Chobani IPO: CHO plans to raise $100 million by end of 2021

Chobani Inc. is best known for its original flagship product, Greek-style yogurt. But the company in recent years has expanded to produce a broad range of new items. This includes new types of yogurt, including non-dairy yogurt alternatives, and other food products such as oat milk, dairy and non-dairy coffee creamers, ready-to-drink coffee, and plant-based beverages.

Chobani filed to go public through an initial public offering (IPO) on Nov. 17, 2021 amid a surge in investor interest in health-focused and socially responsible companies. Following the IPO, the company expects shares of its class A common stock to trade on the Nasdaq under the ticker symbol “CHO”. Chobani did not disclose the number of shares it expects to sell, the initial offering price, or the exact date of the offering in its S-1 registration form filed with the Securities and Exchange Commission (SEC). While Chobani said it expects to raise $100 million, that is a commonly used figure in IPO filings for the sole purpose of calculating a registration fee. The actual amount of money Chobani raises could vary dramatically from that number.

Chobani was founded in 2005 by Hamdi Ulukaya, the company’s chief executive officer (CEO) and chairperson. Ulukaya came across an advertisement for the sale of a shuttered yogurt factory in New Berlin, New York that had previously been owned by a large food conglomerate. After visiting the old, run-down factory, Ulukaya saw potential in the plant and the people who had previously worked there. He took out a small business loan, purchased the factory, and rehired five of the former employees. Together, they outlined a strategy that would eventually lead to the sale of the company’s first Greek-style yogurt in 2007.

Chobani built on the success of its yogurt and began offering a range of yogurt products that have rapidly gained market share in the U.S. The company says that, from the start, it has focused on building a single brand. CEO Ulukaya wants the brand to represent the company’s dedication to making high-quality, delicious, and healthy food, as well as working to make positive social and environmental change. Chobani eventually expanded its product offerings to include other food categories, such as oat milk and coffee creamer, both of which were launched in 2019.

On Oct. 14, 2021, Chobani elected to be treated as a public benefit corporation. This means that the company must balance the best financial interests of its stockholders with the best interests of any stakeholders materially affected by its business operations. For this reason, Chobani now may perform certain actions that do not maximize stockholder value.

Chobani Financials

Chobani provided recent financial results in its S-1 registration form. For its 2021 fiscal third quarter, which ended Sept. 25, 2021, the company reported a net loss of $12.1 million, widening significantly from the net loss of $1.0 million in the year-ago quarter. Net sales for Q3 rose 14.9% year over year (YOY) to $419.7 million. Chobani’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which is based on the combined profits of its individual geographic segments, was $42.1 million in Q3. That was a sharp decline in adjusted EBITDA from the same quarter a year earlier.

Chobani’s net sales in North America comprise about 91% of total net sales. International net sales account for the remaining 9%. Adjusted EBITDA for the North America segment accounts for nearly 90% of companywide adjusted EBITDA. International sales comprise the remaining 10%. Chobani said that it has experienced a decrease in sales of some products in certain markets that have been affected by the COVID-19 pandemic.

Over the past five years, Chobani has expanded its annual net sales from $1.3 billion in its 2016 fiscal year (FY) to $1.4 billion in FY 2020. Growth has been uneven over that time, however. Annual net sales rose 7.0% in FY 2017 before falling 6.5% in FY 2018. Growth resumed in FY 2019 with net sales expanding 3.2%. Growth accelerated to a pace of 5.2% in FY 2020. The company’s net loss that year was $58.7 million, about three times bigger than the net loss in FY 2019.

Chobani’s total book value, the difference between its assets and liabilities, was -$668.3 million as of Sept. 25, 2021. The negative balance means that the company’s liabilities are greater than its assets, which represents negative shareholder equity and is a red flag for many investors. Total cash and cash equivalents on Chobani’s balance sheet at the end of the third quarter were $65.9 million, down 27.2% from the year-ago quarter.

Chobani plans to use the net proceeds of funds raised in the IPO for the following: repay debt; purchase class B units of Chobani Global Holdings LLC, the company’s predecessor, that are indirectly held by founder, CEO, and Chairperson Ulukaya; purchase class M units from certain executives; and fund a portion of the consideration due to the Healthcare of Ontario Pension Plan Trust Fund (HOOPP) related to the merger of HOOPP Capital Partners (Greek) LLC into Chobani.

One of Chobani’s key metrics is its market share in the U.S. yogurt market. That market share has gradually increased over the past several years. In the first quarter of FY 2018, the company’s share of the U.S. yogurt market was 17.1%. Since then, Chobani has steadily gained market share. It rose to 17.8% in the first quarter of 2019, to 18.6% in the first quarter of 2020, and then to 20.1% as of the end of Q3 FY 2021.

^{Source: Chobani S-1 Form}

How Much is Chobani Worth?

In early July 2021, Chobani confidentially filed for an IPO. People familiar with the matter told Reuters that the company could be valued at more than $10 billion. Seven years earlier in April 2014, the company secured a $750 million loan from private equity firm TPG Capital. While the financing round was not based on any specific valuation, Chobani said at the time that its business was worth about $5 billion.

Chobani’s main institutional shareholders are HOOPP and FHU U.S. Holdings LLC, which is controlled by Ulukaya. Thus, the company is currently owned by Ulukaya, employees, and HOOPP.

Chobani Key Competitors and Additional IPO Details

Chobani faces competition across its portfolio of products from large national and international companies as well as certain smaller manufactures and private-label brands. Some of its competitors include yogurt brands Yoplait and Dannon, the latter of which is owned by France-based Danone SA (BN). Other rivals include dairy firm Stonyfield Farm, food and beverage company Zen Monkey LLC, and Sweden-based Oatly Group AB (OTLY).

Following the IPO, CEO Ulukaya will beneficially own a majority of outstanding voting power. Because he will be able to control certain matters that are submitted to a stockholder vote, the company is expected to be considered a “controlled company” as defined by the Nasdaq corporate governance standards. This means that the company is not obligated to comply with certain corporate government requirements, such as those concerning independent directors of the company, executive compensation, and other corporate matters.

The Bottom Line

Food company Chobani is expected to go public through an IPO sometime in 2021. The company did not disclose the initial offering price of its shares or the total number of shares it plans to sell. But it expects to raise approximately $100 million. The company is estimated to be worth about $10 billion. Following completion of the offering, Chobani’s shares will trade on the Nasdaq under the symbol “CHO”.