McCormick,June 201262 “Old Factory, Snap Decision”63 “Area residents seek to fix Chobani issues,”thedailystar.com, March 29, 201264 Personal communication with Jack Williams,regional director, Region 9, NYSDOT, April 30,201265 “In Albany, Hopes of Making New York State aYogurt Empire,” New York Times, August 15, 201223 “How the Milk Pricing System Evolved,” MilkPricing in the United States/AIB-761, EconomicResearch Service (ERS), USDA24 “U.S. Dairy Industry in Brief,” Milk Pricing in45 Personal communication with Dick McCormick,Southern Tier East Regional Planning andDevelopment Board, June 2012Flickr user: messycupcakes

About the NADO Research FoundationFounded in 1988, the NADO ResearchFoundation is the nonprofit research affiliateof the National Association of DevelopmentOrganizations (NADO). The NADOResearch Foundation identifies, studies, andpromotes regional solutions and approachesto improving local prosperity and servicesthrough the nationwide network of regionaldevelopment organizations. The ResearchFoundation shares best practices and offersprofessional development training, analyzesthe impact of federal policies and programson regional development organizations, andexamines the latest developments and trendsin small metropolitan and rural America.Most importantly, the Research Foundationis helping bridge the communications gapamong practitioners, researchers, and policymakers.This report was authored by consultant David Cole, formerly commissioner of the Maine Department of Transportationand CEO of Eastern Maine Development Corporation, under the editorial guidance of NADO Associate Director CarrieKissel. We thank all the individuals who provided information and images and those who consented to be interviewed.Images from Flickr are used under a Creative Commons License.This work is supported by the Federal Highway Administration under contract number DTFH61-06-H-0029 throughthe NADO Research Foundation’s Center for Transportation Advancement and Regional Development (www.RuralTransportation.org).Any opinions, findings and conclusions, or recommendations expressed in this publication are those of theauthor and do not necessarily reflect the views of FHWA or the NADO Research Foundation.19

Regional Strategies. Partnerships. Solutions.An Affiliate of the National Association of Development Organizations400 North Capitol Street, NW, Suite 390Washington, DC 20001202.624.7806202.624.8813 (fax)info@nado.orgwww.NADO.orgwww.RuralTransportation.orgwww.KnowYourRegion.org20