Now reading How I Started My Business: Siggi’s Skyr

How I Started My Business: Siggi’s Skyr

When success seems as challenging as failure.

Love is patient. Love is kind. But love is also expensive when you’re in love with Siggi’s yogurt. When I started eating it seven years ago, a 5.3 oz container was $2.49 at my local Stop & Shop. Prices have come down over the years—$1.99 per container is the norm in New York—but it still feels like a splurge when I dump an armload into my shopping cart. (And I do that with alarming frequency.)

 I wanted to understand where all of my money was going, so I contacted Siggi himself to help me understand the cost behind each cup. Instead, I received a lesson in starting a small business. Here’s what he had to say. —Ryan Healey

I moved to the U.S. from Iceland almost thirteen years ago to attend business school. I had always been into food, but it wasn’t until I came here that I realized how important what I ate was to me. A big part of that awakening came from seeing how many ingredients and how much sugar goes into food here. I was used to sugary sodas and candies, but I never thought it was possible to have so much sugar in regular foods like bread, condiments, and yogurts. Especially yogurts. It made me miss skyr, the strained yogurt of Iceland that I grew up eating.

After finishing business school, I took a consulting job that I really didn’t like; I wasn’t a corporate guy, and I didn’t fit in. At the same time, I missed home and started making skyr in my kitchen. Before long, I became a total nerd about it. I was spending my nights reading microbiology articles, trying to figure out how to replicate the stuff I ate growing up. I had no idea what I was doing; my technique—if you could even call it that—was rooted more in nostalgia than in science. Some of my experiments produced great yogurt; most of the time they MINOLTA DIGITAL CAMERAdidn’t.

Finally, I realized that if I wanted to get serious about making skyr, I would need help. Morrisville State College in upstate New York had a small dairy plant that they used to teach college kids about dairy farming. When classes weren’t in session, the school rented it out to cheese makers and ice cream makers for a couple of days at a time. I took a couple of days off and went up there to tinker with my recipe. I learned that most of my problems were culture-related; I wasn’t using nearly enough culture, and I wasn’t keeping my yogurts warm enough to allow the microbes to survive. It was the first time I had used real tanks and equipment—and instead of making a couple of cups like when I made it at home, I had three hundred.

So I handed them out to everybody I knew—including a friend of mine who worked at Murray’s Cheese. I had given it to her for personal feedback, but she ended up giving it to the store’s buying committee. A month later, I got an email from them that told me if I started making it, they would stock it.

I didn’t know what I was going to do. I spoke with my business school professor, an American who had visited Iceland who knew the product and agreed to invest in it. Even though I was dead broke from grad school, I had found a customer and investor; the risk seemed low enough. That I was unsatisfied with my job didn’t hurt either.

Quitting my job was the easy part; I still had to figure out how to produce this yogurt. Even after securing a permanent production space in upstate New York, I spent a whole year tinkering with the recipe before I was ready to start selling it. I tried what felt like an endless combination of cultures and temperatures to find one that reminded me of the skyr I ate growing up: thick and tangy and only slightly sweet.. In August 2006, almost two years after making that first batch in my kitchen, I delivered my first case of yogurt to Murray’s.

first day selling at the real food market in New York summer 2006I didn’t believe the success. We quickly jumped from selling at Murray’s and a small farmers’ market to fifteen locations around New York—Dean and Deluca, Zabars, high-end groceries like that. But even though those stores were doing well, seeing customers return to the farmers’ market stand week after week was what ultimately convinced me that Siggi’s was going to be something bigger.

By the end of 2006, I knew that I needed to take on additional investors. I understand how that can be difficult for people—you’re giving up part of something you created—but I had no choice. I was using cheesecloths to strain all of the yogurt by hand, trying to market it on my own, and only paying myself an extremely meager salary. Even though I was only selling to a handful of vendors, I was completely at capacity; I couldn’t physically produce any more yogurt. I knew that if I ever wanted to expand, I’d need money.

I tapped everybody from my siblings and my university buddies to Icelandic people who had done well in New York. Aside from maybe two people, everyone was a first-degree contact who believed in the product.

Then Whole Foods approached us—and instead of walking down that path, we had to run. We didn’t anticipate the challenge that would come with supplying their stores; our new plant simply did not have the cooling capacity needed in the summer months. It was the most hectic time in my life: I had just asked my investors for money to build the plant, and here I was, just a few months later, asking for money to rebuild it. We had orders in but just couldn’t supply them. We left many people with many empty shelves. When we relaunched that in the fall of 2008, we knew we had to be careful and build the business slowly and steadily. That’s been our philosophy ever since.

The costs always seem overwhelming. That never really goes away. You have to look at spreadsheets and talk yourself into it—ultimately, you say that it’s not acceptable for it not to work. Our primary expense is milk, both obtaining it and discarding it. Making one cup of skyr requires four cups of yogurt—that means we have three cups of whey to get rid of. Normal yogurt production doesn’t have those costs, and our price reflects that. Our packaging costs 20 percent more because it uses 40 percent less plastic than standard yogurt cups. We only use real fruit, which is complicated and expensive to source.

As a small business, you can’t compromise on those things —that’s your calling card, your way to stand out. If people don’t fall in love with your product, they’re not going to pay that higher price or drive the extra mile to go to the store that sells it. You have to offer certain values that other people aren’t—and you have to stick to them. Otherwise, you’re just like everyone else. I cannot compete with Dannon at Dannon’s game. I want to reach as many people as possible without compromising the values that I have set for the business.

When I was first deciding whether to quit my job and make Siggi’s, I realized that it was very important for me to believe in the product. That way, I wouldn’t mind if I failed. If you do something only for the money and it fails, then you have nothing. If you do something you believe in and it fails, you’ll still have your pride.