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As confidentially submitted to the Securities and Exchange Commission on July 6, 2021. This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein is strictly confidential.

Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Chobani Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   2000   87-1268935
(State or other jurisdiction of
incorporation or organization)
 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

669 County Road 25

New Berlin, New York 13411

Telephone: (607) 847-7413

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Hamdi Ulukaya

Founder, Chief Executive Officer and Chairperson

Chobani Inc.

669 County Road 25

New Berlin, New York 13411

Telephone: (607) 847-7413

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

 

Andrew Fabens

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY 10166

(212) 351-4000

 

Kathy Leo

Chief Legal Officer, General Counsel and Secretary

Chobani Inc.

669 County Road 25

New Berlin, New York 13411

(607) 847-7413

 

Michael Kaplan

Roshni Banker Cariello

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

(212) 450-4000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer        Accelerated filer        Non-accelerated filer        Smaller reporting company       
            Emerging growth company       

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to be Registered
  Proposed Maximum
Aggregate Offering
Price(1)(2)
  Amount of Registration
Fee

Class A common stock, par value $0.001 per share

  $                                        $                                     

 

 

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended (the “Securities Act”)

(2)

Includes                shares subject to the underwriters’ option to purchase additional shares, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.


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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated                    , 2021

PROSPECTUS

 

             Shares

 

 

LOGO

Class A Common Stock

 

 

This is Chobani Inc.’s initial public offering. We are selling                shares of our Class A common stock.

We expect the public offering price to be between $            and $            per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares of our Class A common stock will trade on the                  under the symbol “CHO.”

We intend to cause Chobani Global Holdings, LLC to use a portion of the net proceeds of this offering to repay indebtedness, to purchase Class B Units of Chobani Global Holdings, LLC indirectly held by Hamdi Ulukaya, our Founder, Chief Executive Officer and Chairperson, and to fund a portion of the merger consideration payable to the Healthcare of Ontario Pension Plan Trust Fund (“HOOPP”) in connection with the merger of HOOPP Capital Partners (Greek) LLC (“HOOPP Blocker”) into Chobani Inc. There is no public market for the Class B Units. The purchase price payable by us to the holders of such units will be equal to the public offering price of our Class A common stock, less the underwriting discounts and commissions referred to below.

Following this offering, we will have two classes of authorized common stock: Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote per share on all matters presented to our stockholders generally. Each share of Class B common stock is entitled to ten votes per share on all matters presented to our stockholders generally. Holders of our common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise provided in our amended and restated certificate of incorporation (the “certificate of incorporation”) or as required by applicable law. The holders of Class B common stock will not have any economic rights, including any of the economic rights (including the rights to dividends) provided to holders of Class A common stock.

Immediately following the offering, all of the issued and outstanding shares of our Class B common stock will be beneficially owned by Hamdi Ulukaya, and he will directly or indirectly control approximately     % of the voting power of our common stock with respect to director elections (or approximately     % of the voting power with respect to director elections if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). As a result, we will be a “controlled company” under the corporate governance rules of the                 , and therefore we will be permitted to, and intend to, elect not to comply with certain corporate governance requirements thereunder. See “Organizational Structure” and “Management—Controlled Company Exemption.”

 

 

Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 30 to read about factors you should consider before buying shares of our Class A common stock.

 

 

 

     Per Share      Total  

Initial public offering price

   $                    $                

Underwriting discount(1)

   $        $    

Proceeds to us, before expenses

   $        $    

 

(1)

Please see “Underwriting” for a description of compensation payable to the underwriters.

The underwriters may also exercise an option to purchase up to an additional                shares of our Class A common stock from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares of Class A common stock will be ready for delivery on or about                     , 2021.

 

Goldman Sachs & Co. LLC    BofA Securities

 

 

 

The date of this prospectus is                 , 2021.

 


Table of Contents

Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

TABLE OF CONTENTS

 

     Page  

GENERAL INFORMATION

     iii  

PROSPECTUS SUMMARY

     1  

RISK FACTORS

     30  

FORWARD-LOOKING STATEMENTS

     76  

ORGANIZATIONAL STRUCTURE

     78  

USE OF PROCEEDS

     88  

DIVIDEND POLICY

     89  

CAPITALIZATION

     90  

DILUTION

     92  

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

     95  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

     103  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     104  

BUSINESS

     127  

MANAGEMENT

     152  

COMPENSATION DISCUSSION AND ANALYSIS

     160  

PRINCIPAL STOCKHOLDERS

     178  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     180  

DESCRIPTION OF CAPITAL STOCK

     189  

SHARES ELIGIBLE FOR FUTURE SALE

     195  

MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK

     197  

UNDERWRITING

     200  

LEGAL MATTERS

     208  

EXPERTS

     208  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     208  

INDEX TO FINANCIAL STATEMENTS

     F-1  

 

 

Through and including                     , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Neither we, nor the underwriters have authorized anyone to provide you with information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

For investors outside of the United States: We have not and the underwriters have not, done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our Class A common stock and the distribution of this prospectus outside of the United States.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

GENERAL INFORMATION

Unless otherwise indicated or the context otherwise requires, references in this prospectus to (i) “Chobani Inc.” refer to Chobani Inc., a Delaware corporation, the company conducting the offering made pursuant to this prospectus and not to any of its subsidiaries and (ii) the “Company,” “we,” “us,” “our” and “Chobani” refer to Chobani Inc. and its consolidated subsidiaries. Chobani Inc. was incorporated as a Delaware corporation on June 15, 2021 and, prior to the consummation of the Reorganization described herein and our initial public offering, did not conduct any activities other than those incidental to our formation and our initial public offering.

Presentation of Financial Information

Chobani Global Holdings, LLC (“Chobani Global Holdings”) is the predecessor of the issuer, Chobani Inc., for financial reporting purposes. Chobani Inc. will be the audited financial reporting entity following this offering. Accordingly, this prospectus contains the following historical financial statements:

 

   

Chobani Inc. Other than the audited balance sheet as of                , the historical financial information of Chobani Inc. has not been included in this prospectus as it has no business transactions or activities to date other than those incidental to its formation and preparation of this prospectus and the registration statement of which this prospectus forms a part. Chobani Inc. had no other assets or liabilities during the periods presented in this prospectus.

 

   

Chobani Global Holdings. As we will have no other interest in any operations other than those of Chobani Global Holdings and its subsidiaries, the historical consolidated financial information included in this prospectus is that of Chobani Global Holdings and its subsidiaries.

Immediately following this offering, Chobani Inc. will be a holding company, and its sole material asset will be a controlling equity interest in Chobani Global Holdings. As the sole managing member of Chobani Global Holdings, Chobani Inc. will operate and control all of the business and affairs of Chobani Global Holdings and, through Chobani Global Holdings and its subsidiaries, conduct our business. The Reorganization will be accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of Chobani Inc. will recognize the assets and liabilities received in the reorganization at their historical carrying amounts, as reflected in the historical financial statements of Chobani Global Holdings. Chobani Inc. will consolidate Chobani Global Holdings on its consolidated financial statements and record a noncontrolling interest related to the Class B Units indirectly held by Hamdi Ulukaya on its consolidated balance sheet and statement of operations. See “Organizational Structure.”

Our fiscal year is comprised of 52 or 53 weeks, ending on the last Saturday of the calendar month of December. References to “2021” refer to our 2021 fiscal year, which will end on December 25, 2021, references to “2020” refer to our 2020 fiscal year, which ended on December 26, 2020, references to “2019” refer to our 2019 fiscal year, which ended on December 28, 2019 and references to “2018” refer to our 2018 fiscal year, which ended on December 29, 2018. Fiscal years 2020, 2019 and 2018 included, and 2021 will include, 52 weeks.

Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

Market and Industry Data

This prospectus contains estimates, projections and other information concerning (i) our industry, (ii) our business, (iii) the markets for our products and (iv) data related to certain sub-markets, their

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

size and our position within such sub-markets. Except as otherwise noted, all industry and market data in this prospectus is based in part on data reported by (i) Nielsen Consumer LLC (“Nielsen”) through its                Service for the U.S. Yogurt (including drinkables), U.S. Greek Yogurt, U.S. Creams and Non-Dairy Creamers, U.S. Milk and Milk Alternatives, U.S. Beverages, U.S. Coffee-Liquid categories for the                period ending                , or (ii) Information Resources, Inc. (“IRI”) for the U.S. total yogurt market (including drinkables), the U.S. Greek yogurt market, the U.S. Dairy Creamers market, and the U.S. Plant-based Beverage Alternatives market for the                period ending                . Some market data and statistical information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed below, our internal research and knowledge of our market. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. We have not independently verified market data and industry forecasts provided by any of these or any other third-party sources referred to in this prospectus. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the sections titled “Risk Factors” and “Forward-Looking Statements” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the projections and estimates made by the independent third parties and us.

Unless otherwise expressly stated, we obtained industry, business, market and other data from the reports, publications and other materials and sources listed below. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

Trademarks

We own or have the rights to use various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not, imply a relationship with, or endorsement or sponsorship by, us. Solely for convenience, the trademarks, service marks and trade names presented in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names.

 

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Letter from Hamdi Ulukaya, Our Founder and Chief Executive Officer

Chobani is the story of a few dedicated everyday people coming together to create something extraordinary. Together, we have built a transformative force in the food industry that aims to provide good food for all while also improving our communities. We are a new kind of company that operates on a simple fundamental principle that we do well by doing good.

I immigrated to the United States in 1994 seeking opportunity and freedom and have benefitted more than I ever could have imagined from my home over the past 27 years. However, when I arrived here, I found that the food I had access to did not measure up to what I experienced in Turkey. In particular, I could not find the same high-quality yogurt we made on our family farm—a food that was so much a part of my childhood and identity. American yogurt was sugary, watery, and not nutritious. As I learned more about how food was made in the United States, I became convinced that this wasn’t because of different taste preferences, but because of choices made by big companies who prioritized low cost of production over the real desires—and well-being—of consumers.

The approach these companies took made me frustrated and angry. From my upbringing in Turkey, I knew that high quality food did not have to be a luxury only available to the well-off. Growing up, we were not rich, but we had access to good bread, delicious olive oil, fresh fruit and vegetables, and our family made fresh, simple cheese and yogurt that was available to everyone in our community. It hit me right in the heart: everyone in America should have access to good nutritious food.

So I decided to challenge the status quo and create my own food company. It all started when I came across a piece of mail advertising a fully equipped yogurt factory for sale in New Berlin, New York. I was intrigued and the next day, on a whim, I took the most important drive of my life to go see this factory. The factory was old and in bad shape. The previous owner—a large food conglomerate—had given up on the factory and thought it was worthless. Even worse, I felt like they had given up on the people who worked there—there were 55 of them left and their only job was to break the plant apart and close it forever. Not only was a factory being dismantled, but also families and an entire community.

I took a leap of faith and bought the factory using a small business loan. I hired back five of the employees—the ones who were bold enough to work for an immigrant with no money and no timeline for paying them. The first thing we did was paint the walls together—our first act of the teamwork that would define the company forever. The second thing we did was outline our strategy to launch a yogurt that Americans had never tasted before. We spent two years perfecting every detail of our product: ensuring we had the right milk, the best fruit, a different container and imagery, and the right equipment and process. I spent days and nights working together with our team, often sleeping on the factory floor, making sure that we had a product that consumers would love.

We made the decision to do things differently from the very beginning because we wanted to make better products and be proud of the company we were building. Which meant that we would never compromise the quality or nutrition of our product, we would make our food for everyone, and we would always take care of our people and support our community. These simple principles were and are our bedrock, and they continue to live in every one of our people, and in every decision that we make.

And it worked. Five years after we sold our first cup of yogurt, Chobani was a billion-dollar brand. Today, we create opportunities for more than 2,000 colleagues, sell our products in more than 90,000 retail locations, operate primarily in four countries, lead the category we created, and are transforming the way yogurt, oat milk, coffee creamer, ready-to-drink coffee, and non-dairy probiotic beverages are made and consumed. Chobani was founded on a mission to disrupt the status quo—we will continue to innovate and disrupt around new products and categories following the same formula that got us to where we are today.

 

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We have built Chobani for the long-term. We have made significant investments in the past few years to ensure we control our innovation capabilities, our production, our distribution, and our marketing. This makes us different from other food companies. We continuously invest in our people and our infrastructure so that we never lose the ability to develop, launch, and scale our products very fast.

Our success confirms that Americans want high quality food and that how a company is run is as important as what it makes. Together, we are building the leading modern food company that is empowering people around the world to turn away from legacy food full of unhealthy, processed ingredients and toward Chobani products that are delicious, natural, nutritious, and accessible. And together we are supporting our employees, giving back to communities, protecting the environment, working to eradicate hunger, and working to employ and support immigrants and refugees.

While Chobani has come a long way since we re-opened the factory in 2007 (by the way, many of our earliest employees are still with us!), we are still a young, energetic, entrepreneurial company. I still feel most comfortable in our factories, alongside my team – all of whom are owners of our business—developing and executing on new ideas to strengthen our leadership position and sustain our growth.

As I think about the next stage of this incredible journey, I am excited to partner with new shareholders who share our mission to provide good food for all while improving our communities. Our goal is lofty—but achievable: we will recreate the way food is made and consumed all over the world and be a new model for how a next-generation company should operate responsibly.

I invite you to join our journey.

Sincerely,

 

 

LOGO

Hamdi Ulukaya

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

PROSPECTUS SUMMARY

This summary highlights selected information discussed in this prospectus. The summary is not complete and does not contain all of the information you should consider before investing in our Class A common stock. Therefore, you should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes included elsewhere in this prospectus, before making a decision to purchase shares of our Class A common stock. Some of the statements in this summary constitute forward-looking statements. See “Forward-Looking Statements.”

Overview

Who We Are

Chobani is driven by a simple yet powerful mission: making high quality, nutritious food accessible to more people while elevating our communities and making the world a healthier place. In short, to provide good food for all.

We deliberately created a values-driven, people-first, food-and-wellness-focused strategy that has guided us since Hamdi Ulukaya founded the Company in 2005. Hamdi’s founder mentality is rooted in disruption, innovation, consumer-centricity and inclusion, fueling our success over the past 14 years. This mindset and culture have enabled Chobani to reinvent multiple food categories, redefine consumer expectations for the food they consume and change the model for how companies operate responsibly. We aspire to be the most innovative and impactful food company in the world.

At Chobani, we are an anti-traditional consumer packaged goods company. We challenge the old, staid and conventional status quo represented by our legacy competitors by creating food that is delicious, natural, nutritious and accessible (DNNA). Throughout our history, we have paired our innovative mindset with deliberate investments in people, plants and our sales and distribution platform (our 3Ps) that, coupled with unparalleled in-house execution capabilities, allow us to innovate rapidly and build scale across categories seamlessly. As a result, we believe we can move from concept to shelf more quickly than our competition and, importantly, with better quality, more natural and nutritious food options.

This disruptive, nimble, owned-asset approach fuels our success, ensuring exceptional product quality, deep relationships with retail partners, enduring trust with consumers and category leadership. Our mission and strategy have and will remain the same as we enter our next chapter of growth, driving a culture that builds on our past successes and creates opportunity to generate sustainable growth for the future by replicating our playbook across categories and geographies. Importantly, our growth creates a virtuous cycle. Chobani’s success increases our ability to impact our communities and to contribute to the health and wellbeing of millions of people, which then powers our unique brand and connects us more deeply with our consumers.

We believe good food has great power to improve bodies, families, communities, economies and the environment. At Chobani, we work with thousands of talented colleagues from diverse backgrounds, support our local farmers, and enthusiastically contribute to the fabric of the places in which we live and work. We prioritize giving back to our communities and beyond: working to eradicate child hunger, supporting immigrants, refugees and members of underrepresented groups, honoring veterans and protecting the planet. As we pursue our mission, we seek to simultaneously reinforce the power of the Chobani brand and drive sustainable growth and value for our employees, customers and stakeholders.



 

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Our Business

Hamdi Ulukaya founded Chobani in 2005 when he purchased a shuttered manufacturing plant in New Berlin, New York with a dream of bringing healthy, high-quality food to more people. From the purchase of our first plant in 2005 with a handful of employees, we invented an entirely new food category in the United States—Greek yogurt—that completely disrupted an old one.

We were early to identify a once-in-a-generation mega-trend towards healthier eating preferences and leveraged our innovation and brand-building capabilities to create a portfolio of high-quality yogurt products that rapidly gained market share. We distributed these products into mass market channels—not just specialty stores—where nutritious packaged food typically had not been available and positioned our offerings with pricing that was attractive and accessible to all consumers. This strategy allowed Chobani to reach approximately $1.1 billion in net sales in 2013, while building the key relationships, brand awareness, trust, and scale that we benefit from today.

We made the strategic decision to focus on a single brand across our entire company and instill it with great meaning – we define this as our “branded house”, in contrast to the legacy, more widely utilized house of brands strategy. Our single-brand approach enables us to efficiently deploy investment and scale to support the Chobani brand and to repeatedly disrupt and re-invent large, established categories and expand into other aisles, product formats, channels, categories, and geographies. We believe the “branded house” we have built means consumers are more inclined to try new products with the Chobani brand.

Today we believe that the Chobani brand is synonymous with high-quality, delicious, healthy food and making a social and environmental impact, both of which resonate very strongly in the current marketplace. This creates authentic, mutual connections with consumers who are increasingly seeking an emotional, values-based relationship with the brands they choose—a core insight of our business since day one. As we advance our mission and our social impact grows, so too will the value of our brand in the eyes of our customers and consumers.

Our success is built on having the people, capabilities, and capacity within our company to deliver strong growth through innovation. We are makers at heart and have built a platform of production and execution capabilities that fuel our innovation engine. We view the following owned assets to be crucial and differentiated elements of our platform that serve as a competitive advantage for innovation, execution, operational flexibility, speed to market, and agility:

 

   

In-house production capabilities across our three plants with 1,900 dedicated people. We have a manufacturing facility in New Berlin, New York, a state-of-the-art multi-platform factory in Twin Falls, Idaho, and an additional facility in Melbourne, Australia.

 

   

Chobani Labs facility in New Jersey with a dedicated group of microbiologists, molecular biologists and biochemists to help realize the future of food and unlock groundbreaking innovation.

 

   

Internal R&D and Innovation teams in our Chobani Innovation and Community Center, attached to our Twin Falls, Idaho manufacturing facility, where we ideate and commercialize our new products.

 

   

Demand and Commercial Team consisting of our dedicated, direct sales force of approximately 180 people, a retail execution team of more than 100 people that forges deep relationships with key retail partners, a category management and insights team of more than 25 people and a consumer loyalty team.


 

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In-house, award-winning creative agency and packaging design team of more than 30 people that enables us to build and position our brand ethos consistently across our creative endeavors.

Innovation is foundational to our company. We are in a unique position to innovate and bring new products to market due to our ability to scale manufacturing and utilize our robust in-house platform. This is perhaps best evidenced through the introduction and early success of our more recent new category launches, including our Chobani Oat, Chobani Coffee Creamers, ready-to-drink Chobani Coffee and Chobani Probiotic lines of products. Our trusted brand and expertise in the food value chain has enabled us to drive awareness and helps us convert Chobani loyalists into these new high-growth categories. For example, since entering the oat milk market in December 2019, Chobani Oat has grown to a market share of                as of                 , much quicker than we had disrupted the yogurt category.

We currently sell our products in single-serve, multi-serve, and/or multi-pack formats through over 90,000 retail locations in the United States. In addition to our key customers, which include Wal-Mart, Whole Foods, Amazon, Target, Kroger, Publix, Costco and Safeway/Albertsons, we also sell our products to various other national and regional retailers, including convenience and drug stores, as well as a significant number of food service customers. Our diverse retail presence and innovative capabilities allow us to elevate the quality and accessibility of our products and ensure they are widely available for our consumers.

Chobani also has an international presence through the operation of a manufacturing facility in Melbourne, Australia and participates in certain international export markets, such as Mexico and Canada.

For the year ended December 26, 2020, we generated net sales, net loss and Adjusted EBITDA of approximately $1.4 billion, $58.7 million and $191.0 million, respectively, achieving year-over-year net sales and Adjusted EBITDA growth of 5.2% and 7.8%, respectively – even after significant brand investment in new platforms. We experienced a year-over-year increase in net loss of 200% for the year ended December 26, 2020. For the three months ended March 27, 2021, we generated net sales, net loss and Adjusted EBITDA of approximately $385.0 million, $14.5 million and $42.5 million, respectively, achieving year-over-year net sales growth of 5.3%. For the three months ended March 27, 2021, year-over-year, Adjusted EBITDA remained flat and we experienced a reduction in net loss of 22.1%. See the reconciliation of non-GAAP financial measures included in footnote (1) to the summary financial information table included in “Summary Historical Consolidated Financial Information.”


 

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FY 2010—FY 2020 Net Sales ($ Millions)

 

 

LOGO

 

Our Market Opportunity

Chobani operates in the large and growing Packaged Food & Beverage industry in North America, Australia and certain export markets. In 2007, Chobani disrupted the United States total yogurt market by pioneering the Greek yogurt category and we have maintained our leading position as the #1 Greek yogurt brand. This success has underpinned our ability to continue innovating into new and emerging categories, unlocking a massive Packaged Food & Beverage Total Addressable Market (TAM) of approximately $599 billion in North America and Australia.

Since our founding, Chobani has focused on providing delicious, nutritious and natural food that is accessible to all, and continues to benefit from evolving consumer trends towards healthier food and beverage options. According to the International Food Insight Counsel, 62% of consumers rate the healthiness of food as a very important factor in their purchasing decisions and 75% of consumers have increased the healthiness of their diets over the last ten years. Similarly, according to a Food Business News report, 25% of consumers are actively trying to manage their health through food. Chobani is well-positioned to capitalize on these health and wellness secular mega trends given our commitment to offering products that are high in protein, low in sugar, with billions of probiotics, and made from natural ingredients.

We see significant growth potential for our yogurt products and have unlocked meaningful new whitespace in adjacent categories through our highly successfully recent launches of our oat milk, coffee creamer, ready-to-drink coffee and plant-based probiotic beverage product lines. We believe that our strong brand recognition, powerful innovation engine, scale and unique platform of owned-production and in-house execution capabilities will enable us to continue to enter into new categories that will create new and incremental opportunities in the future.

We currently operate in the following product categories:

Yogurt

Yogurt, and in particular Greek yogurt, has benefited from the growing demand for natural, healthier, higher protein, and lower sugar food products. As part of the broader health and wellness trends, the introduction of Greek yogurt has changed American tastes and preferences in yogurt and


 

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significantly disrupted the market. Since 2009, the overall United States spoonable yogurt market has grown from $4.5 billion at a CAGR of     % to $              in retail sales for the 52-week period ended                 , 2021. The Greek yogurt segment has led this growth, growing from 4.4% to     % market share over that same time period, with $             in retail sales, which represents a     % CAGR. Before Greek yogurt became a broadly available category, the total United States yogurt market had virtually no Greek yogurt product and was dominated by two large, established players, both of which offered only conventional, higher sugar, lower protein yogurt products. In 2007, Chobani entered the United States yogurt market as a disruptor, focusing entirely on Greek yogurt products. Only six years after the first cups of Chobani hit the shelves in New York in 2007, Chobani generated approximately $1.1 billion in net sales and drove approximately 45% of total spoonable category growth in the same period.

Since June 2020, Chobani has been the #1 brand in the total Yogurt category with    % market share. Chobani is also the market leader within Greek Yogurt, and currently holds     % market share. Over the last three years, Chobani’s market share has increased     %, the highest increase amongst the top three players in the market, who collectively hold approximately     % share based on retail dollar sales. In the 52 weeks ended                    , 2021, the total yogurt category grew     % , while Chobani significantly outpaced the market, growing     % and captured     % in market share.

Total U.S. Yogurt Market Share xAOC (%)

 

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Chobani entered the Australian market in 2011 following the acquisition of the Gippsland Dairy brand and its factory, and quickly grew to become the #1 brand in the market. The Chobani brand currently represents     % of the aggregate $            billion yogurt market in Australia. The global yogurt market represents $                billion and represents a tremendous opportunity for future growth for us outside of the United States and Australia.

Plant-Based Milk

Plant-based milk in the United States is a large and high growth category generating $2.4 billion in revenue and growing at     % during the 52 weeks ended                     , 2021. Plant-based milk includes a variety of milk alternatives, including oat, almond, coconut, and soy milk. Today, plant-based



 

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milk represents                % of the broader $15.7 billion milk market, which is up from only     % four years ago. The category has experienced significant momentum and benefited from changing consumer preferences towards healthier food and lactose-free beverage options. New and emerging categories within plant-based milk are expected to offer significant future growth and expansion opportunities.

The United States oat milk market, specifically, has experienced explosive growth in recent years and is the fastest growing segment within plant-based milk. As of                     , 2021 , it was a $                 category, growing     % year-over-year. Oat milk is gaining significant share within the overall plant-based milk category, rising from     % to                % during the 52 weeks ended                     , 2021. Oat milk is also taking share from other popular plant-based milk alternatives, like almond milk, whose market share decreased from     % to     % over the same time period.

Compared to other plant-based milks, oat milk is attractive based on its nutritional accessibility (given the product contains no nuts or soy) and its environmental profile and role in regenerative agriculture. Perhaps most importantly, relative to dairy alternatives, oat milk does not compromise taste or texture (it tastes great drinking straight from a glass) and its versatility makes it ideal for many uses, including adding to coffee, tea, smoothies, cereal, and more.

Total U.S. Oat Milk Market Size xAOC ($ Millions)

 

 

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The oat milk market is heavily concentrated, with four brands accounting for     % of the category. Since entering the market in December 2019, Chobani Oat has been well received by both retailers and consumers, capturing     % of U.S. market share. From March 28, 2020 to                , 2021, Chobani Oat retail sales have grown     %, ahead of the category and several incumbents.

Coffee Creamers

The landscape within the United States coffee creamer category exhibits similar dynamics to the yogurt market 15 years ago. The market is highly concentrated with the top four legacy players controlling approximately     % of the category. Coffee creamers are often perceived as “fresh dairy” when in reality, many of the products are actually oil-based with no cream, and are made with artificial ingredients. The category is approximately $             in retail sales and as of                  , 2021, has grown at a     % CAGR since 2017. The dairy-based coffee creamer segment now represents     % of



 

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the total coffee creamer category and is the fastest growing segment. Chobani has secured the #             position with     % market share in the dairy coffee creamer category since its launch in December 2019. Chobani benefits from our consumers’ desire to consume delicious products that are made with fewer and natural ingredients. We also offer a full line of oat-based coffee creamers that are made with gluten-free oats and natural flavors. The coffee creamer category, like many others, is benefiting from a variety of both dairy- and plant-based options, which are disrupting the category with their craft product positioning.

Consistent with our focus across all parts of our business, we strive to minimize waste throughout the manufacturing process. Cream is a natural byproduct of our yogurt-making process and we sell most of this excess cream into the food service channel, typically to butter producers. We use the remaining cream in our yogurt and coffee creamer products. Not only is this environmentally conscious, but also financially and operationally responsible. We also put our Coffee Creamers in a Tetra Pak developed package that is made of more than 50% paperboard, a renewable material from FSC-certified forests and other controlled sources.

Coffee and Non-Dairy Probiotic Beverages

Coffee

The U.S. ready-to-drink coffee market is approximately $                  in retail sales for the 52 weeks ended                      , 2021, and is growing at         % for the last 13 weeks ending                  , 2021. The ready-to-drink coffee market continues to benefit from the long-term, secular consumer trend towards convenient, on-the-go consumption due to consumers’ increasingly busy lifestyles. In January 2021, ready-to-drink Chobani Coffee launched with four SKUs: Pure Black, Sweet Cream, Vanilla Cream, and Oat Milk. Ready-to-drink Chobani Coffee’s speed to market benefited greatly from our ability to leverage our existing assets and capabilities, including our manufacturing lines in our production facilities and other product inputs and ingredients, such as our coffee creamers and oat milk.

Non-Dairy Probiotic Beverages

The U.S. non-dairy probiotic beverages market reported retail sales of $             as of                 , 2021. The growth of this category aligns with long-term trends tied to the broader healthy food movement, as consumers increasingly seek to take control of their overall wellness. Consumers are removing juices and sodas from their diets to reduce sugar consumption and are instead seeking healthier replacements to play a key role in supporting their overall wellbeing. The non-dairy probiotic beverage category is currently highly fragmented and comprised of many smaller brands as opposed to incumbent consumer packaged food companies.

During the 52-week period ended                     , 2021, the overall non-dairy probiotic beverage market grew     % year-over-year, while the smaller, non-kombucha, non-dairy probiotic beverage subset, which includes products like our plant-based probiotic beverages, has expanded the category and grown     % over the same time period. In June 2020, Chobani launched Chobani Probiotic, a full portfolio of fermented, plant-based probiotic beverages with immunity, digestion and gut health supporting probiotics. Since then, we have also launched dairy probiotic yogurts and drinks and Little Chobani Probiotics for kids, including pouches and shakes, to increase the visibility and availability of probiotics within our product assortment. Chobani Probiotic currently sells into more than 4,500 retail locations. In the 13 weeks ended                     , 2021, Chobani Probiotic grew     %.


 

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Our Competitive Strengths

The Chobani Brand is Built on the Quality of Our Food and the Trust and Loyalty of Our Customers

The Chobani brand is widely recognized and loved. From the very beginning, Chobani has dedicated itself to crafting food and beverage options that are delicious, natural, nutritious, and accessible (DNNA). DNNA is exactly what it sounds like: our DNA. It is what we make, it is what we do. We believe that it is the future of how food will be produced and consumed.

 

   

Delicious:    We pride ourselves on making wholesome, quality food every single day. In all of our products, we strive to excite consumers with superior flavor, taste and texture. We take a back-to-basics approach using authentic ingredients and locally-sourced milk. Today, nearly all of our products are produced in-house, allowing us to deliver consistent quality in every serving.

 

   

Natural:    We believe every food maker has a responsibility to provide people with better options. Since the beginning, every Chobani cup, carton and bottle is crafted using real, high-quality, non-GMO ingredients. That means the fruit is real fruit and the honey is real honey. Our products do not contain any artificial sweeteners or preservatives.

 

   

Nutritious:    The Chobani brand is positioned as a nutrition powerhouse. It stands for products that are an excellent source of protein, with key vitamins, and minerals. We also solve for the growing need-states for gluten-free, higher protein and lower sugar options, as well as lactose-free and plant-based alternatives. Regardless of what consumers are looking for, we seek to ensure that there is a Chobani product for everyone.

 

   

Accessible:    Chobani’s mission is to provide good food for all. We believe good food is a right, not a privilege. Our goal has always been to democratize delicious and nutritious food, making our products accessible to everyone across retail locations, distribution channels, price points and pack sizes.

Chobani is a leader in transforming our food system by producing high quality products, protecting the health of our planet and providing a better future for our employees, partners and consumers. Our core belief is that we will do well by doing good.

We work with thousands of talented colleagues from diverse backgrounds, support our local farmers and deeply contribute to the fabric of the communities in which we live and work. Our contributions are not limited to the local level. Nationally, we have prioritized giving back to society by working to eradicate child hunger and supporting diverse and underserved communities, including immigrants and refugees. Our core values align fully with those of today’s increasingly socially conscious consumer, which helps drive our success.

Living our values every day and creating products that fully integrate with our DNNA has fostered deep loyalty and trust in the Chobani brand with our consumers and our retail partners. Chobani’s national aided brand awareness reached 79% in 2020 with consumers viewing us favorably in terms of trust, nutrition, and high-quality ingredients.

Proven Ability to Innovate and Disrupt Large and Growing Categories

Chobani has established itself as a leader in innovation by identifying unique opportunities and leveraging our scale and owned asset platform. We fundamentally changed the United States yogurt market in 2007 when we transformed an emerging category with the introduction of our Greek yogurt.



 

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Our product was celebrated for being thicker, richer, and creamier than traditional yogurt with higher protein, less sugar, and more nutrients. Since 2009, Greek yogurt has driven total yogurt growth within the United States, and Chobani has emerged as the leading brand in the $7.7 billion United States yogurt market. Our U.S.-based yogurt revenue grew     % from 2009, far outpacing the category growth of     % during this period.

We continue to innovate, allowing us to build out a comprehensive product portfolio that extends across day parts and need-states, expands into different eating, drinking and cooking occasions, and supports a wide range of consumer lifestyles and preferences.

 

 

LOGO

In 2007, we offered only two yogurt SKUs. Now we feature approximately 245 yogurt SKUs under the Chobani brand across channels, geographies, and formats. This includes Chobani Core (our plain, blended and fruit-on-the-bottom Greek yogurt products), Chobani Flip yogurt snacks, Chobani Less Sugar Greek yogurt, drinkable yogurt, Chobani Complete lactose-free Greek Yogurt, and more.

Our success in the yogurt category has allowed us to successfully expand into adjacent categories with the introduction of Chobani non-dairy yogurt alternatives, Chobani Oat Milk, Chobani dairy and non-dairy Coffee Creamers, ready-to-drink Chobani Coffee, and Chobani Probiotic beverages. Recently, we launched Chobani with Zero Sugar, a groundbreaking new sugar-free dairy product with only natural ingredients, further transforming the yogurt category by addressing consumers’ desire for no-sugar options.

Our unique, nimble, and flexible culture, as well as our leadership team’s relentless commitment to product development, allows us to launch new products quickly and with very limited need for external product research and development or manufacturing resources. Chobani Flip, introduced in 2013, went from idea to shelf in less than 12 months and has since grown to $                in retail sales as of                 , 2021. Chobani Flip was a major innovation in yogurt, solving for an otherwise untapped snacking day part, attracting countless new consumers.

Our Chobani Oat Milk platform is #3 in the category after less than                  months on the shelf. Like Flip, Oat went from idea to commercial availability in less than 12 months. Chobani Coffee Creamer has captured     % market share of the dairy creamer segment for the 13 weeks ended                 , 2021 after only                  months in market. In yogurt, oat milk, and creamer, we were able to move quickly and overtake long-time incumbent producers in a matter of a year or even months, providing powerful validation of our aggressive go-to-market innovation model.


 

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Differentiated Platform and State-of-the-Art Facilities Support Ample Capacity for Future Growth

We believe that the creation process is as important as the final product, and we handle every step with careful consideration and a commitment to efficiency. Our differentiated, owned infrastructure represents a key strategic asset that has positioned Chobani as a formidable leader and has allowed us to disrupt an industry crowded by legacy food companies. As we continue to leverage our production facilities and in-house capabilities, we have capacity to support future growth.

 

   

Production Facilities:    At the heart of our infrastructure in the United States are our two production plants: our original facility in New Berlin, New York and our state-of-the-art facility in Twin Falls, Idaho. As an example of the advantages of these owned assets and the excellence of our production team, we successfully met 98% of heightened demand in 2020 despite the unprecedented obstacles posed by the COVID-19 pandemic, while many of our competitors struggled to keep products stocked in stores. We have the ability to quickly scale production in new categories to meet increased future demand. We also have developed relationships with co-manufacturers, distribution and cold storage warehouse suppliers that allow us to flex our capacity to produce certain new items or address surges in volume. We have an international presence in Melbourne, Australia, where we produce yogurt and are currently expanding manufacturing capacity to launch our refrigerated oat beverages by year-end 2021.

 

   

Innovation and Community Center:    In August 2019, we opened our Innovation and Community Center in Twin Falls, Idaho, a 71,000 square foot research and development facility that is designed to promote a culture of collaboration, creativity, innovation, and wellness among employees and our community. Our innovation center is constantly testing new products, supporting continued expansion of our product offering. In 2020, we launched approximately 80 new items and plan to launch nearly 100 new items in 2021.

 

   

Sales Force:    We have a dedicated in-house sales force of approximately 180 people that know our business inside-and-out and has unparalleled relationships with our retail customers across all categories supporting the successful launch of Chobani products into new categories like oat milk.

 

   

Retail Execution Team:    Our exceptional in-house retail execution team differentiates us from certain competitors who use third-party brokers with feet on the street to ensure that we have the right assortment of products in stock at competitive pricing. As a result, we are able to build on our leadership positions in our key categories and successfully and efficiently navigate new product launches. This team of more than 100 people has the expertise and experience to optimize merchandising and order replenishment products, ensuring strong shelf presence and sales momentum, while strengthening relationships with our retail partners.

 

   

In-House Creative Agency:    Our in-house creative agency creates, plans, and executes all of our advertising and branding initiatives, in addition to other forms of promotion and marketing for the Chobani brand, ensuring that we communicate with a consistent voice and build direct grassroots connections with the communities we impact.

Over the years, we have significantly benefited from the competitive advantage of investing in our manufacturing facilities to increase production capacity while also maintaining our focus on efficiency. Importantly, our ownership of product design and production is designed to ensure that our supply chain practices align with our commitment to sustainability and environmental stewardship.


 

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Powerful Scale and Differentiated Customer Relationships Supports Agility and Speed to Market

The total number of distribution points for Chobani’s products has only continued to grow, driving volume increases at our retail customers across the country. Our products are sold through more than 100 retail partners with over 90,000 retail locations in the United States, in addition to the food service channel. We have established exceptional relationships with a broad range of diverse retailers. Key customers include Wal-Mart, Whole Foods, Amazon, Target, Kroger, Publix, Costco and Safeway/Albertsons, among others. The launch of our new products has benefited from the relationships that we have cultivated with key retailers over the years through our Greek yogurt product offering and broadened through our category expansions.

Retailers trust us to efficiently bring product offerings at scale that will resonate with consumers – and create disruptive moments similar to those that Chobani Greek Yogurt brought to the yogurt aisle. We believe our owned platform of production and execution capabilities affords us a distinct competitive advantage in introducing successful new products quickly. For example, as mentioned previously, our highly successful Chobani Flip and Chobani Oat lines of products went from idea to broad commercial availability in less than a year. While our investments in manufacturing assets and human capital have enabled us to successfully grow our business, they have also strengthened our reputation as a reliable partner to retailers who are focused on allocation of store and shelf space to the best products. The depth of these award-winning relationships has benefited us as we have extended our brand into new products and categories. As a partner of choice to our retailers, Chobani has been ranked #1 Dairy for five years in a row by Advantage Solutions and named 2020 Dairy Processor of the Year by Dairy Foods and Company of the Year in 2019 by FoodDive.

People-First Culture and Focus on Community Engagement

From the very beginning, Hamdi, our Founder and Chief Executive Officer, has built Chobani by deploying an “anti-CEO playbook,” which inspires a new way of doing business: one that views the prioritization of our people, communities, consumers, and society as foundational to better business results. Hamdi works closely with our leadership team and employees to make a difference in communities around the world. We believe that business done right has the ability to change lives and strengthen communities while still supporting strong financial results.

Principles of diversity, equity, inclusion, and acceptance guide all that we do at Chobani. Our goal is to create opportunity and economic vitality for our employees and, in turn, for our communities. We create an accepting and welcoming environment through which everyone can do what they love and love what they do. We actively recruit talent from various and diverse backgrounds, including refugees, immigrants, members of underrepresented groups and military veterans, who are often otherwise overlooked for employment opportunities. At Chobani, diversity of background, experience, and world-view is a core component of our culture and success.

We believe investing in our employees and communities pays dividends every day in productivity, engagement, and ambassadorship. Some examples include:

 

   

Employee Rewards:    Taking care of our employees is an investment. As a result, we established the Employee Rewards program in 2016, through which all full-time Chobani employees regardless of level can become owners in Chobani. The program consists of awards to every full-time employee, representing a stake in Chobani’s future value and fostering internal motivation and driving top-quality performance.


 

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Employing Refugees and Immigrants:    At last count, our manufacturing workforce was comprised of approximately 30% refugees and immigrants. Our manufacturing workforce speaks over 20 different native languages.

 

   

Anti-Hunger Advocacy:    As part of Chobani’s concerted efforts to combat hunger nationwide, we have taken action to drive meaningful change, including paying off the school lunch debt of several school districts and launching a charitable SKU with 100% of the profits benefiting local food banks.

 

   

Supporting Community Through COVID-19:    Throughout the COVID-19 pandemic, we donated and delivered more than eight million Chobani products to food banks, food pantries, USDA food box distributions, schools, hospitals, and senior centers in our backyards of New York and Idaho, and across nearly 30 other states, and advocated for government support to end child hunger in partnership with NGOs like Feeding America

 

   

Fair Trade Dairy:    Chobani also pioneered and helped launch the first ever and only Fair Trade Dairy certification in the United States, which is designed to protect and empower dairy workers and provide meaningful premiums to benefit farmers and farm workers alike.

 

   

Other Programs:    In addition to the above initiatives, Chobani’s proactive decision in 2020 to implement a starting wage of at least $15.00 an hour, resulting in an average hourly wage of approximately $19.00 an hour, coupled with other programs that support entrepreneurship and education, such as Chobani Paid Parental Leave, the Chobani Incubator, Chobani Scholars, and our Community Impact Funds, serve to further our legacy of support for our communities.

We believe that these values-driven programs will continue to strengthen the Chobani brand and cultivate awareness and loyalty among consumers who share these same values, thereby enhancing our ability to improve the world through our food.

Proven Track Record of Financial Success, Highlighted by Diversified Growth

Since our launch in 2007, Chobani has demonstrated strong financial performance. We have historically driven robust topline growth, reaching $1.1 billion in net sales in the first six years of our operations, and generating over $1.4 billion in net sales in 2020. From 2010 to 2020 we grew net sales at a 19.1% CAGR. From 2018 to 2020, we continued to grow net sales at a 4.2% CAGR, while the broader United States yogurt market grew at only 1.6%. In 2020, we recorded $58.7 million in net loss, which increased 200% year-over-year, and $191.0 million in Adjusted EBITDA, which increased 7.8% year-over-year. As our original and most established product category, yogurt has provided the growth and profitability from which we independently funded broader capital investment and extension into new categories.

As a result of our scale and operating performance, we generate significant operating cash flow. We have achieved positive operating cash flow in every year since 2015 and reported $105.6 million in 2020, up 33.5% year-over-year. Healthy operating cash flow enables us to make strategic investments in our business to drive future growth. We are flexible in our ability to allocate capital to projects that will both satisfy demand and drive incremental topline growth. We have made significant investments over the past several years to expand our facilities, implement SAP and extend our brand portfolio. We will continue to make strategic investments moving forward as we identify new market disrupting categories and demand for our products grows.

Our Growth Strategies

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consistent since 2007, allowing us to successfully launch many new products within our yogurt portfolio as well as highly-relevant products in new growth categories. We expect to continue to leverage our competitive strengths to replicate this playbook to generate sustainable and differentiated growth over time.

Drive Differentiated Growth in Our Yogurt Business and Support our Category Leadership Position

Our yogurt offering is performing well and growing significantly faster than the overall category. We believe that for much of the last decade, Chobani has been a key driver of growth in the yogurt category and we believe we have a significant runway for continued growth across our yogurt offerings in a number of key areas:

 

   

New Product Platform Innovation:    We have consistently been able to launch ground-breaking innovation across our yogurt portfolio to drive growth well above category levels. This product platform innovation includes new ingredient profiles, flavors and formats that meet different need states, including Chobani with Zero Sugar, on-the-go yogurt drinks, and snacking-oriented products like Chobani Flip. We have a deep pipeline of future yogurt product platform innovation that we believe will achieve similar success with retailers and consumers.

 

   

Product Platform Expansion:    As we introduce new product platform innovation, for example Chobani with Zero Sugar and our plant-based yogurts like coconut and oat, we have the capabilities to quickly and efficiently bring new flavor variants and SKUs to market. We believe that Chobani with Zero Sugar has significant opportunity for growth. We will continue to expand product platforms in this manner based on consumer demand and key flavor, format, and ingredient trends.

 

   

Build Awareness and Drive Adoption/Penetration:    Yogurt consumption levels in our core markets are still significantly underpenetrated relative to global per capita consumption levels. We believe there is a large opportunity to drive increased brand and category awareness through effective product positioning and marketing, particularly with respect to the health and nutritional benefits of our yogurt products. As consumer awareness rises we believe we can further increase household penetration and grow customer adoption across all trade channels.

 

   

Channel and Shelf-Space Expansion:    We believe we have a significant opportunity to increase our current penetration in new channels and increase the accessibility of our yogurt products. We are currently under-shelved relative to our market share in certain key retail outlets and as we close opportunity gaps, we believe the Chobani brand serves as an on-shelf beacon that drives incremental trial and awareness. Additionally, our food service business, which drives expanded access to Chobani products in hotels, airlines, resorts and cafes, currently represents less than 10% of our overall distribution. We anticipate continued growth in this key channel, as many food companies operating in the food service channel have penetration in excess of 20% of their distribution. Additionally, we anticipate our recent pilot distribution partnership with a U.S.-based multinational food, snack, and beverage corporation will broaden distribution into high-growth but underpenetrated channels like convenience and drug stores and colleges.

The growth and profitability of our yogurt business will continue to serve as a base from which we will fund differentiating platform investment and fuel disruptive innovation across our portfolio in the future. We believe these growth drivers will enable sustained, durable growth of our yogurt products and allow us to continue to be a category leader.


 

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Expand Our New Growth Categories through Continued Distribution and Channel Expansion and Enhanced Marketing

As a result of our successful launch of Chobani Oat and its impressive early growth, as well as the promising results of our new Chobani Complete line, Coffee Creamer, and ready-to-drink coffee products to date, we believe we are well-positioned to continue to expand our reach in these new growth categories. For example, in the oat milk category, we are focused on becoming the leader in the category despite having launched our line of oat milk products within the last two years.

We believe that our differentiated platform of best-in-class production infrastructure and in-house execution are a key competitive advantage in driving sustainable growth across all of our new growth categories. We intend to employ the following approaches to fuel the expansion of these businesses:

 

   

Naturalize Big, Unhealthy Categories:    We offer high-quality, clean label products and source natural ingredients that consumers value. We believe that our commitment to a superior tasting product distinguishes us from many competitors in the space who use artificial ingredients. For example, while oat milk is traditionally higher in sugar than other types of milk and milk alternatives, Chobani introduced its Zero Sugar Oat product to address customer concerns over sugar content in December 2020. We believe oat milk will continue to take share from traditional dairy milk as well as other plant-based milk categories like almond. Similarly, clean label coffee creamers are on-trend and in high demand from retailers.

 

   

Improve Accessibility of High-Growth Functional Foods:    Functional foods and beverages are extremely attractive categories with long runways for growth as consumers become more aware of their health benefits, including immunity support, gut health and additional protein. We recently launched our Chobani Probiotic line of products with the intention of both benefitting from a high-growth market and making it more broadly accessible outside of upscale health foods retail outlets where products like this have been traditionally sold. We believe that our functional food and beverage offerings will allow us to further attract new customers and build brand loyalty while expanding our portfolio in healthy products.

 

   

Expand Channels, Shelf Space, and Occasion:    Currently we sell at over 90,000 retail points of distribution in the United States and we cultivate and maintain positive relationships with our distributors. We plan to continue forging relationships with new customers to bring our new products to as many shelves and homes as possible. Because we have scale and well-established existing relationships with retailers, we can efficiently leverage these partnerships to successfully launch innovation more effectively than many lower volume competitors who are typically focused on only a single product category or part of the store. Additionally, we anticipate our recent pilot distribution partnership with a U.S.-based multinational food, snack, and beverage corporation to broaden distribution into high-growth but underpenetrated channels like convenience and drug stores, and colleges to expand and grow into new and existing channels over time.

Further Leverage Our Chobani Brand and Powerful Platform to Enhance Consumer-Centricity and New Category Disruption

We want every interaction that a consumer has with our product to be positive. Consumers are demanding more personalization and products that are tailored to meet their specific values and needs, whether it is convenient formats, specific dietary needs, or e-commerce availability. Through our innovation pipeline we are building a more consumer-centric product portfolio that is responsive to emerging consumer trends and preferences. We listen to our consumers, and we have a best-in-class consumer loyalty team that is well equipped to interact directly with our consumers and leverage those


 

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insights to create products we know will resonate with customers and consumers, regardless of the category. We will continue to invest in these capabilities while strengthening our brand. It is these investments, consumer insights, and capabilities that have allowed us to successfully launch products into four completely new categories in the last 18 months.

Consumers have increasingly been demanding more e-commerce accessibility for healthy food products. In retail channels both online, through e-commerce grocers, and offline, through retailer e-commerce platforms (across both home delivery and store-pickup), Chobani products have grown over      % since                 . Our e-commerce efforts will be a key component of our channel expansion and our goal of building out a well-balanced, accessible business that is on the leading edge of consumer-centricity. We expect continued strong growth in e-commerce channels for our products and are actively exploring new and innovative ways to get Chobani’s products into consumers’ hands even more directly and conveniently.

Our widely recognized and loved Chobani “branded house” resonates with today’s increasingly conscious consumers by representing both high-quality, healthy food and alignment with a mission that is supported by a deep set of values. The power of the Chobani brand, coupled with our differentiated platform will enable us to continue to launch products into new categories. We have a deep pipeline of new product innovation that we believe will resonate with our consumers and we have a platform that allows us to ideate, commercialize, market, and distribute these products quickly and efficiently. We prioritize new categories where accessibility, health and wellness, and quality can be differentiators. We will continue to target both large categories that are starved for innovation and ripe for disruption, as well as newer, high-growth categories that are in high consumer demand. We see significant opportunity to bring plant-based, lactose-free alternatives into large categories where products for health-conscious consumers do not currently exist or where penetration is low. As we continue to extend into new categories, we will also expand our addressable market and elevate our brand, helping sustain growth over the long-term.

Our Mindset of Sustainable and Continuous Operational Improvement Will Enhance Growth

We understand that as the world changes, we need to adapt and change too. We pride ourselves on continuous innovation, effective listening, and flawless execution. Over the past few years, this strategy has helped us achieve a variety of different improvements to reduce waste, streamline costs and efficiencies, and to enable investments in innovation and growth; however, we are constantly seeking to expand and accelerate these initiatives to enhance sustainability and generate savings which can be re-invested to fuel growth.

 

   

Driving Cost and Operational Efficiency:    We plan to continue to increase our cost and operational efficiency. Our pipeline of operational initiatives includes automation projects, procurement programs that leverage our scale, and expanding production capability to increase proximity to key markets and reduce miles driven. We have successfully been able to offset cost inflation in our business through these types of initiatives, which has afforded us the resources to invest in new high growth businesses and products. We strive to achieve productivity improvements with these and other initiatives and programs.

 

   

Resource Use Reduction:    In 2020, we achieved our goal of increasing the amount of renewable energy powering our plants. We have cut our Scope 1 and 2 greenhouse gas emissions by 11,000 metric tons of CO2e since 2018. We have achieved our Scope 1 and 2 greenhouse gas emissions goal ahead of our 2022 target by working closely with the electricity companies in both New York and Idaho to obtain cost competitive renewable electricity


 

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supplies available in each region, and by creating efficiencies in logistics. In addition, we continue to actively review new opportunities for additional cost competitive renewable electricity sources.

 

   

Sustainable Packaging:    In 2020, we achieved a goal set in 2018 for 50% of our product packaging to be either recyclable, compostable, biodegradable or made with recycled content. We have partnered with companies such as Tetra Pak on sustainable packaging for our Chobani Oat Milk, Coffee Creamers and ready-to-drink Chobani Coffee products. Over the years, we have also made many subtle changes to our packaging that we believe are environmentally and socially responsible, including redesigning our yogurt cup to be made with less plastic, integrating recycled fiber into our packaging overwraps, utilizing widely recyclable materials in our shipping packaging, and partnering with the Sustainable Packaging Coalition and the How 2 Recycle programs to help educate consumers on how to recycle our packaging.

We will continue to leverage initiatives like these to support our mission and also drive sustainable efficiency in our business. These initiatives have been good for both our financial and social bottom line. Our focus on these environmentally sustainable initiatives also serves to strengthen our brand which in turn drives our ability to spread awareness and adoption of our products.

Build Out New Geographies Beyond the U.S.

While our focus has been primarily in domestic markets to date, we have successfully established a leadership position in Australia and have extended our presence in North America into Mexico and Canada, where we believe there is significant runway to expand our offerings. In Mexico, Chobani has recently expanded to 39 SKUs across yogurt and oat milk. In Canada, we launched plant-based products (due to restrictive dairy import guidelines in Canada) one year ago and now have seven SKUs across oat yogurt and oat milk. Incremental international expansion is a large opportunity and can be a meaningful growth driver across our entire product portfolio over the longer term. In the near term, we expect to focus on North America and Australia – markets we know well and where we have competitive advantages.

Continue to Advance Our Mission and Benefit Our Communities and Environment Which Will in Turn Drive Value for Internal and External Stakeholders

Our effort to create a new kind of company that does well by doing good formed the basis for our identity. As a result, we have always operated in a people- and employee-first manner that we believe is socially and environmentally responsible. Unlike other businesses who are only recently trying to retroactively build values-based frameworks like ours, these values are strongly associated with our brand and products and actually drive customer and consumer adoption and trust. As we continue to pursue our mission and act in accordance with our values, we will continue to create value and growth for internal and external stakeholders, including our employees, our partners, our communities, our customers, our society and our shareholders.

Chobani has established a sustainability program with initiatives tied to the UN Sustainable Development Goals that address carbon emissions, water usage, sustainable farming, and other important environmental concerns. Additionally, our new platform of oat-based products utilize oats, which require less water to produce than many other crops and have the potential to help regenerate soil health, an important practice in agricultural sustainability. Chobani also pioneered and received the first ever and only Fair Trade Dairy certification in the United States for its yogurt products, which is designed to protect and empower dairy workers and provide meaningful premiums to benefit farmers and farm workers alike.


 

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Further, our proven purpose-led initiatives, such as Fill Their Plate, an initiative to end child hunger, have been very successful and have enabled us to establish ourselves as a leader in addressing food and nutrition insecurity while creating a brand that is synonymous with sustainability, health and accessibility. With this focus we are able to innovate and create products with our broader mission in mind. According to Nielsen, 73% of consumers globally said they would change their consumption habits to reduce their impact on the environment. We believe our mission-oriented approach to business will continue to drive sustainable growth as it will cater heavily to the broad array of values-focused and health conscious consumers.

Corporate Information

Chobani Inc. was incorporated in Delaware on June 15, 2021. It had no business operations prior to this offering. In connection with the consummation of this offering, Chobani Inc. will become the sole managing member of Chobani Global Holdings, pursuant to the Reorganization described under “Organizational Structure—The Reorganization.” Our principal office is located at 669 County Road 25, New Berlin, New York 13411 c/o Chief Legal Officer, General Counsel and Secretary. Our telephone number is (607) 847-7413. Our website address is www.chobani.com. Information contained on our website or linked therein or otherwise connected thereto does not constitute part of and is not incorporated by reference into this prospectus or the registration statement of which this prospectus forms a part. We have included our website address in this prospectus solely as an inactive textual reference.

Risks Affecting Our Business

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors” immediately following this prospectus summary. These risks include, but are not limited to, the following:

 

   

changes in the market price of milk or cream or interruption in our supply of milk;

 

   

dependence on one supplier for a significant portion of our North American raw milk;

 

   

volatility of raw material and packaging costs;

 

   

inability to obtain raw or other packaging materials used in our manufacturing process on a timely basis or in sufficient quantities to produce our products;

 

   

changes in the food industry, including changing dietary trends and consumer preferences;

 

   

inability to innovate successfully and introduce new products in new, growing and profitable categories on a cost-effective basis;

 

   

the loss of one or more of our major customers or if any of our major customers experiences significant business interruption;

 

   

inability to maintain, extend or expand our reputation and brand image;

 

   

failure of price increases to offset cost increases and maintain profitability, potentially resulting in sales volume declines associated with pricing elasticity;

 

   

issues or concerns related to the quality and safety of our products, ingredients, labeling, or packaging that could cause a product recall or result in regulatory investigations and litigation or result in harm to our reputation, negatively impacting our operating results;


 

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failure to adequately protect our intellectual property or findings that we infringed the intellectual property rights of others;

 

   

changes in the legal and regulatory environment that may limit our business activities, increase our operating costs, reduce demand for our products or result in litigation;

 

   

loss of the services of Hamdi Ulukaya, our Founder, Chief Executive Officer and Chairperson, and other key management personnel;

 

   

inability to hire or retain and develop key personnel or a highly skilled and diverse workforce or manage changes in our workforce needed to drive our growth strategies; and

 

   

dependence on Chobani Global Holdings to pay any taxes and other expenses.

You should carefully consider all of the information set forth in this prospectus and, in particular, the information in the section entitled “Risk Factors” beginning on page 30 of this prospectus prior to making an investment in our common stock. These risks could, among other things, prevent us from successfully executing our strategies and could have a material adverse effect on our business, financial condition and results of operations.

Organizational Structure

In connection with this offering, we will undertake certain transactions as part of a corporate reorganization (the “Reorganization”) described under Organizational Structure below. The Reorganization will be conducted through what is commonly referred to as an “UP-C” structure, which is often used by partnerships and limited liability companies undertaking an initial public offering. The UP-C structure can provide tax benefits and associated cash flow advantages to both the issuer corporation and the existing owners of the partnership or limited liability company in the initial public offering.

Following the Reorganization and this offering, Chobani Inc. will be a holding company and its sole asset will be ownership of Class A Units of Chobani Global Holdings. Because Chobani Inc. will be the managing member of Chobani Global Holdings, Chobani Inc. will operate and control all of the business and affairs (and will consolidate the financial results) of Chobani Global Holdings and its subsidiaries.

Chobani Global Holdings is owned by Hamdi Ulukaya, employees and HOOPP. Prior to the consummation of the Reorganization and this offering, the outstanding equity capital of Chobani Global Holdings consists of two classes of membership units (which we refer to collectively as the “Pre-IPO Units”):

 

   

Pre-IPO Class A Units.    All of the Pre-IPO Class A Units are held by FHU US Holdings, LLC (“FHU US Holdings”). FHU US Holdings is controlled by:

 

   

Hamdi Ulukaya, who beneficially owns 80% of the membership units of FHU US Holdings; and

 

   

HOOPP Blocker, an entity that is taxable as a corporation for U.S. federal income tax purposes that is controlled by HOOPP, which owns 20% of the membership units of FHU US Holdings.

 

   

Pre-IPO Class B Units.    All of the Pre-IPO Class B Units are held on behalf of certain Chobani employees indirectly through CGH Management Holdings, LLC (“CGH Management Holdings”). CGH Management Holdings holds the Pre-IPO Class B Units to satisfy its obligations under grants to certain of our employees.


 

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Chobani Global Holdings has historically maintained a number of employee incentive plans, pursuant to which our employees and directors and CGH Management Holdings (which issues grants to certain of our employees), are eligible to receive awards with respect to which we have allocated an aggregate 12.5% stake in Chobani Global Holdings (or     % after giving effect to the offering). These plans are the 2016 Growth Sharing Plan (the “2016 Growth Sharing Plan”), the 2020 Value Sharing Plan (the “2020 Value Sharing Plan”), the CGH Management Holdings 2016 Management Plan (the “2016 Management Plan”) and the CGH Management Holdings 2020 Management Plan (the “2020 Management Plan”).

To effect the Reorganization and the closing of this offering:

 

   

FHU US Holdings will distribute a portion of its Pre-IPO Class A Units to the HOOPP Blocker in complete redemption of HOOPP Blocker’s interest in FHU US Holdings, leaving Hamdi Ulukaya as the beneficial owner of all the remaining interests of FHU US Holdings;

 

   

HOOPP holds its interest in Chobani Global Holdings through HOOPP Blocker. HOOPP Blocker will merge with a newly-formed, wholly-owned subsidiary of Chobani Inc., with HOOPP Blocker surviving, and, subsequently, merging with and into Chobani Inc. (the two mergers, together, the “Blocker Merger”), with Chobani Inc. surviving. Chobani Inc. will transfer to HOOPP a combination of cash funded by a portion of the net proceeds of this offering and will issue shares of Class A common stock as merger consideration in connection with the Blocker Merger. As a result of the Blocker Merger, HOOPP effectively will have indirectly transferred Pre-IPO Class A Units representing a     % interest in Chobani Inc., and following completion of the Reorganization and the offering, HOOPP will indirectly own, through its ownership of Class A common stock, approximately     % of Chobani Inc. on a fully-diluted basis.

 

   

The operating agreement of Chobani Global Holdings will be amended and restated (as amended and restated, the “CGH LLC Agreement”) to cause its membership units to be reclassified into:

 

   

new Class A Units, held only by Chobani Inc., as the sole managing member of Chobani Global Holdings;

 

   

new Class B Units (formerly Pre-IPO Class A Units) held by FHU US Holdings; and

 

   

new Class M Units (formerly Pre-IPO Class B Units) held on behalf of certain Chobani employees indirectly through CGH Management Holdings.

 

   

Chobani Inc. will use a portion of the net proceeds of this offering to purchase                Class B Units held directly by FHU US Holdings and indirectly by Hamdi Ulukaya, and Chobani Inc. will issue shares of Class B common stock to FHU US Holdings, with the result that Hamdi Ulukaya will directly or indirectly own all the outstanding shares of Class B common stock. As a result, Hamdi Ulukaya effectively will have sold Class B Units representing a     % interest in Chobani Inc. and, following completion of the Reorganization and the offering, will directly or indirectly own approximately     % of Chobani Inc. on a fully-diluted basis.

Chobani Inc. will have two classes of authorized common stock: Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote per share on all matters presented to our stockholders generally. Each share of Class B common stock is entitled to ten votes per share on all matters presented to our stockholders generally until a Sunset (as described below) becomes effective. Holders of our common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise provided in our certificate of incorporation or as required by applicable law. The holders of Class B common stock will not have any economic rights, including any of the economic rights (including the rights to dividends) provided to holders of Class A common stock.


 

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A “Sunset” becomes effective if Hamdi Ulukaya or his affiliates or permitted transferees cease to maintain beneficial ownership of at least 15% of the aggregate number of shares of our issued and outstanding common stock beneficially owned as of the date of completion of this offering. See “Description of Capital Stock” for more information about the terms of the Class A common stock and Class B common stock.

After the closing of this offering, Class B Units may be exchanged for Class A common stock or, at the election of Chobani Inc., for cash, subject to certain restrictions pursuant to the CGH LLC Agreement. When Class B Units are exchanged for cash or shares of Class A common stock, at the election of Chobani Inc., it will result in the automatic retirement of the corresponding number of shares of our Class B common stock and, therefore, will decrease the aggregate voting power of the Class B common stock.

All of the Pre-IPO Class B Units are held on behalf of certain Chobani employees indirectly through CGH Management Holdings. Following the adoption of the CGH LLC Agreement, the Pre-IPO Class B Units will be reclassified into Class M Units. Subject to certain restrictions, the CGH LLC Agreement will entitle any holder of Class M Units to exchange their vested Class M Units for cash or a number of shares of Class A common stock, at the election of Chobani Inc., that will generally be equal in value to the implied “spread value” of the corresponding Class M Units (calculated based on the excess of the public trading price of Class A common stock at the time of the exchange over the participation threshold of such Class M Units). Holders of “growth unit” awards under the 2016 Growth Sharing Plan and “value unit” awards under the 2020 Value Sharing Plan will have their vested awards settled in cash or shares of Class A common stock, at the election of Chobani Global Holdings, subject to certain restrictions pursuant to the CGH LLC Agreement.

Chobani Inc. will enter into a tax receivable agreement (the “Tax Receivable Agreement”) for the benefit of certain direct and indirect beneficial owners of Pre-IPO Units (the “TRA Parties”), pursuant to which Chobani Inc. will pay to the TRA Parties 85% of the amount of the net cash tax savings, if any, that Chobani Inc. realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Chobani Inc.’s acquisition of Class B Units and certain Class M Units in connection with this offering and in future exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Chobani Inc. will acquire in the Blocker Merger and (iii) any payments Chobani Inc. makes to the TRA Parties under the Tax Receivable Agreement (including tax benefits related to imputed interest). See Organizational Structure and Certain Relationships and Related Person Transactions—Proposed Transactions with Chobani Inc.—Tax Receivable Agreement.


 

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The diagram below depicts our organizational structure following the consummation of the Reorganization and this offering.

 

 

LOGO


 

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THE OFFERING

 

Issuer

Chobani Inc.

 

Class A common stock offered by Chobani Inc.

                 shares.

 

Underwriters’ option to purchase additional shares of Class A common stock from Chobani Inc.

                 shares.

 

Class A common stock outstanding immediately after this offering

                 shares of Class A common stock (or             shares of Class A common stock if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

 

Class B common stock outstanding immediately after this offering

             shares of Class B common stock. Class B common stock will be issued to holders of Class B Units in Chobani Global Holdings. Immediately following the offering, all of the issued and outstanding shares of Class B common stock will be beneficially owned by Hamdi Ulukaya.

 

Use of proceeds

We estimate that the net proceeds from this offering, based on an assumed initial public offering price of $             per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), after deducting estimated underwriting discounts and commissions but before deducting expenses of this offering and the Reorganization payable by us, will be approximately $             million, or approximately $             million if the underwriters exercise in full their option to purchase additional shares of Class A common stock.

 

  We intend to cause Chobani Global Holdings to use

 

   

$             million of the net proceeds to repay up to $530.0 aggregate principal amount outstanding of the 7.50% Senior Unsecured Notes due April 2025 (the “Senior Unsecured Notes”) and to repay other indebtedness;

 

   

$             million, or approximately $             million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, of the net proceeds to purchase Class B Units of Chobani Global Holdings indirectly held by Hamdi Ulukaya, at a per-unit price equal to


 

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the per-share price paid by the underwriters for shares of the Class A common stock in this offering. Accordingly, we will not retain any portion of such proceeds; and

 

   

$             million, or approximately $             million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, of the net proceeds to pay the cash consideration to HOOPP in connection with the Blocker Merger. Accordingly, we will not retain any portion of such proceeds.

 

  We intend to cause Chobani Global Holdings to use the remaining net proceeds to pay the expenses incurred by us in connection with this offering and the Reorganization and for capital investment or other general corporate purposes. See “Use of Proceeds” for a more complete description of the intended use of proceeds from this offering.

 

Controlled company

After this offering, we expect to be a controlled company under the corporate governance rules of the         , and therefore we will be permitted to, and intend to, elect not to comply with certain corporate governance requirements thereunder. See “Management—Controlled Company Exemption.”

 

Dividend policy

We have no present intention to pay cash dividends on our common stock. Any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our existing and any future debt agreements and other factors that our board of directors deems relevant.

 

 

Holders of our Class A common stock are entitled to receive dividends when, as and if declared by our board of directors out of legally available funds. Holders of our Class B common stock will not be entitled to dividends distributed by Chobani Inc. because such shares are non-economic interests. The shares of Class B common stock are expected to have no (or nominal) value because such shares are


 

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non-economic interests and are expected to be generally non-transferable.

 

  Following the Reorganization and this offering, Chobani Inc. will be a holding company and its sole asset will be ownership of the Class A Units of Chobani Global Holdings, of which it will be the managing member. Subject to funds being legally available for distribution, we intend to cause Chobani Global Holdings to make pro rata distributions to each of its members, CGH Management Holdings, Chobani Inc. and FHU US Holdings, in an amount intended to enable each member to pay all applicable taxes on taxable income allocable to each member and to allow Chobani Inc. to make payments under the Tax Receivable Agreement. If the amount of tax distributions to be made exceeds the amount of funds available for distribution, Chobani Inc. shall receive the full amount of its tax distribution before the other members receive any distribution and the balance, if any, of funds available for distribution shall be distributed to the other members pro rata in accordance with their assumed tax liabilities. See “Dividend Policy.”

 

Voting rights

We will have two classes of authorized common stock: Class A common stock and Class B common stock.

 

  Each share of Class A common stock entitles its holder to one vote per share on all matters presented to our stockholders generally, representing an aggregate of % of the combined voting power of our issued and outstanding common stock upon completion of this offering (or     %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

 

  Each share of Class B common stock entitles its holder to ten votes per share on all matters presented to our stockholders generally until a Sunset becomes effective, representing an aggregate of % of the combined voting power of our issued and outstanding common stock upon completion of this offering (or     %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock). After a Sunset becomes effective, each share of Class B common stock will entitle its holder to one vote per share instead of ten votes per share.


 

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  A “Sunset” becomes effective when Hamdi Ulukaya or his affiliates or permitted transferees cease to maintain beneficial ownership of at least 15% of the aggregate number of shares of our issued and outstanding common stock beneficially owned as of the date of completion of this offering.

 

  Holders of our common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise provided in our certificate of incorporation or as required by applicable law. See “Description of Capital Stock.”

 

  When Hamdi Ulukaya (or any other holder) exchanges Class B Units for cash or shares of our Class A common stock, at the election of Chobani Inc., it will result in the automatic retirement of the corresponding number of shares of our Class B common stock and, therefore, will decrease the aggregate voting power of the Class B common stock. See “Organizational Structure—Voting Rights of Common Stock.”

 

  Upon completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares of our Class A common stock and after the transactions described herein under “Organizational Structure”), Hamdi Ulukaya, will indirectly own through his controlling ownership of FHU US Holdings, 100% of our Class B common stock (representing     % of the total combined voting power of our issued and outstanding common stock). As a result, Hamdi Ulukaya will be able to control matters requiring stockholder approval, including the election and removal of directors, changes to our organizational documents and significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets. See “Risk Factors—Risks Relating to this Offering and Ownership of Our Common Stock—Hamdi Ulukaya will have the ability to direct the voting of a majority of the voting power of our common stock, and his interests may conflict with those of our other stockholders.”

 

CGH LLC Agreement

The CGH LLC Agreement will entitle any holder of Class B Units to exchange their Class B Units for shares of Chobani Inc.’s Class A common stock on a one-for-one basis or, at Chobani Inc.’s



 

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election, for cash. Subject to certain restrictions, the CGH LLC Agreement will entitle any holder of Class M Units to exchange their vested Class M Units for cash or a number of shares of Class A common stock, at the election of Chobani Inc., that will generally be equal in value to the implied “spread value” of the corresponding Class M Units (calculated based on the excess of the public trading price of Class A common stock at the time of the exchange over the participation threshold of such Class M Units). When a Class B Unit is exchanged for a share of our Class A common stock, the corresponding share of our Class B common stock will automatically be retired. See “Organizational Structure—CGH LLC Agreement” and “Certain Relationships and Related Person Transactions—Proposed Transactions with Chobani Inc.—CGH LLC Agreement.”

 

Tax Receivable Agreement

Chobani Inc. will enter into the Tax Receivable Agreement for the benefit of the TRA Parties, pursuant to which Chobani Inc. will pay to the TRA Parties 85% of the amount of the net cash tax savings, if any, that Chobani Inc. realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Chobani Inc.’s acquisition of Class B Units and certain Class M Units in connection with this offering and in future exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Chobani Inc. will acquire in the Blocker Merger and (iii) any payments Chobani Inc. makes to the TRA Parties under the Tax Receivable Agreement (including tax benefits related to imputed interest). See “Organizational Structure” and “Certain Relationships and Related Person Transactions—Proposed Transactions with Chobani Inc.—Tax Receivable Agreement.”

 

Risk factors

You should carefully read and consider the information set forth in the section entitled “Risk Factors” beginning on page 30, together with all of the other information set forth in this prospectus, before deciding whether to invest in our Class A common stock.

 

Symbol

“CHO.”


 

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Unless otherwise noted, Class A common stock outstanding after the offering and other information based thereon in this prospectus does not include:

 

   

                shares of Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares;

 

   

                shares of Class A common stock reserved for issuance upon exchange of Class B Units beneficially owned by Hamdi Ulukaya;

 

   

                shares of Class A common stock reserved for issuance upon exchange of vested Class M Units held on behalf of certain Chobani employees indirectly through CGH Management Holdings;

 

   

                shares of Class A common stock issuable under our 2021 Equity Incentive Plan (the “2021 Plan”) (under which no equity awards have been granted as of                , 2021), including:

 

  (i)

                shares of Class A common stock underlying restricted stock units or other awards to be granted to certain employees and non-employee directors pursuant to the 2021 Plan immediately after the closing of this offering; and

 

  (ii)

                additional shares of Class A common stock to be reserved for future issuance of awards under the 2021 Plan;

 

   

                shares of Class A common stock reserved for issuance upon the conversion of vested value units issued or issuable under the 2020 Value Sharing Plan into shares of Class A common stock at settlement (under which                 Pre-IPO Class A Units are issued and outstanding as of                , 2021); and

 

   

                shares of Class A common stock reserved for issuance upon the conversion of vested growth units issued or issuable under the 2016 Growth Sharing Plan into shares of Class A common stock at settlement (under which                 Pre-IPO Class A Units are issued and outstanding as of                , 2021).

Unless otherwise indicated in this prospectus, all information in this prospectus assumes the completion of the Reorganization and that shares of our Class A common stock will be sold in this offering at $             per share (the midpoint of the price range set forth on the cover page of this prospectus).

Throughout this prospectus, we present performance metrics and financial information regarding the business of Chobani Global Holdings. This information is generally presented on an enterprise-wide basis. The new public stockholders will be entitled to receive a pro rata portion of the economics of Chobani Global Holdings’s operations through their ownership of our Class A common stock. Chobani Inc.’s ownership of Class A Units will represent a minority share of Chobani Global Holdings. Hamdi Ulukaya will continue to hold a majority of the economic interest in its operations as a non-controlling interest holder, primarily through direct and indirect ownership of Class B Units of Chobani Global Holdings. Prospective investors should be aware that the owners of the Class A common stock will be entitled only to a minority economic position, and therefore should evaluate performance metrics and financial information in this prospectus accordingly. To the extent Class B Units are exchanged for Class A common stock or, at the election of Chobani Inc., for cash, over time, the percentage of the economic interest in Chobani Global Holdings’s operations to which Chobani Inc. and the Class A common stockholders are entitled will increase proportionately.



 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth certain summary financial information and other data of Chobani Global Holdings on a historical basis. Chobani Global Holdings is considered our predecessor for accounting purposes and its consolidated financial statements will be our historical financial statements following this offering. The summary financial information for the years ended December 26, 2020, December 28, 2019 and December 29, 2018 have been derived from our audited consolidated financial statements prepared in accordance with U.S. GAAP. The summary historical consolidated financial data for the three months ended March 27, 2021 and March 28, 2020 have been derived from our unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP, which financial statements include, in the opinion of our management team, all normal and recurring adjustments that are considered necessary for the fair presentation of the results for the period and dates presented. The summary historical consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. Our historical results and growth rates are not necessarily indicative of the results or growth rates to be expected in future periods.

 

    Year Ended
December 29,
2018
    Year Ended
December 28,
2019
    Year Ended
December 26,
2020
    Three
Months
Ended
March 27,
2021
    Three
Months
Ended
March 28,
2020
    Year Ended
December 26,
2020

Pro Forma
Chobani Inc.
    Three Months
Ended March 27,
2021
Pro Forma
Chobani Inc.
 
    (in thousands)  

Income Statement Data:

             

Net sales

  $ 1,289,811     $ 1,331,697     $ 1,401,371     $ 385,039     $ 365,682     $                   $                

Costs and expenses

             

Costs of sales

    956,452       1,003,948       1,091,156       304,538       293,292      

Gross profit

    333,359       327,749       310,215       80,501       72,390      

Selling, general and administrative

    272,243       250,650       266,135       67,942       67,710      

Restructuring and other costs

    1,707       446       2,330       3,275            
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

    59,409       76,653       41,750       9,284       4,680      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other (expense):

             

Interest expense

    (93,201     (95,135     (96,278     (23,081     (22,910    

Gain on extinguishment of debt

    17,721                              

Other (expense) income

    (9,076     1,321       (1,050     (558     88      

Currency gain (loss)

    169       (786     (39     (50     (8    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

    (84,387     (94,600     (97,367     (23,689     (22,830    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) before income taxes

    (24,978     (17,947     (55,617     (14,405     (18,150    

Income tax expense

    1,440       1,484       3,105       67       424      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (26,418   $ (19,431   $ (58,722   $ (14,472   $ (18,574   $       $    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Financial Data:

             

Cash

  $ 45,202     $ 47,474     $ 90,433     $ 67,210     $ 77,575     $       $    

EBITDA(1)

  $ 169,389     $ 173,703     $ 149,647     $ 35,365     $ 31,701     $       $    

Adjusted EBITDA(1)

  $ 158,411     $ 177,170     $ 191,013     $ 42,536     $ 42,292     $       $    

Capital expenditures

  $ 65,735     $ 83,071     $ 73,461     $ 20,265     $ 30,120     $       $    

 

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     Year Ended
December 26, 2020
     Three Months Ended
March 27, 2021
 
   Actual      Actual      As Adjusted(*)  
   (in thousands except ratios)  

Credit Statistics:

        

Interest Expense

   $ 96,278      $ 23,081      $                

Secured Debt

     885,934        860,583     

Total Debt

     1,393,449        1,369,600     

Net Secured Debt to Adjusted EBITDA

     4.2x        4.1x     

Net Total Debt to Adjusted EBITDA

     6.8x        6.8x     

Adjusted EBITDA to Interest Expense

     2.0x        1.8x     

 

(*)

As adjusted to give effect to the offering and the use of proceeds from the offering, assuming an initial public offering price of $            per share of Class A common stock.

(1)

We use EBITDA and Adjusted EBITDA to evaluate operating performance, specifically with relation to cash flow, debt capacity, and compliance with our debt instruments. In addition, we believe the use of EBITDA and Adjusted EBITDA facilitates operating performance comparisons from period-to-period and provides a supplemental understanding of the factors and trends affecting our business. However, management analyzes these metrics in conjunction with traditional U.S. GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity, and does not rely on these measures as its only measures of operating performance and liquidity.

EBITDA consists of net (loss) before interest expense, income tax provision, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted for unusual items and other adjustments such as gain on extinguishment of debt, asset impairment and gain or loss on disposals, restructuring costs, stock based compensation expense, costs related to new platforms, and non-recurring and other charges. We do not believe these items and adjustments are indicative of our ongoing operating performance.

However, EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP and our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA or Adjusted EBITDA as an alternative to net (loss) determined in accordance with U.S. GAAP, as an indicator of our operating performance or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, or as an indicator of cash flows, or as a measure of liquidity. The following is a reconciliation of EBITDA and Adjusted EBITDA to net loss:

 

     Year Ended     Three Months Ended  
     December 29,
2018
    December 28,
2019
    December 26,
2020
    March 27,
2021
    March 28,
2020
 
     (in thousands)  

Net loss

   $ (26,418   $ (19,431   $ (58,722   $ (14,472   $ (18,574

Interest expense

     93,201       95,135       96,278       23,081       22,910  

Income tax provision

     1,440       1,484       3,105       67       424  

Depreciation and amortization

     101,166       96,515     108,986     26,689     26,941  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 169,389     $ 173,703     $ 149,647     $ 35,365     $ 31,701  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs related to new platforms(a)

   $     $ 54     $ 16,284     $ 973     $ 8,691  

Stock compensation costs

     1,483       3,975       4,429       907       1,615  

Restructuring costs

     1,707       446       2,330       3,275        

Non-recurring and other charges(b)

           (1,852     3,351       2,124       301  

Asset impairment and gain / loss on disposal

     3,553       844       14,972       (108     (16

Gain on extinguishment of debt

     (17,721                        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 158,411     $ 177,170     $ 191,013     $ 42,536     $ 42,292  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a)

Represents the costs associated with the launch of new product platforms.

  (b)

Represents charges relating to initial public offering transaction costs, COVID-19 expenses and income effect from swap derivatives.



 

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties described below, together with all other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our Class A common stock. The occurrence of any of the following risks, as well as any risks or uncertainties not currently known to us or that we currently do not believe to be material, could materially and adversely affect our business, prospects, financial condition, results of operations and cash flow, in which case, the trading price of our Class A common stock could decline and you could lose all or part of your investment.

Risks Related to Our Business and Industry

Changes in the market price of milk or cream or interruption in our supply of milk could materially and adversely affect our results of operations, financial condition, and business prospects.

Raw milk is one of the primary raw materials we use to produce our products, and as we pursue our growth strategy we expect our raw milk demands to continue to grow. The continuity of raw milk supply is of critical importance to our business and the market price for raw milk significantly affects our operating results. The dairy industry continues to experience periodic imbalances between supply and demand for raw milk. In general, the pricing of raw milk is affected by a relative inelasticity of supply and demand, often resulting in small changes in production or demand having a large effect on prices. Changes in the price of milk have in the past, and may in the future, have a material adverse effect on our business, prospects, results of operations, and financial condition.

Historically, the price of milk has fluctuated widely. Cost increases in certain fluid milk components could cause our profits to decrease significantly compared to prior periods, as we may be unable to increase the retail prices of our products to offset the increased cost of our raw materials. Our limited ability to increase retail yogurt prices in the United States is dictated by competition and consumer sentiment. We have evaluated the possibility of hedging our milk exposure from time to time, and may choose to do so in the future.

The production and sale of milk, including the price of raw milk, is regulated through federal market orders and price support programs. To mitigate the impacts of fluctuating milk prices, we purchase a significant portion of our raw milk in federally regulated areas at federally mandated prices. For example, we purchase Class II milk (milk used for “soft” manufactured products such as yogurt) and Class III milk (milk used for the production of hard cheeses) from a limited number of raw milk suppliers and depend on one of those suppliers for a significant portion of our raw milk supply. Our raw milk supply is limited by the ability of individual dairy farmers to provide raw milk in the amount and quality to meet our requirements. Raw milk production is, in turn, influenced by a number of factors that are beyond our control including:

 

   

seasonal factors: dairy cows generally produce more milk in temperate weather than in cold or hot weather and extended unseasonably cold or hot weather could lead to lower than expected production;

 

   

environmental factors: the volume and quality of milk produced by dairy cows is closely linked to the quality of the nourishment provided by the environment around them, and, therefore, if environmental factors cause the quality of nourishment to decline, milk production could decline and we may have difficulty finding sufficient raw milk; for example, a major outbreak of mad cow disease (bovine spongiform encephalopathy) or other serious disease in any principal region supplying our raw milk could lead to significant shortfalls in the supply and quality of our raw milk; and

 

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governmental, agricultural and environmental policy: declines in government grants, subsidies, provision of land, technical assistance and other changes in agricultural and environmental policies may have a negative effect on the viability of individual dairy farms, and the numbers of dairy cows and quantities of milk they are able to produce.

Cream is a natural by-product of our yogurt manufacturing process. We sell cream, which is primarily purchased for the production of butter, and such sales can serve as a partial hedge against milk prices. Historically, the prices of milk and cream have largely increased or decreased together. However, their prices are subject to unpredictable movements. For example, during the novel coronavirus (“COVID-19”) pandemic, we experienced reduced cream sales due to declines in the food service industry generally, at the same time that we saw higher prices for other milk components. A change in the market price of milk and cream could materially and adversely affect our profitability, results of operations, and financial condition.

We depend on one supplier for a significant portion of our North American raw milk, a shortage of which could result in reduced production and sales revenues or increased production costs. We also may be exposed to the risks associated with failure in such supplier’s quality control processes.

We source approximately 75% of our North American raw milk from one supplier, Dairy Farmers of America, Inc. (“DFA”), a large U.S. milk marketing cooperative. If DFA fails to deliver the raw milk we need on the terms we have agreed, we may be challenged to secure alternative sources at commercially acceptable prices or on other satisfactory terms, in a timely manner. Any extended delays in securing an alternative source could result in production delays and late shipments of our products to distributors and end customers, which could materially and adversely affect our customer relationships, profitability, results of operations, and financial condition. If we are forced to expand our sources for raw milk as we attempt to implement our growth strategy, it may become increasingly difficult for us to maintain expected production levels, due to the limited availability of raw milk that meets our quality standards. DFA is also a significant customer to whom we sell cream. Any impairment of our relationship with DFA could materially and adversely affect our results of operations and financial condition.

Raw material and packaging costs are volatile and may rise significantly, which may negatively impact the profitability of our business.

We purchase large quantities of raw materials. Our principal raw materials include milk, fruit, nuts and packaging. Costs of ingredients and packaging materials are volatile and fluctuate due to conditions that are difficult to predict, including commodities market fluctuations, currency exchange rates, imbalances between supply and demand, speculative influences, trade agreements among producing and consuming nations, supplier compliance with commitments, import/export requirements for raw materials and finished goods, transportation costs, extreme or unusual weather conditions and natural disasters, manmade disasters (such as the major electric power shortage that occurred in Texas in February 2021), pandemics, political unrest in producing countries, and changes in governmental agricultural programs and energy policies, as well as other factors outside of our control. Continued volatility in the prices of raw materials and other supplies we purchase could increase our cost of sales and reduce our profitability. We generally do not secure raw materials capacity and pricing for more than a year forward, nor do we hedge pricing or availability of any raw or packaging materials. However, in the future, we may use futures, financial swaps and option contracts to hedge pricing or availability of milk and other raw or packaging materials. Any material upward movement in raw materials pricing could negatively impact our margins if we are not able to pass these costs on to our customers. Additionally, should raw materials prices move meaningfully lower there is no guarantee our customers will not ask us to pass some or all of our savings on to them in the form of

 

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price reductions or switch to competitors who do so. If we are not successful in managing the costs of our principal raw materials, if we are unable to increase our prices to cover increased costs or if such price increases reduce our sales volumes, then such increases in costs could materially and adversely affect our business, results of operations, and financial condition.

Future raw material prices may be impacted by new laws or regulations, suppliers’ allocations to other purchasers, interruptions in production by suppliers, natural disasters, pandemics, volatility in the price of crude oil and related petrochemical products, transportation costs and changes in exchange rates, which could materially and adversely affect our business, results of operations, and financial condition.

The limited availability of raw materials and packaging materials could materially and adversely affect our business, financial condition, and results of operations.

Our ability to ensure a continuing supply of raw materials and packaging materials depends on many factors beyond our control. The factors that may adversely impact the supply of raw materials include, the availability of vendors that grow, process, and market ingredients (including dairy farmers and other raw material suppliers), the vagaries of these farming businesses (including poor harvests), climate conditions, such as adverse weather conditions, natural disasters, floods, droughts, water scarcity, temperature extremes, frosts, earthquakes, hurricanes, fires, and pestilences, global or regional health crises, acts of war and terrorism (including bioterrorism), changes in national and world economic and geopolitical conditions, and our ability to forecast our ingredient requirements. The supply and costs of obtaining packaging materials are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, weather conditions, consumer demand and changes in governmental trade policies and regulations.

We maintain relationships with suppliers with the objective of ensuring that we have adequate sources for the supply of our primary raw and packaging materials. However, increases in demand for such materials, both within our industry and in general, limited availability and adverse weather conditions and natural disasters, among other factors, can result in shortages and higher costs. Further, adverse weather conditions and natural disasters may impede our primary suppliers from meeting our delivery schedules, may contribute to the loss of a significant supplier or result in a supplier’s failure to meet our performance and quality specifications. If supplies of raw or packaging materials are reduced for any reason or there is greater demand for such materials from us and others, we may not be able to obtain sufficient supply on favorable terms or at all, which could impact our ability to supply products to distributors and retailers and could materially and adversely affect our business, results of operations, and financial condition.

In addition, we are subject to risks related to the availability of natural ingredients. A trend toward increased consumer preference for packaged goods made with natural ingredients places greater competitive demand on ingredients we source. Concurrently, the number of certifications and quality requirements demanded by consumers for the products we produce results in a diminished pool of available vendors and supply chains from which to source. As additional retailers require or consider requiring more of their products to be non-GMO, we may face increased competition for sources of raw materials that are non-GMO. Such industry pressure may be particularly problematic in the United States, where most farmers produce genetically modified foods, making it more difficult to source non-GMO ingredients and raw materials. For example, natural ingredients which are also kosher-certified and sourced from non-GMO supply chains are less plentiful and available from fewer suppliers than their conventional counterparts. We recently partnered with a leading third-party certifier of Fair Trade products in North America to launch a first-of-its-kind Fair Trade certification program for dairy, under which certain of our yogurt product SKUs are Fair Trade Certified. Unforeseen shortages or increased pricing for Fair Trade Certified dairy, or other certified ingredients, may result in unfavorable

 

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business decisions to deprioritize certain claims or certifications, which may negatively impact consumers’ preferences for our products. An inability to source our natural or certified ingredients on competitive pricing terms could materially and adversely affect our profitability, results of operations, financial condition, and business prospects.

Because we rely on a limited number of suppliers for raw materials, such as DFA, we may not be able to obtain raw or other prepared materials used in our manufacturing process on a timely basis or in sufficient quantities to produce our products.

We rely on a limited number of vendors to supply us with raw materials. Our financial performance depends in large part on our ability to arrange for the purchase of raw materials in sufficient quantities at competitive prices. We are not guaranteed continued supply, pricing, or access to raw materials from some of these sources. Any of our suppliers could discontinue or seek to alter their relationship with us. For example, we may be adversely affected if they raise their prices, stop selling to us or our co-manufacturers, or enter into arrangements that impair their ability to provide raw materials for us.

Any disruption in our supplier relationships could have a material adverse effect on our business. Events that adversely affect our suppliers could impair our ability to obtain raw material inventory in the quantities that we desire. Such events include problems with our suppliers’ businesses, finances, labor relations, ability to import raw materials, costs, production, quality control, insurance and reputation, as well as natural disasters, pandemics, or other catastrophic occurrences. A failure by any current or future co-manufacturer to comply with food safety, environmental or other laws and regulations, source raw materials, meet required timelines, adhere to COVID-19 guidelines and state executive orders, and hire and retain qualified employees may disrupt our supply of products.

If we experience significant increased demand for our products or need to replace an existing supplier, there can be no assurance that additional supplies of raw materials will be available when required on acceptable terms, or at all, or that any supplier would allocate sufficient capacity to us in order to meet our requirements, fill our orders in a timely manner or meet our strict quality standards. Even if our existing suppliers are able to expand their capacity to meet our needs or we are able to find new sources of raw materials, we may encounter delays in production, inconsistencies in quality, and added costs. We are not likely to be able to pass increased costs to the customer immediately, if at all, which may decrease or eliminate our profitability in any period. Any delays or interruption in or increased costs of our supply of raw materials could have a material and adverse effect on our ability to meet consumer demand for our products and result in lower net sales and profitability both in the short and long term.

Changes in the food industry, including changing dietary trends and consumer preferences, may have a material adverse effect on our brand loyalty, net sales, results of operations, and financial condition.

Consumer tastes and preferences can change rapidly due to many factors, including shifting consumer preferences, dietary trends, and purchasing patterns. Consumers focus on dietary, fitness, and health and wellness trends, different nutritional aspects and health effects of foods and beverages, lactose intolerance, preference for vegan or plant-based products, sourcing practices relating to ingredients, animal welfare, and environmental concerns. If we fail to anticipate, identify, or react to changes in consumer focus and food and beverage industry trends, we could experience reduced consumer demand and price reductions, which could cause our revenue and profitability to decrease. Demand for our products could also be adversely affected by changes in general economic conditions, demographic trends, customer confidence in the economy, changes in government regulations or policies, and changes in discretionary consumer income. As a consequence of the COVID-19

 

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pandemic, we experienced reduced product consumption at food service outlets and decreased cream sales. This decrease was positively offset by an accelerated shift in consumer channel preferences and package configurations, including strong sales at retail and warehouse clubs and increased levels of at-home product consumption and demand for multi-serve and multi-pack products. Such changes in consumer behavior, the longevity of which is currently unclear to us, have and may continue to impact our profitability and may require us to add costs and make investments to adapt to serve these preferences. A significant shift in consumer demand away from our products could reduce our sales or our market share and the prestige of our brand, which would harm our business and financial condition.

Our efforts to expand into new product categories may be unsuccessful.

Our success depends, in part, on our ability to anticipate the tastes, preferences, and dietary habits of consumers and to offer products that appeal to their needs and preferences on a timely and affordable basis. It is difficult to successfully predict the products our customers will demand. The development of new products requires significant investment in research and development, testing, formulation and potential manufacturing process changes and enhancements. The product innovation process can be long, costly and its outcome can be uncertain. We may not be successful in developing, introducing on a timely basis or marketing any new or enhanced products, and specifically, the sales volumes for new or enhanced products may not reach anticipated levels. Further, our new products may not achieve market acceptance, grow revenue at expected growth rates, or become profitable. We also may incur expenses and capital expenditure costs relating to the development of new products, including costs incurred in connection with the development and adoption of new production safety protocols, that do not generate a positive return on our investment. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend on our continued ability to develop and introduce innovative, high-quality products and, in some cases, acquire or develop the intellectual property necessary to develop new products or improve our existing products. There are inherent risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance or potential impacts on our existing product offerings. Several products we have introduced did not enjoy success and have been or are being discontinued. The long-term success of these products or any we may introduce in the future is not guaranteed or known at this time.

Our continued success depends to a large extent on our ability to innovate successfully and introduce new products in fast growing and profitable categories on a cost-effective basis.

One way to achieve growth is to enhance our product portfolio by adding innovative new products in faster growing and more profitable categories. The food industry and retailers in the grocery industry use new products as a way of creating excitement and a variety of choices in order to attract new consumers and increase demand among existing consumers. Consumer behavior related to nutrition and food choice is changing at a more rapid rate than ever. Our future results will depend on our ability to increase market share in existing categories, such as through the introduction of new products in the yogurt category, as well as to introduce innovative new products in faster-growing and potentially more profitable categories to keep up with changing consumer tastes, preferences, and trends. We operate in the highly competitive yogurt, plant-based milk, coffee creamers, ready-to-drink coffee and non-dairy probiotic beverages categories. We face significant competition in each of our product categories from large national and international companies and a number of smaller manufacturers in addition to private label products. These competitors and others may be able to introduce innovative products more quickly or market their products more successfully than we can, which could cause our growth rate in certain existing categories to be slower than anticipated or render such products unattractive to consumers, which could cause us to lose sales. Our competitors also may choose to increase price promotions or may be more effective with their promotional programs, which may impact our volume

 

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growth, price realization and market share. If our products are unable to compete successfully with other branded or private label offerings in existing categories, we may be unable to grow existing market share, or may lose market share in such categories.

Our success in new product development is dependent, in part, on our ability to anticipate and react to consumer preferences and dietary trends to leverage our research and development capabilities, and to launch new or improved products successfully and on a cost-effective basis. The development and introduction of new products can require substantial research and development and marketing expenditures, which we may be unable to recover if the new products do not achieve commercial success or gain widespread market acceptance. New products may not achieve success in the marketplace, due to lack of demand, failure to meet consumer tastes, preferences, or other factors. Product innovation may also result in increased costs resulting from the use of new manufacturing techniques, capital expenditures, new raw materials and ingredients, new product formulations, new product packaging, and possibly new manufacturing partners. Some of our recent launches, such as Greek Yogurt with Nut Butter, were not successful. Additionally, the introduction of new products could also divert resources and attention from existing products or cannibalize sales of our existing products and be decretive in margin and net sales. As a result, even if new products are successful, they could cause our overall profit margins to decline. If we are unsuccessful in our efforts to maintain market share in existing categories, our product innovation efforts are unsuccessful or unprofitable or demand for our products declines, our sales, profitability, results of operations, and financial condition could be materially adversely affected.

If we lose one or more of our major customers or if any of our major customers experiences significant business interruption, our results of operations could be adversely affected.

We are substantially dependent on relationships with our key customers, including leading national and regional retailers, food service distributors and wholesalers across the United States and Australia. We do not have long-term contracts with our customers, and as a result, our customers could significantly decrease or cease their business with us with limited or no notice. As of March 27, 2021, two customers individually accounted for approximately 10% of our net sales. These key customers purchase our food and beverage products. Our net sales also include sales of cream, which is a natural byproduct of our yogurt making process. The competition to supply products to high-volume retailers is intense. The loss of one or more major customers, a material reduction in sales to these customers as a result of competition from other food and beverage manufacturers or the occurrence of a significant business interruption of our customers’ operations would result in a decrease in our revenues, operating results, and earnings. We may be similarly negatively impacted if any of our key customers change their pricing and margin expectations or business strategies as a result of industry consolidation or otherwise. In the event of key customer consolidation, we may lose key business if the surviving entities do not continue to purchase products from us or reduce the number of our products they carry or the amount of shelf space they allocate to our products and categories, or increase their emphasis on competing categories or brands. Any inability to resolve a significant dispute with any of our key customers, a change in the business condition (financial or otherwise) of any of our key customers, even if unrelated to us, or the loss of or a reduction in sales or anticipated sales to one or more of our most significant distributors or retailers may negatively affect us. Further, retail customers may continue to consolidate, resulting in fewer but larger customers across various channels. These larger customers may seek to leverage their positions to improve their profitability by demanding improved efficiency, lower pricing, more favorable terms, increased promotional spend, or specifically tailored product or promotional offerings, which may have a material adverse effect on our business, results of operations, and financial condition. A reduction in sales to one or more major customers could have a material adverse effect on our business, financial condition, and results of operations.

 

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Changes in consumer spending and general economic conditions may have a material adverse effect on our brand loyalty, net sales, results of operations, and financial condition.

Consumer purchases of discretionary items, including health conscious items like our products, generally decline during weak economic periods and other periods where disposable income is adversely affected. Concerns related to the ongoing COVID-19 pandemic have contributed to a shift in consumer shopping patterns towards grocery store purchases for household staples, and away from other retail and food service outlets. Shifts in consumer behavior and preferences such as these may require us to adapt, increase the speed and efficiency of investment in product development, the introduction and marketing of innovative new product lines, and the expansion or modification of current product offerings to ensure continued growth and profitability. Consumers may reduce the number of natural and nutritional products that they purchase because such products generally have higher retail prices than their conventional counterparts. In addition, retailers are increasingly offering competing private label products, which generally have lower retail prices than their branded counterparts and may also seek to reduce their inventories in response to challenging economic conditions. In those circumstances, we could experience a decrease in sales of our products. Consumers’ willingness to purchase our products will depend upon our ability to offer products that appeal to consumers at the right price. If we fail to use our sales and marketing expertise to respond to these trends in a way that is beneficial to us and to our customers, or if we lower our prices or increase promotional support of our products and are unable to increase the volume of our products sold, our profitability and financial condition could be materially adversely affected. It is also important that our products are perceived to be of a higher quality than less expensive alternatives. If the difference in quality between our products and those of private label brands or lower priced brands narrows or if such difference in quality is perceived to have narrowed, then consumers may not buy our products. Furthermore, during periods of economic uncertainty, consumers may shift their purchases to lower-priced or private label products or forego certain purchases altogether. Our performance is subject to factors that affect economic conditions in the United States and globally, including consumer confidence, employment levels, disposable income, availability of consumer credit, consumer debt levels, energy costs, residential real estate and mortgage markets, taxation, interest rates, and other factors. A change in consumer discretionary spending, due to economic downturn, pandemic, or other reasons, may have a material effect on sales. Declining customer demand for our products could have a material adverse effect on our brand loyalty, net sales, results of operations, and financial condition.

Maintaining, extending, and expanding our reputation and brand image is essential to our business success.

Our success depends on our ability to maintain brand image for our existing products, extend our brand into new categories and geographies and to new distribution platforms, including online, and expand our brand with new product offerings. We seek to maintain, extend, and expand our brand image through public relations activities and marketing investments, including advertising and consumer promotions and product innovation. Increasing attention on the role of food and beverage marketing could adversely affect our brand image. It could also lead to stricter regulations and greater scrutiny of marketing practices. Any state or federal labeling rule change that restricts our ability to differentiate the quality and character of our products from our competition could affect our operating results. For instance, like other food companies, we are subject to strict regulations regarding the declaration of allergens in our products, and we must adhere to various regulations and limitations pertaining to our use of product-related claims on labeling and advertising, including “non-GMO ingredients,” “rBST-free” and “kosher certified.” Increased legal or regulatory restrictions on our advertising, consumer promotions, and marketing could limit our efforts to maintain, extend, and expand our brand.

In addition, our success in maintaining, extending, and expanding our brand image depends on our ability to adapt to a rapidly changing marketing and media environment, including our reliance on

 

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social media and online dissemination of marketing and advertising campaigns. We are active in social media as an important medium for our marketing efforts. Therefore, any negative posts or comments about us, our brands, our products, our customers, or any of our employees on social networking web sites (whether factual or not), security breaches related to use of our social media or related impacts of withdrawn public support (known popularly as “cancel culture”) and failure to respond effectively to these posts, comments, or activities could damage our reputation and brand image across the various regions in which we operate and threaten our sales and profitability. The costs of maintaining, extending, and enhancing our brands may increase. We might fail to invest sufficiently in maintaining, extending, and expanding our brand image. If we do not successfully maintain, extend, and expand our reputation and brand image, then our brand, product sales, financial condition, and results of operations could be materially and adversely affected.

Price increases may not be sufficient to offset cost increases and maintain profitability or may result in sales volume declines associated with pricing elasticity.

We may be able to pass some or all raw material and other input cost increases to customers by increasing the selling prices of our products, reducing promotional discounts or modifying the size of our products; however, higher product prices or decreased promotional spend or product sizes may result in a reduction in sales volume or consumption. Additionally, our ability to improve and maintain sales volume levels may be jeopardized by competitive pricing pressures. If our competitors are able to offer their products at more favorable prices to customers, our sales may decline and we may lose market share for our products. If we are not able to increase our selling prices, or reduce promotional spend sufficiently or in a timely manner, to offset increased raw material, energy, or other input costs, our financial condition and results of operations could be materially adversely affected.

Issues or concerns related to the quality and safety of our products, ingredients, labeling, or packaging could cause a product recall or result in regulatory investigations and litigation or result in harm to our reputation, negatively impacting our operating results.

In order to sell our products, it is important that we maintain a good reputation with our customers and consumers. Issues or concerns related to the quality and safety of our products, ingredients, labeling, or packaging could jeopardize our image and reputation. Negative publicity related to these types of issues or related to product contamination, product quality or product tampering, whether valid or not, or whether or not we are at fault, could decrease demand for our products, harm our relationship with our customers, impact consumer perception of or reduce consumer confidence in our products, or cause production and delivery disruptions. Our products could be subject to a voluntary or involuntary product recall or market withdrawal if any of our products, due to suspected or confirmed product contamination, adulteration, product mislabeling or misbranding, tampering, undeclared allergens or other deficiencies, could potentially be unfit for consumption or cause injury, illness, or death, or if the products or we or our suppliers or co-manufacturers are found to be noncompliant with regulatory requirements. For example, in September 2013 we announced a voluntary recall of our Greek yogurt products manufactured in our Twin Falls, Idaho plant. We received recognition from the FDA on November 13, 2015 that the recall was completed and that there was proper disposition of the recalled product by us.

If any of our products becomes subject to a product recall or market withdrawal, whether voluntary or involuntary, our costs to conduct such recall or market withdrawal could be significant, we may be required to destroy product inventory, require customers to remove product from shelves and in inventory, sales may be reduced, and our reputation could be harmed, which could materially adversely affect our financial performance. In addition, any adverse food safety event could result in mandatory or voluntary product withdrawals or recalls and regulatory and other investigations, any of which could disrupt our operations, increase our costs, require us to respond to findings from

 

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regulatory agencies that may divert resources and assets, and result in potential civil fines and penalties as well as other legal action. These events can occur whether or not we are at fault as we have limited control over handling procedures once our products have been shipped for distribution. We could also be subject to litigation and class actions or government actions in the future relating to these events, which could result in payments of fines or damages. Costs associated with product recalls, market withdrawals, and related litigation or government actions and marketing related to the re-launch of such products, could materially and adversely affect our operating results.

In addition, certain products or product components are manufactured by our co-manufacturing partners. We do not control the manufacturing processes of, and rely upon, our co-manufacturers for compliance with current good manufacturing practices for the manufacturing of our products. If we or our co-manufacturers cannot successfully manufacture products that conform to our specifications and the strict regulatory requirements of the FDA or other regulatory regimes, we or they may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products, could result in our co-manufacturers’ inability to continue manufacturing for us or could result in a recall of products that have already been distributed.

We may be subject to significant liability should the consumption of any of our products cause or be claimed to cause illness or physical harm.

We sell products for human consumption, which involves risks such as product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, manufacturing, storage, handling or transportation phases, product tampering, allergens, and other adulteration, mislabeling and misbranding. Further, we rely on third-party service providers to operate certain Chobani-branded cafés, making it difficult to monitor food safety compliance and increasing the risk foodborne illnesses. We may also be subject to claims or lawsuits resulting in liability for actual or claimed harm, injuries, illness, or death. Any of these events may result in a material adverse effect on our business. Even if a product liability claim or lawsuit is baseless, unsuccessful or not fully pursued, the negative publicity surrounding any assertion that our products caused illness or physical harm could adversely affect our reputation with existing and potential customers and consumers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain general liability and product liability, property, worker’s compensation, business interruption, director and officer, and other insurance in amounts and on terms that we believe are customary for similarly situated companies. However, we cannot be sure that this insurance will be adequate to cover all potential hazards incidental to our business or that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage. For example, a product liability judgment against us or a product recall could have a material adverse effect on our business, results of operations, financial condition, and liquidity. We may incur significant expenses in defending these lawsuits and claims and repairing any reputational damage. Additionally, adverse publicity about regulatory or legal action against us, product or ingredient quality and safety, labor issues, or environmental and human rights risks in our supply chain could damage our reputation and brand image, undermine our customers’ confidence, and reduce demand for our products, even if the regulatory or legal action is unfounded or these matters are immaterial to our operations. This could have a material adverse effect on our profitability, financial condition, and results of operations.

If we are not successful in expanding sales in alternative retail channels, such as e-commerce retailers, our business, or financial results may be negatively impacted.

Alternative retail channels, such as e-commerce retailers (including as a result of the integration of traditional and digital operations at key retailers), subscription services, direct-to-consumer brands,

 

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convenience stores, colleges and drug stores, have become more prevalent. This trend away from traditional retail grocery, and towards such channels, is expected to continue in the future. Conducting sales of our products through e-commerce channels is more challenging than completing such sales through traditional retail channels. If we are not successful in expanding sales in alternative retail channels, our business or financial results may be negatively impacted. In particular, substantial growth in e-commerce has encouraged the entry of new competitors and business models, intensifying competition by simplifying distribution and lowering barriers to entry. Concerns related to the ongoing COVID-19 pandemic have contributed to an accelerated consumer shift towards e-commerce and other online retail activity. The expanding presence of e-commerce retailers has impacted, and may continue to impact, consumer preferences and market dynamics, which in turn may negatively affect our sales or profits. The Internet and mobile networks provide new, rapidly evolving, and intensely competitive channels for the sale of all types of goods and services. Customers who purchase our food products have many alternatives, and merchants have other channels to reach customers. We expect competition to continue to intensify. Online and offline businesses compete with each other, and our competitors include a number of online and offline food and beverage companies with greater resources, large user communities and well-established brands. In addition, these alternative retail channels may create consumer price deflation, affecting our retail customer relationships and presenting additional challenges to increasing prices in response to commodity or other cost increases. Also, if these alternative retail channels, such as e-commerce retailers, were to take significant share away from traditional retailers, where we generate a greater share of revenue, our financial results could be negatively impacted.

The categories in which we participate are very competitive, and increased marketplace competition or our inability to compete effectively could hurt our business and market demand for new and existing products could decline.

The food and beverage categories in which we participate are intensely competitive and some of our competitors are large companies that have significant resources and substantial international operations across multiple products and categories with lower fixed costs or are substantially less leveraged than us. Competition in these industries is based on product quality, taste, functional benefits, convenience, brand loyalty, positioning, product variety, product packaging, shelf space, price, promotional efforts, and ingredients. In order to protect our existing market share or capture additional market share in this highly competitive environment, we may be required to increase expenditures for promotions and advertising, continue to introduce and establish new products that appeal to our customers and support those products with associated capital expenditures and investments in marketing. We are developing a direct from retail experience on our website that facilitates transactions between our consumers and our retail partners, but there is no guarantee this offering or any of our current and future e-commerce initiatives will be successful. Due to inherent risks in the marketplace associated with advertising and new product introductions, including uncertainties about customer and consumer acceptance, food and beverage industry trends, and consumer health concerns, increased expenditures may not prove successful in maintaining or enhancing our market share and could result in lower sales and profits. Increased competition can reduce our sales due to loss of market share or because we reduce prices to respond to competitive and customer pressures. In addition, we may incur increased credit and other business risks because we operate in a highly competitive retail environment. Competitive pressures also have restricted our ability to increase prices, including in response to commodity and other cost increases. Our profits could decrease if a reduction in prices or increased costs are not counterbalanced with increased sales volume. We cannot assure you that we will be able to compete effectively against current and future competitors and increased competition may result in shifting market trends we are unable to react to, pricing pressures, reduced margins, and loss of market share, any of which could have a material adverse effect on our business, financial condition, or results of operations.

 

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We are primarily dependent on sales of a single product category.

Our future results will depend on our ability to continue to drive revenue growth in the yogurt category. Historically, we have derived a substantial portion of our revenue and profitability from sales of our Greek yogurt products, and we expect to continue to derive significant revenue from sales of such products for the foreseeable future. The success of Greek yogurt products has been supported by shifting consumer preference and growing demand for natural, low-fat, high-protein food products. Since 2009, the overall United States spoonable yogurt market has grown from $4.5 billion at a CAGR of     % to $              in retail sales for the 52-week period ended                 , 2021. The Greek yogurt segment has led this growth, growing from 4.4% to     % market share over that same time period, with $              in retail sales, which represents a     % CAGR. A decline in the overall yogurt and Greek yogurt markets could have a material adverse effect on our profitability, results of operations, and financial condition. Further, a decline in the price of these products, whether due to competition or otherwise, or our inability to drive revenue growth in this product category, would harm our business and operating results more seriously than it would if we derived significant revenue from a variety of product categories.

Our failure to achieve anticipated efficiencies and margin improvement could adversely affect our business and results of operations.

We strive to improve operating margins through sales growth, reasonable price increases, the application of leverage and scale to improve our purchasing power, productivity gains, and improved manufacturing techniques, but we may not achieve the desired improvements. These activities depend on a combination of improved product design and formulations, effective manufacturing process control initiatives, cost-effective production, reduction in supplier pricing, and other efforts made to sustain a robust pipeline of new products that may not be successful. The success of sales growth and price increases depends not only on our actions but also on the strength of customer demand and competitors’ pricing responses, which we cannot predict. Failure to successfully implement actions to improve operating margins could adversely affect our business, financial condition, or results of operations.

Failure to maintain sufficient capacity or expand production capacity may result in our inability to meet customer demand or increase our operating costs and capital expenditures.

The success of our business depends, in part, on maintaining and improving a strong production platform and we rely primarily on internal production resources to fulfill our manufacturing needs. Production levels may be challenged by insufficient milk yields, water supply, waste control, customer demand and production constraints. For example, water is an essential ingredient in substantially all of our products and is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. We periodically experience water supply issues that can be exacerbated by increased production demands. Any constraint on water supply can impact the volume of products we may manufacture for customers. In the event we are unable to obtain water in the quantities and quality required for our manufacturing processes, we may need to expand our production facilities beyond our existing manufacturing plants or increase our reliance on third parties to provide manufacturing and supply services for our products. Our continued success depends upon our ability to manage, improve, and replace our existing facilities and to expand our operations by developing and adding new facilities, as appropriate, improve water quality, to maintain or increase operational efficiency, sustain or expand production capacity, or meet changing regulatory requirements. A significant increase in maintenance costs and capital expenditures could adversely affect our financial condition, results of operations and cash flows. In addition, a failure to operate these facilities optimally could result in declining customer service capabilities, which could have a material adverse effect on our business, financial condition, and results of operations.

 

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Disruption to our supply chain could impair our ability to produce or deliver finished products, resulting in a negative impact on our operating results.

Disruption to our manufacturing operations or our supply chain could result from, among other factors, the following:

 

   

natural disaster;

 

   

pandemic outbreak of disease (among humans or animals), including the COVID-19 pandemic;

 

   

weather;

 

   

fire or explosion;

 

   

civil unrest, war or perceived threat of war, terrorism, or other acts of violence;

 

   

labor disturbances (including strikes, labor shortage due to illness, work stoppages, and slowdowns);

 

   

data security breaches, cyber-attacks, including malware and ransomware, and other unauthorized or improper access;

 

   

production or shipping delays;

 

   

power disruptions or failures;

 

   

equipment or systems failures;

 

   

unavailability of raw or packaging materials;

 

   

changes in the regulatory environment for the manufacture of food and dairy products;

 

   

non-compliance with applicable regulatory and quality compliance rules, laws or guidance;

 

   

operational and/or financial instability of key suppliers and other vendors or service providers;

 

   

impediments to international trade; or

 

   

ineffective product planning.

An interruption in production capacity at any of our Twin Falls, Idaho, New Berlin, New York or Melbourne, Australia manufacturing facilities or any facilities operated by our co-manufacturing partners due to equipment failure, catastrophic loss, the release of ammonia gas or other hazardous materials or other reasons could have a material adverse effect on our results of operations and financial condition and may create challenging circumstances for recovery. Ammonia gas is a volatile and potentially hazardous substance used in our refrigeration equipment to preserve raw milk and store finished products and other raw materials as part of our manufacturing process. From time to time, our manufacturing facilities experience minor releases of ammonia related to leaks from our facilities’ equipment. In the event of similar or more significant events in the future, we could incur significant costs, including fines, penalties and other sanctions, cleanup costs and third-party claims for property damage or personal injury as a result of the failure to comply with, or liabilities under, applicable environmental, health and safety requirements.

We have strategies and plans in place designed to manage disruptive events if they were to occur, including our business interruption insurance, cyber liability insurance, and our cyber incident response plan. If we, or any of our co-manufacturing partners, are unable or find that it is not financially feasible to effectively plan for or mitigate the potential impacts of such disruptive events on our manufacturing operations, in particular at our Twin Falls, Idaho, New Berlin, New York and Australian facilities or supply chain, our financial condition, and results of operations could be materially adversely affected if such events were to occur.

 

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Failure by any of our North American and international transportation providers or distributors to deliver our raw or packaging materials to us or our products to customers on time or at all could result in lost sales.

We rely upon third-party transportation providers for the delivery of finished products to our customers and shipment of raw and packaging materials required to manufacture our products. A significant portion of our products and the raw and packaging materials we use are transported by truck, which is a highly regulated mode of transportation. Our utilization of such delivery services for shipments is subject to risks, including the effects of health epidemics or pandemics or other contagious outbreaks, such as the COVID-19 pandemic, any shortage of truck drivers, increases in fuel prices, which would increase our shipping costs, employee strikes, labor shortages, failure to meet customer standards, and severe weather conditions and natural disasters such as fires, floods, droughts, hurricanes, earthquakes, and tornados. If any of our third-party transportation providers were to fail to deliver raw materials to us in a timely manner, or fail to deliver our products to our customers in a timely manner, we might be unable to meet customer and consumer demands for our products. These risks may impact the ability of carriers to provide delivery services that adequately meet our shipping needs. Prime Trucking is responsible for a significant portion of our North American shipping needs. Any disruption in this relationship or the ability of Prime Trucking to fulfill its contracted services could affect our business. We may, from time to time, change third-party transportation providers and we could therefore face logistical difficulties that could adversely affect deliveries. In addition, we could incur costs and expend resources in connection with such change. Moreover, in the future we may not be able to obtain terms as favorable as those we receive from the third-party transportation providers that we use, which in turn would increase our costs and adversely affect our business. Any failure of a third-party transportation provider to deliver raw materials or finished products in a timely manner could harm our reputation, negatively impact our customer relationships and have a material adverse effect on our financial condition or results of operations.

In select international markets, we depend exclusively on third-parties to reach our customers. Our success in these markets depends almost entirely upon the efforts of our international distributors and logistics and fulfillment partners, over whom we have little or no control. If a distributor or logistics or fulfillment partner, fails to fulfill its contracted services, for any reason, we could lose sales and our ability to compete in that market may be adversely affected.

Increased costs associated with product processing and transportation, such as wastewater disposal, ammonia containment, electricity, natural gas, fuel, and labor costs, could increase our expenses and reduce our profitability.

We require a substantial amount of energy to make our products. Transportation costs, including fuel and labor, also account for a significant portion of the cost of our products, because we use third-party trucking companies to transport a substantial portion of our raw materials and to deliver our products to our distributors and customers. Labor is also an important component of our production costs. Our products generate significant volumes of wastewater and whey. Additionally, ammonia gas is a volatile and potentially hazardous substance used in our refrigeration equipment to cool raw milk as part of our manufacturing process. The increased costs associated with the safe transport and disposal of wastewater, whey and ammonia, including related regulatory compliance costs, may reduce our profitability. These costs fluctuate significantly over time due to factors that may be beyond our control, including increased fuel prices, adverse weather conditions or natural disasters, employee strikes or work slowdowns, regulation (including increases in minimum wage rates in the United States), and increased export and import restrictions. Transportation costs may further increase as a result of high levels of long-haul driver capacity issues. We may not be able to pass on increased cost of production or transportation to our customers. Increases in the cost of water, electricity, natural gas, fuel, or labor and failure to ship products on time, could increase our costs of production and adversely affect our profitability.

 

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As a food production company, all of our products and product labeling must be compliant with regulations by the Food and Drug Administration (“FDA”) and other laws and regulations in the U.S. and in other countries where we manufacture, distribute and sell our products. Any non-compliance with these laws or regulations could harm our business.

As a manufacturer of products intended for human consumption, we are subject to extensive governmental regulation. We must comply with various laws and FDA regulations (as well as laws and regulations administered by government entities and agencies outside the United States), including those regarding product manufacturing, food safety, required testing, and appropriate labeling and marketing of our products. It is possible that such laws and regulations by the FDA or other governing bodies or the interpretation thereof may change over time. As such, there is a risk that our products could become non-compliant with the FDA’s or other governing bodies laws or regulations and any such non-compliance could harm our business.

The failure to comply with applicable regulatory requirements could result in, among other things, administrative, civil, or criminal penalties or fines, mandatory or voluntary product recalls, warning or untitled letters, cease and desist orders against operations that are not in compliance, closure of facilities or operations, the loss, revocation, or modification of any existing licenses, permits, registrations, or approvals or the failure to obtain additional licenses, permits, registrations, or approvals in new jurisdictions where we intend to do business, any of which could negatively affect our business, reputation, financial condition, and results of operations.

Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.

The conduct of our businesses, including the production, storage, distribution, sale, display, advertising, marketing, labeling, health and safety practices, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to laws and regulations administered by government entities and agencies outside the United States in markets in which our products or components thereof (such as ingredients and packaging) may be made, manufactured, or sold. These laws and regulations and interpretations thereof may change, sometimes dramatically, as a result of a variety of factors, including political, economic, or social events. Such changes may include changes in:

 

   

food and drug laws (including FDA regulations) any other laws related to product labeling;

 

   

advertising and marketing laws and practices (including Federal Trade Commission (“FTC”) guidelines);

 

   

laws and programs restricting the sale and advertising of certain of our products;

 

   

laws and programs aimed at reducing, restricting, or eliminating ingredients present in certain of our products;

 

   

laws and programs aimed at discouraging the consumption of products or ingredients or altering the package or portion size of certain of our products;

 

   

increased regulatory scrutiny of and increased litigation involving, product claims and concerns regarding the effects on health of ingredients in or attributes of, certain of our products;

 

   

state consumer protection and disclosure laws;

 

   

taxation, including the imposition or proposed imposition of new or increased taxes, including limitations such as limitations on the deductibility of interest;

 

   

other limitations on the sale of our products;

 

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competition laws;

 

   

anti-corruption laws;

 

   

employment laws;

 

   

worker safety and protection laws (including Occupational Safety and Health Administration (“OSHA”) and those addressing COVID-19);

 

   

privacy laws;

 

   

laws regulating the price we may charge for our products;

 

   

laws or programs regulating the sourcing of materials or ingredients domestically or abroad;

 

   

farming and environmental laws;

 

   

sustainability laws; and

 

   

international and domestic trade and tax laws regarding the importing and exporting of products and ingredients, such as those enforced by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury, and similar laws and regulations in other jurisdictions.

New laws, regulations, or governmental policy and their related interpretations and enforcement or changes in any of the foregoing, including taxes or other limitations on the sale of our products, ingredients contained in our products or commodities used in the production of our products, may alter the environment in which we do business and, therefore, may impact our profitability, results of operation, and financial condition.

If we fail to adhere to U.S. and international regulations to which we are subject, or if we are unable to grow our business in developing and emerging markets, our business, financial condition, or results of operations can be adversely affected.

Our products are subject to numerous food safety and other laws and regulations relating to the sourcing, manufacturing, storing, labeling, marketing, advertising, selling, displaying, transporting, distributing and usage of these products in the United States, Australia, Canada, Mexico, and internationally. Compliance with new, evolving, or revised tax, environmental, food quality and safety, labeling or other laws or regulations, or new, evolving, or changed interpretations or enforcement of existing laws or regulations, may have a material adverse effect on our business, financial condition or operating results.

The marketing of food products has come under increased regulatory scrutiny in recent years and the food industry has been subject to an increasing number of regulatory and legal proceedings and claims relating to alleged false or deceptive marketing under federal, state, and foreign laws or regulations. We are also regulated with respect to licensing requirements, trade and pricing practices, tax, anti-corruption standards, advertising and claims, and environmental matters, among others. Changes in legal or regulatory requirements, such as new food safety requirements and revised nutrition facts labeling and serving size regulations, or evolving interpretations, of existing legal or regulatory requirements, may result in increased compliance costs, capital expenditures, and other financial obligations that could adversely affect our business or financial results. If we are found in violation of the applicable laws and regulations in these areas, we could be subject to civil remedies, including fines, injunctions, termination of necessary licenses or permits, or recalls, as well as potential criminal sanctions, any of which could have a material adverse effect on our business. Even if regulatory agency review does not result in these types of determinations, it could potentially create negative publicity or perceptions which could harm our business or reputation. Further, modifications to international trade policy, including the imposition of increased or new tariffs, quotas, or trade barriers

 

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on key commodities, could have a negative impact on us or the industries we serve, including as a result of related uncertainty, and could materially and adversely impact our business, financial condition, operating results, and cash flows.

In addition, our international operations could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), OFAC, anti-money laundering and trade sanction laws and similar anti-corruption, anti-bribery and international trade laws. International anti-bribery laws, such as the FCPA, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials or other third parties for the purpose of obtaining or retaining business. We cannot provide assurance that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees, joint-venture partners, or agents. Violations of these laws or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, cash flows, and financial condition.

Our growth strategy depends in part on our ability to expand our operations in emerging markets. Competition in emerging markets is increasing as our competitors grow their global operations and low-cost local manufacturers expand and improve their production capacities. However, some emerging markets have greater political, economic, and currency volatility and greater vulnerability to infrastructure and labor disruptions than more established markets. In many countries outside of the United States, particularly those with emerging economies, it may be common for others to engage in business practices prohibited by laws and regulations with extraterritorial reach, such as the FCPA or local anti-bribery laws. These laws generally prohibit companies and their employees, contractors, or agents from making improper payments to government officials, including in connection with obtaining permits or engaging in other actions necessary to do business. Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition, and results of operations. If we cannot successfully increase our business in emerging markets and manage associated political, economic, and regulatory risks, our product sales, financial condition, and results of operations could be materially and adversely affected.

We expect to need capital in the future and we may not be able to raise that capital on acceptable terms or at all.

Growing our business will require significant capital in the future. To meet our capital needs, we expect to rely on our cash flow from operations and other third-party financing. Third-party financing in the future may not, however, be available on terms favorable to us or at all. Our ability to obtain additional funding will be subject to various factors, including market conditions, our operating performance, lender sentiment, and our ability to incur additional debt in compliance with other contractual restrictions such as financial covenants under our credit facilities or other debt documents. These factors may make the timing, amount, terms, and conditions of additional financings unattractive. Our inability to raise capital could impede our growth and could materially adversely affect our business, financial condition, or results of operations.

If we are unable to make payments or we are unable to refinance our debt or obtain new financing on commercially reasonable terms or at all, we may consider other options, including:

 

   

sales of assets;

 

   

sales of equity;

 

   

reductions or delays of capital expenditures, strategic acquisitions, investments, and alliances; or

 

   

negotiations with our lenders to restructure the applicable debt.

 

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If we are forced to pursue any of the above options, our business, or the value of an investment in our securities could be adversely affected.

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under existing debt agreements.

Subject to the limits contained in our First Lien Credit Agreement (as defined herein) governing our Credit Facilities, the indentures governing our Senior Secured Notes, Senior Unsecured Notes and our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments, acquisitions or for other purposes. If we do so, the risks related to our high level of debt could intensify.

Specifically, our outstanding debt could restrict our operations and could have important consequences, including:

 

   

making it more difficult for us to satisfy our obligations with respect to our existing indebtedness;

 

   

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements;

 

   

requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions, and other general corporate purposes;

 

   

increasing our vulnerability to general adverse economic and industry conditions and limiting our ability to withstand competitive pressures;

 

   

exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;

 

   

limiting our flexibility in planning for and reacting to changes in the industry in which we compete, placing us at a disadvantage compared to other, less leveraged competitors;

 

   

increasing our cost of borrowing; and

 

   

causing us to be more leveraged than some of our competitors, which may place us at a competitive disadvantage.

In addition, the indentures governing our Senior Unsecured Notes and Senior Secured Notes and the First Lien Credit Agreement governing our Credit Facilities, respectively, contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all our debt.

Changes in financial market conditions may also make it difficult to access credit markets on commercially acceptable terms, which may reduce liquidity or increase borrowing costs for us, our customers, and our suppliers. A significant reduction in liquidity could increase counterparty risk associated with certain suppliers and service providers, resulting in disruption to our supply chain and/or higher costs and could impact our customers, resulting in a reduction in our revenue or a possible increase in bad debt expense. This could materially affect our results of operations and financial condition.

 

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We may not be able to adequately protect our intellectual property or may be found to infringe the intellectual property rights of others, which could harm the value of our brand and adversely affect our business.

Our intellectual property is material and significant to the conduct of our business. Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks, trade dress, and other proprietary intellectual property, including our name and logos. We rely on a combination of patent, copyright, trademark and trade secret laws, as well as certain contractual provisions, to protect our intellectual property rights. However, these laws, procedures and agreements provide only limited protection and may not be adequate to protect any of our intellectual property rights from being challenged, invalidated, circumvented, infringed, diluted or misappropriated. As of June 2, 2021, we have eight issued U.S. patents and four foreign patents, including both design and utility. As of June 2, 2021, we maintain six pending U.S. patent applications. We own 13 registered copyrights, including 12 registered in the U.S. and one registered in China. We cannot offer any assurances about which, if any, patents will issue from these applications, the breadth of any such patents, or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or, if applicable in the future, licensed to us could deprive us of rights necessary for the successful commercialization of products that we may develop. Since patent applications in the United States and most other countries are confidential for a period of time after filing (in most cases 18 months after the filing of the priority application), we cannot be certain that we were the first to file on the technologies covered in several of the patent applications related to our technologies or products. Furthermore, a derivation proceeding can be provoked by a third-party, or instituted by the U.S. Patent and Trademark Office, or USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. Patent law can be highly uncertain and involve complex legal and factual questions for which important principles remain unresolved. In the United States and in many international jurisdictions, policy regarding the breadth of claims allowed in patents can be inconsistent and/or unclear. The U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, international courts and governments have made, and will continue to make, changes in how the patent laws in their respective countries are interpreted. We cannot predict future changes in the interpretation of patent laws by U.S. and international judicial bodies or changes to patent laws that might be enacted into law by U.S. and international legislative bodies.

We enter into confidentiality agreements with parties who have access to and use our formulations to manufacture our products. Such agreements generally require that all information made known to them be kept strictly confidential. Nevertheless, trade secrets are difficult to protect. Although we attempt to protect our trade secrets, our confidentiality agreements may not effectively prevent disclosure of our proprietary information and may not provide an adequate remedy in the event of unauthorized disclosure of such information. If we do not keep our trade secrets confidential, others may produce products with our recipes or formulations. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights against such parties.

While it is our policy to protect and vigorously defend our rights to our intellectual property, we cannot predict whether steps taken by us to protect our intellectual property rights will be adequate to prevent misappropriation of these rights or the use by others of our intellectual property, or the use by others in the marketplace of products based upon our intellectual property, or otherwise similar to our products. Third parties may misappropriate or infringe on our intellectual property or develop more efficient and advanced technologies. We may be unaware of intellectual property rights of others that may cover some of our technology, brands, or products. Some of our intellectual property rights expire over time and our partners could also inappropriately disclose our trade secrets. It may be difficult for

 

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us to prevent others from copying elements of our products and any litigation to enforce our rights will likely be costly and may not be successful. As of June 2021, we own 418 trademark registrations globally (of which 58 are registered U.S. trademarks). We also have 18 pending applications in the U.S. Although we believe that we have sufficient rights to all of our trademarks and service marks, we may face claims of infringement that could interfere with our ability to market and promote our brand. Any such litigation may be costly and divert resources from our business. Moreover, if we are unable to successfully defend against such claims, we may be prevented from using our trademarks or service marks in the future and may be liable for damages, which in turn could materially adversely affect our business. Additionally, the laws of certain international jurisdictions in which our products may be sold may not protect intellectual property rights to the same extent as the laws of the United States. As a result, we may not be able to effectively prevent third parties from infringing or otherwise misappropriating our trademark rights in such jurisdictions. Moreover, failure to obtain adequate trademark rights in these foreign jurisdictions could negatively impact our ability to expand our business and launch products in certain international markets. Further, we may not be able to effectively protect our intellectual property rights against unauthorized third parties that obtain the rights to our trademarks in foreign jurisdictions where we have not yet applied for trademark protections, and we may expend substantial cost to obtain those trademarks from such third parties. Our failure to develop or adequately protect our trademarks, service marks, trade dress, new features of our products or our technology, or any change in law or other changes that serve to lessen or remove the current legal protections of our intellectual property, may diminish our competitiveness and could materially harm our business, financial condition, or results of operations.

Disruptions, failures, loss of data or cybersecurity breaches of our information technology infrastructure, including our information technology systems and those of our third-party vendors, contractors and consultants, could have a negative impact on our operations.

Information technology is critically important to our business operations. We use information technology to manage all business processes including manufacturing, financial, logistics, sales, marketing, and administrative functions. In the ordinary course of our business, these processes collect, interpret, store, process and distribute business data and communicate large amounts of confidential information, including intellectual property, proprietary business information and personal information internally and externally with employees, carriers, suppliers, customers, co-manufacturers, and others. We engage in a due diligence process with our major technology suppliers and service providers for purposes of compliance with our security policy and standards. We invest in industry-standard security technology and rely on third-party data centers to protect and manage our data and business processes against risk of data security breach and cyber-attack. Our data security management program includes identity, vulnerability, risk, awareness training, security monitoring, and incident response processes as well as adoption of standard data protection policies. We measure our data security effectiveness through industry-accepted methods and remediate significant findings, we maintain and test information technology disaster recovery procedures for critical systems and have processes in place to minimize the impact of and recover from disruptions.

While we have established physical, electronic and organizational measures designed to safeguard and secure our systems, and believe that our security technology and processes provide adequate measures of protection against security breaches and in reducing cybersecurity risks, disruptions in, or failures of information technology systems are possible and could have a negative impact on our operations or business reputation. Such information technology systems are vulnerable to damage or interruption from a variety of sources, including telecommunications or network failures or interruptions, system malfunction, natural disasters, malicious human acts, terrorism and war. Such information technology systems, including our servers, are additionally vulnerable to physical or electronic break-ins, security breaches from inadvertent or intentional actions by our employees, third-party service providers, contractors, consultants, business partners and other third parties, or from

 

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cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information). As a result of the COVID-19 pandemic, we may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. We may not be able to anticipate all types of security threats, and we may not be able to implement preventative measures effective against all such security threats. Cyber-attacks and other cyber incidents are constantly evolving in nature, are becoming more sophisticated and are being carried out by groups and individuals with a wide range of expertise and motives including monetization of corporate assets, payment, or other internal or personal data, theft of computing resources, notoriety, financial fraud, operational disruption, or theft of trade secrets and intellectual property for competitive advantage. As with other global companies, we are, from time to time, subject to the types of cyber-attacks described above. Although to date we have not experienced any material losses relating to cyber-attacks, we may suffer such losses in the future. Failure of our systems (including network outages and including failures due to cyber-attacks that would prevent the ability of systems to function as intended), could cause transactional errors, processing inefficiencies, loss of intellectual property and data, data breaches and loss of customers and sales; each of which could have negative consequences to our company, our employees, and those with whom we do business, including a material, adverse effect on our business, results of operations, and financial condition.

We also use mobile devices, social networking and other online activities to connect with our employees, suppliers, co-manufacturers, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Further, as we pursue a strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, we will also be expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks.

Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. We can provide no assurance that our current information technology systems, or those of the third parties upon which we rely, are fully protected against cybersecurity threats. It is possible that we or our third-party vendors may experience cybersecurity and other breach incidents that remain undetected for an extended period. Even when a security breach is detected, the full extent of the breach may not be determined immediately. If a computer security breach affects our systems or results in unauthorized release of personally identifiable information, our reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state privacy and security laws. In addition, we could face litigation, significant damages for contract breach or other breaches of law, significant monetary penalties, or regulatory actions for violation of applicable laws or regulations, and incur significant costs for remedial measures to prevent future occurrences and mitigate past violations. The costs related to significant security breaches or disruptions could be material and exceed the limits of the cybersecurity insurance we maintain against such risks. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage, all of which could have a material adverse effect on our business, financial condition or results of operations.

 

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Actual or perceived failures to comply with applicable data protection, privacy and security, advertising and consumer protection laws, regulations, standards and other requirements could adversely affect our business, financial condition and results of operations.

We are subject to data privacy and protection laws and regulations that apply to the collection, transmission, storage and use of personally identifying information, which among other things, impose certain requirements relating to the privacy, security and transmission of personal information. We receive, generate and store significant and increasing volumes of sensitive information, including data related to our consumers, food service distributors, wholesalers, employees, suppliers and business partners. The secure collection, processing, maintenance and transmission of this information is critical to our operations. Consumers, our food service distributors, wholesalers, employees, suppliers and business partners have a high expectation that we will adequately protect their information, including personal information, from cyber-attacks or other security breaches, and may have claims against us if we are unable to do so. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of personal data. We and any potential collaborators may be subject to federal, state, local and foreign laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. The legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries where we do business. For example, the State of California enacted the California Consumer Privacy Act (the “CCPA”), which became effective January 2020, requiring companies that process information of California residents to, among other things, provide new disclosures and options to consumers about data collection, use and sharing practices. Further, the CCPA has been subject to revision and amendments, including significant modifications made by the California Privacy Rights Act (“CPRA”), which was recently approved by California voters as a ballot initiative in November 2020 and will take effect January 1, 2023. The updates and modifications to the CCPA may require us to modify our data processing practices and policies and to incur substantial costs and expenses to ensure compliance. Moreover, the CCPA confers a private right-of-action on certain individuals and associations. Our failure to adhere to or successfully implement appropriate processes to adhere to the requirements of CCPA and other evolving laws and regulations in this area could increase our exposure to regulatory enforcement action and other liabilities.

In addition, several other states have introduced or passed similar legislation to the CCPA and CPRA, such as the Virginia Consumer Data Protection Act and the Colorado Consumer Protection Act, which may impose varying standards and requirements on our data collection, use and processing activities. The FTC and many state attorneys general are also interpreting federal and state consumer protection laws to impose standards for the collection, use, dissemination and security of data. Furthermore, various international jurisdictions, where we have operations, have significantly strengthened their data privacy laws, rules and regulations. If more restrictive or inconsistent legal requirements are adopted by international, state or federal authorities in the future or regulators’ enforcement priorities shift, we could experience increased compliance costs and potential liability, which could cause reputational harm and have an adverse effect on our business.

 

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Compliance with environmental laws may negatively affect our business.

We are subject to foreign, federal, state, and local laws and regulations concerning waste disposal, pollution, energy and water consumption, protection of the environment and the presence, discharge, storage, handling, release, and disposal of, exposure to and remediation of hazardous or toxic substances including minimizing and preventing potential risks associated with the ammonia used in our refrigeration systems. Such environmental regulations, including the EPA Risk Management Plan program, provide for periodic audits and independent third-party audits of our manufacturing facilities on a routine schedule or if warranted following certain process safety events. These environmental laws provide for significant fines and penalties or other sanctions for noncompliance and/or liabilities for remediation of soil, sediment, surface water, or groundwater impacted by a release of hazardous or toxic substances, sometimes without regard to whether the owner or operator of the property knew of or was responsible for, the release or presence of hazardous or toxic substances. Failure to comply with environmental laws and regulations could have serious consequences for us, including civil or administrative penalties, claims for damage to natural resources, the denial or revocation of permits necessary for our operations, the issuance of injunctions to limit or cease operations, and negative publicity. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of or actual or alleged exposure to, such hazardous or toxic substances at, on, or from our manufacturing or distribution facilities. Compliance with environmental laws governing air emissions, waste handling, or wastewater discharges, or environmental conditions relating to releases of hazardous substances at our prior, existing or future properties, especially for manufacturing or distribution facilities, could materially adversely affect our business, financial condition, or results of operations. Further, environmental laws and the administration, interpretation, and enforcement thereof, are subject to change and may become more stringent in the future, each of which could materially adversely affect our business, financial condition, or results of operations.

We are subject to various risks relating to worker safety.

Given the nature of our operations, there are risks of injury to Chobani employees, contractors, and visitors. We are subject to various regulations relating to worker and community safety, such as OSHA regulations. As part of our compliance measures, we evaluate certain workplace hazards, develop written safety programs to address compliance and take steps to mitigate and train employees in these hazards. If our efforts to comply with worker safety regulations are not successful, we may incur an increase in the number and severity of injuries, be subject to fines, penalties, or third-party lawsuits, and may be required to address any deficiencies at our facilities or with respect to our management systems, and our business, financial condition, and results of operations may be adversely affected. Our safety practices, policies and procedures include on-going, routine and deliberate site-based safety communications and trainings, which may prove unsuccessful to eliminate workplace hazards and reduce our exposure to liability.

COVID-19 has become a new and emerging risk for employers and in particular manufacturers like Chobani. State and federal laws and regulations have been enacted in response to COVID-19 to protect employees. If we fail to comply with these newly enacted laws and regulations, or otherwise fail to protect the health and safety of our employees, we may be subject to regulatory action or litigation and reputational harm to our brand.

Unionization activities or labor disputes may disrupt our operations and affect our profitability.

If a significant number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition, or results of operations. In addition, a labor dispute,

 

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allegation, or claim involving one or more of our employees may harm our reputation, disrupt our operations and reduce our revenues and resolution of disputes may increase our costs. In addition, organized labor may benefit from new legislation or legal interpretations by the current presidential administration. Although we have no history of successful unionization activity at any of our locations, particularly in light of current support for changes to federal and state labor laws, we cannot provide any assurance that we will not experience successful union organization activity in the future. Any labor disruptions could have an adverse effect on our business, financial condition, and results of operations.

As an employer, we may be subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour, labor standards, or healthcare and benefit issues. Our operating costs, earnings, and cash flows could be adversely affected by costs incurred funding the defense and/or settlement of employment-related claims and actions. Such actions, if brought against us and successful in whole or in part, may impact our brand image or reputation, our ability to hire and compete for talent and could materially adversely affect our business, financial condition, or results of operations.

Our success depends in part on the services, reputation, and popularity of Hamdi Ulukaya. Any loss of his services or adverse reactions to publicity relating to Hamdi Ulukaya, could adversely affect our revenues, results of operations, our ability to maintain or generate a consumer base, and execute our business strategy.

We believe Hamdi Ulukaya’s reputation as our Founder, his unique expertise and knowledge in the industry, important role in research, product development and marketing, and relationships with customers and suppliers are critical factors in our continuing growth. Hamdi Ulukaya’s efforts, personality, and leadership, including his services as our Founder, Chief Executive Officer and Chairperson, have been and continue to be, critical to our success. Upon completion of this offering, Hamdi Ulukaya will directly or indirectly control approximately     % of the voting power of our common stock with respect to director elections (or approximately     % of the voting power with respect to director elections if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). As a result, we will be a “controlled company” under the corporate governance rules of the                 , and therefore we will be permitted to, and intend to, elect not to comply with certain corporate governance requirements thereunder. Any extended or permanent loss of his services due to disability, death, or some other cause or any repeated or sustained negative shifts in public or industry perceptions of him, could have a material adverse effect on our growth, revenues, and business.

In addition, the reputation, brand image, and innovative culture of our company are linked to Hamdi Ulukaya’s efforts, reputation, and image. While there is significant consumer recognition of our brand, the image, reputation, popularity, and talent of Hamdi Ulukaya remain important factors to our success. If Hamdi Ulukaya’s image were to become less favorable, the continued success of Chobani could be materially adversely affected. As such, any harm to Hamdi Ulukaya’s image, reputation, or popularity, could materially and adversely affect our profitability, results of operations, and financial condition.

Hamdi Ulukaya exercises controlling ownership of La Colombe Torrefaction LLC, a U.S. based coffee company, and Euphrates, Inc., a manufacturer of feta cheese. Hamdi Ulukaya may make investments in other businesses, unrelated to our company, that are unavailable to our consumers, customers, employees and investors and otherwise may conflict with our purposes and goals. Further, Hamdi Ulukaya’s investment strategies, goals and personal ventures may overlap, or conflict with our business objectives.

 

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Though Hamdi Ulukaya’s primary financial interest is in the successful performance of our company, it is possible that in the future, his involvement in other ventures and corporate opportunities could materially and adversely affect our profitability, results of operations, and financial condition. For additional information relating to Hamdi Ulukaya’s personal business endeavors and potential adverse impacts on our company see “—Our certificate of incorporation will contain provisions renouncing our interest and expectation to participate in certain corporate opportunities identified by or presented to certain of our existing investors.

Loss of our key management or other personnel or an inability to attract and retain such management and other personnel could negatively impact our business.

Our success is substantially dependent on the expertise, experience, continued service and performance of our senior management. The loss of one or more members of our senior management team could harm our business, financial position, results of operations or cash flows. These executives have been primarily responsible for determining the strategic direction of our business and for executing our growth strategy and are integral to our brand and culture and the reputation we enjoy with suppliers, contract manufacturers, distributors, retailers, and consumers. The loss of the services of any of these executives could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by investors and analysts. We do not maintain key-person life insurance with respect to any of them.

Additionally, any initiatives to increase management’s technical and operational expertise in efforts to improve productivity could fail to achieve such objectives and in any case, could increase our operating costs beyond our expectations and could require significant additional capital expenditures. We also depend on our ability to attract and retain qualified personnel to operate and expand our business. If we fail to attract talented new employees, our business and results of operations could be materially adversely affected.

We may be unable to hire or retain and develop key personnel or a highly skilled and diverse workforce or manage changes in our workforce needed to drive our growth strategies.

We must identify, hire, retain, engage, and develop effective leaders and a highly skilled and diverse global workforce. Competition for global talent is intense, and we compete to hire new personnel in the countries in which we manufacture and market our products and then to develop and retain their skills and competencies. Unplanned turnover or failure to develop adequate succession plans for leadership positions or hire and retain a diverse workforce with the skills and in the locations we need to operate and grow our business could deplete our institutional knowledge base and erode our competitiveness. Changes in immigration laws and policies could also make it more difficult to recruit or relocate skilled employees. Any such loss, failure, or limitation to the development of our workforce could materially and adversely affect our business, results of operations, and financial condition.

We also face personnel-related risks in connection with our operating model and business objectives. These risks could lead to operational challenges, including increased wage competition for the services and skills of our manufacturing facilities employees who are essential to the attainment of our business goals, labor shortages, higher employee turnover, including employees with key capabilities, and challenges in developing the capabilities necessary to continually innovate, operate productively and efficiently, and achieve our business objectives. Furthermore, we might be unable to manage changes in, or that affect, our workforce appropriately, or to satisfy the legal and regulatory requirements associated with how we manage and compensate our employees.

 

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These risks could materially and adversely affect our employees, reputation, ability to meet the needs of our customers, product sales, financial condition, and results of operations.

Litigation may lead us to incur significant costs and could adversely affect our business.

We are and may become party to various lawsuits, claims, and other legal proceedings arising in the normal course of business, which may include lawsuits, claims, or other legal proceedings relating to the marketing and labeling of products or brand, intellectual property, contracts, product recalls or withdrawals, product liability, employment matters, environmental matters, or other aspects of our business. For example, we have in the past, and are currently subject to class action lawsuits filed by plaintiffs that allege certain of our product labels are deceptive and misleading. We have also been subject to lawsuits from competitors alleging false or misleading advertising and packaging. Even when not merited, the defense of lawsuits and claims divert the attention of management and other personnel and may result in adverse publicity about our products and brand, and we may incur significant expenses in defending these lawsuits and claims.

In connection with claims, litigation or other legal proceedings, we may be required to pay damage awards or settlements or become subject to injunctions or other equitable remedies, which could have a material adverse effect on our financial position, cash flows, or results of operations. Certain claims may not be covered by insurance or certain covered claims may exceed applicable coverage limits, or one or more of our insurance carriers could become insolvent. The outcome of litigation is often difficult to predict and the outcome of pending or future litigation may have a material adverse effect on our financial position, cash flows, or results of operations. Moreover, adverse publicity about regulatory or legal action against us or adverse publicity about our products (including the resources needed to produce them) could damage our reputation and brand image, undermine consumer confidence, and reduce demand for our products, even if the regulatory or legal action is unfounded or not material to our operations or even if the adverse publicity regarding our products is unfounded.

For more information, see “Commitments and Contingencies,” under Note 16 to our financial statements for 2020 and “Business—Legal Proceedings” in this prospectus.

Our current insurance may not provide adequate levels of coverage against claims.

We carry insurance from insurance providers that we believe is adequate for foreseeable losses with terms and conditions that are reasonable and customary. Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we can obtain or restrict our ability to buy insurance coverage at reasonable rates. In the event of a substantial loss, the insurance coverage that we carry may not be sufficient to pay the full replacement cost of our lost assets or the full value of our financial obligations or liabilities. Because certain types of losses are significantly uncertain, they can be uninsurable or too expensive to insure. In some cases, these factors could result in certain losses being completely uninsured. Such losses could materially and adversely affect our profitability, results of operation, and financial condition.

In addition to the damages caused directly by a casualty loss such as fire, natural disasters, acts of war, or terrorism, we may suffer a disruption of our business as a result of these events or be subject to claims by third parties who may be injured or harmed. While we carry business interruption insurance, cyber liability insurance, and general liability insurance, there is no guarantee that the insurance will be sufficient to cover our losses and we could lose material retailer sales during a business interruption which could create a significant and adverse material impact on the business.

 

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Our financial results may be adversely impacted by the failure to successfully execute or integrate acquisitions, divestitures and joint ventures.

From time to time, we may evaluate potential acquisitions, divestitures, or joint ventures that we believe align with our strategic objectives. The success of such activity depends, in part, upon our ability to identify suitable buyers, sellers, or business partners; perform effective assessments prior to contract execution; negotiate contract terms; and, if applicable, obtain government approval. To the extent we undertake acquisitions, alliances, joint ventures, investments, or other developments outside our core regions or in new categories, we may face additional risks related to such developments. These risks include, among others:

 

   

failing to achieve anticipated synergies and revenue increases;

 

   

difficulty incorporating and integrating the acquired categories of products with our existing product lines and integrating information technology and financial reporting systems;

 

   

coordinating, establishing, or expanding sales, distribution and marketing functions, as necessary; and

 

   

difficulties implementing and maintaining sufficient controls, policies, and procedures over the systems, products, and processes of the acquired company.

For example, as a result of such arrangements, we may become responsible for manufacturing, distributing and/or selling new categories of products with different supply and distribution channels, including retail operations, which may not be integrated successfully and carry various risks. Acquisitions, alliances, joint ventures, investments, or other developments outside our core regions or in new categories could materially and adversely affect our product sales, financial condition, and operating results. These activities may present financial, managerial, staffing and talent and operational risks, including the diversion of management’s attention from existing businesses, difficulties integrating or separating businesses from existing operations, and challenges presented by acquisitions or joint ventures which may not achieve sales levels and profitability that justify the investments made. If the acquisitions, divestitures, or joint ventures are not successfully implemented or completed, there could be a material adverse effect on our financial condition, results of operations, and cash flow from operations.

Climate change may have a long term adverse impact on our business and operations.

Climate change may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. In the event that climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as raw milk and various fruits, nuts and packaging materials. Extreme weather conditions may adversely impact some of our facilities, lead to the disruption of distribution networks or the availability and cost of key raw or packaging materials used by us in production, such as raw milk and various fruits, nuts and packaging materials or the demand for our products. In addition, federal, state, or local governmental authorities may propose legislative and regulatory initiatives in response to public concerns over climate change which could result in increased energy, transportation and raw material costs, and may require us to make additional investments in our facilities and equipment. As a result of climate change, we may also be subjected to decreased availability of water, deteriorated quality of water, or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations and materially and adversely affect our profitability, results of operations and financial condition.

 

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The outbreak of the COVID-19 pandemic and associated responses have had, and we expect will continue to have, negative impacts on our business, financial condition and results of operations.

The public health crisis caused by the ongoing COVID-19 pandemic and the measures being taken by governments, businesses, including us, and the public at large to limit the spread of the COVID-19 pandemic have had, and we expect will continue to have, negative impacts on our business, financial condition, and results of operations, including:

 

   

We have experienced, and may continue to experience, a decrease in sales of certain of our products in certain markets and distribution channels that have been affected by the COVID-19 pandemic. In particular, while sales of our products in the food service business (including U.S. airlines business) historically represent less than 10% of our total net sales, food service sales across all our major markets have been negatively affected by reduced consumer traffic resulting from shelter-in-place regulations, state executive orders and closings, and capacity limitations of restaurants and schools. We expect the impact of the COVID-19 pandemic on our food service business to soften in the future as the food service industry resumes normal operations across the United States. If the COVID-19 pandemic persists or intensifies, its negative impacts on our sales in food service channels, could be prolonged and may become more severe.

 

   

To date, we have experienced increases in consumer demand for grocery products, due in part to consumer health concerns related to the COVID-19 pandemic. However, such increased demand could be short-lived. Further short-term or sustained increases in consumer demand at our retail customers may exceed our production capacity or otherwise disrupt our supply chain. We may also experience significant reductions in the availability of one or more of our products as a result of retailers, common carriers, or other shippers modifying restocking, fulfillment, and shipping practices. Rising costs associated with third-party shipping providers may also impact our business.

 

   

We have and may experience minor temporary workforce disruptions in our supply chain due to the on-going impact of the COVID-19 pandemic. Based on guidance from the Centers for Disease Control and Prevention and state executive orders, we have implemented employee safety measures across our manufacturing plants and office facilities, including proper hygiene, social distancing, mask use, and temperature and health screenings. We believe these measures have reduced the risk of transmission of COVID-19 among our employees. However, illness, travel restrictions, absenteeism, and other workforce disruptions, along with our potential inability to effectively manage evolving health and welfare strategies, could negatively affect our supply chain, manufacturing, distribution, or other business processes.

 

   

The COVID-19 pandemic has and may continue to limit the availability of our products, either by limiting the availability or competitive pricing of raw or packaging materials required to produce our products or by limiting or restricting the ability of third parties upon whom we rely, including co-manufacturers, distributors and contractors from meeting their obligations to us, such as the fulfillment of product shipments to customers. Additionally, the COVID-19 pandemic has and may continue to reduce the demand for certain of our products. As a result, our cream customers and food service partners may experience increased product costs, as we aim to offset the impacts of COVID-19 on our supply chain and fluctuations in customer demand.

 

   

We rely on third-party service providers and business partners, such as cloud data storage and other information technology service providers, suppliers, distributors, co-manufacturers, contractors, and other external business partners, for certain functions or for services in support of key portions of our operations. Our increased reliance on remote access to information systems in response to COVID-19 increases our exposure to potential

 

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cybersecurity incidents. These third-party service providers and business partners are subject to risks and uncertainties related to the COVID-19 pandemic, which may interfere with their ability to fulfill their respective commitments and responsibilities to us in a timely manner and in accordance with the agreed-upon terms.

 

   

We have and may continue to incur additional costs to address the challenges created by the COVID-19 pandemic. These include additional costs associated with overtime and sick pay, appropriately compensating employees, including for working under challenging conditions and time spent getting vaccinated, hiring temporary contractors, implementing increased safety measures, providing employees with personal protective equipment, and procuring ingredients and managing our supply chain during a global pandemic. We will continue to devote increased efforts to maintain our collaborative and unique company culture through the use of videoconferencing and other online communication and sharing tools, and to monitoring the health, safety, morale, and productivity of our employees, including new employees, as we evaluate the impacts of the COVID-19 pandemic on our business and employees. Our operating results may be adversely affected if we experience significant unexpected costs related to these initiatives in the future.

In addition to the potential effects of the COVID-19 pandemic described above, the impacts of the global COVID-19 pandemic could exacerbate conditions in many of our other risk factors described in this “Risk Factors” section. The significance of our efforts to manage and remedy these impacts depends on factors outside our knowledge or control, including the duration of such conditions and to what extent normal economic and operating conditions can resume in the markets we serve and the success of third-party actions taken to contain the spread and mitigate public health effects. If we are unable to successfully manage our business through the challenges and uncertainty created by the COVID-19 pandemic, it could materially and adversely affect our business, results of operations, and financial condition.

We are subject to business and reputational risks related to sustainability and corporate social responsibility.

Our business faces increasing scrutiny related to environmental, social and governance (“ESG”) issues, including sustainable development, product packaging, renewable resources, environmental stewardship, supply chain management, climate change, diversity and inclusion, workplace conduct, human rights, philanthropy and support for local communities. If we or our distributors, suppliers or other partners fail to meet applicable standards or expectations with respect to these issues across our business, including the expectations we set for ourselves, our reputation and brand image could be damaged, and our business, financial condition and results of operations could be adversely impacted.

Implementation of our environmental and sustainability initiatives, including publication of our annual sustainability report, will require financial expenditures and employee resources, and if we are unable to meet our sustainability, environmental and social and governance goals, this could have a material adverse effect on our reputation and brand and negatively impact our relationship with our employees, customers and consumers. Even if we do comply with our standards, these standards could raise our costs. For example, any employment practices that increase the cost of our labor, such as wage increases, could have an adverse effect on our operating costs, financial condition and results of operations.

In addition, certain influential institutional investors are also increasing their focus on ESG practices and are placing importance on the implications and social cost of their investments. If our ESG practices do not meet the standards set by these stockholders, they may choose not to invest in our common stock or if our peer companies outperform us in their ESG initiatives, potential or current

 

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investors may elect to invest with our competitors instead. If we do not comply with investor or stockholder expectations and standards in connection with our ESG initiatives or are perceived to have not responded appropriately to address ESG issues within our company, our business and reputation could be negatively impacted and our share price could be materially and adversely affected.

Risks Relating to Tax Matters

Chobani Inc. will depend on distributions from Chobani Global Holdings to pay any taxes and other expenses, including payments under the Tax Receivable Agreement.

Chobani Inc. will be a holding company and, following this offering, its only business will be to act as the managing member of Chobani Global Holdings, and its only material assets will be Class A Units representing approximately    % of the membership interests of Chobani Global Holdings (or    % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). Chobani Inc. does not have any independent means of generating revenue. We anticipate that Chobani Global Holdings will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to the members of Chobani Global Holdings. Accordingly, Chobani Inc. will be required to pay income taxes on its allocable share of any net taxable income of Chobani Global Holdings. We intend to cause Chobani Global Holdings to make pro rata distributions to each of its members, including Chobani Inc., in an amount intended to enable each member to pay all applicable taxes on taxable income allocable to such member and to allow Chobani Inc. to make payments under the Tax Receivable Agreement. In addition, Chobani Global Holdings will reimburse Chobani Inc. for corporate and other overhead expenses. If the amount of tax distributions to be made exceeds the amount of funds available for distribution, Chobani Inc. shall receive the full amount of its tax distribution before the other members of Chobani Global Holdings receive any distribution and the balance, if any, of funds available for distribution shall be distributed to the other members of Chobani Global Holdings pro rata in accordance with their assumed tax liabilities. To the extent that Chobani Inc. needs funds, and Chobani Global Holdings is restricted from making such distributions under applicable laws or regulations, or is otherwise unable to provide such funds, it could materially and adversely affect Chobani Inc.’s ability to pay taxes and other expenses, including payments under the Tax Receivable Agreement, and affect our liquidity and financial condition. Although we do not currently expect to pay dividends, such restrictions could also affect Chobani Inc.’s ability to pay any dividends (if declared) in the future.

The Internal Revenue Service (IRS) might challenge the tax basis step-ups and other tax benefits we receive in connection with this offering and the related transactions and in connection with future acquisitions of Chobani Global Holdings units.

We will acquire Class B Units in Chobani Global Holdings in connection with this offering, and the members of Chobani Global Holdings other than Chobani Inc., in the future may exchange additional Class B Units or Class M Units for shares of our Class A common stock or, at the election of Chobani Inc., for cash. The Blocker Merger, the initial acquisitions, and exchanges by members of Chobani Global Holdings (other than Chobani Inc.) in the future may result in increases in the tax basis of the assets of Chobani Global Holdings that otherwise would not have been available. These increases in tax basis are expected to increase (for U.S. tax purposes) Chobani Inc.’s depreciation and amortization and, together with other tax benefits, reduce the amount of tax that Chobani Inc. would otherwise be required to pay, although it is possible that the Internal Revenue Service (the “IRS”) might challenge all or part of these tax basis increases or other tax benefits, and a court might sustain such a challenge. Chobani Inc.’s ability to achieve benefits from any tax basis increases or other tax benefits will depend upon a number of factors, as discussed below, including the timing and amount of our future income. We will not be reimbursed for any payments previously made under the Tax Receivable Agreement if

 

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the basis increases or other tax benefits described above are successfully challenged by the IRS or another taxing authority. As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement in excess of our ultimate cash tax savings.

Chobani Inc. will be required to pay over to the TRA Parties of Chobani Global Holdings most of the tax benefits Chobani Inc. receives from tax basis step-ups (and certain other tax benefits) attributable to its acquisition of units of Chobani Global Holdings in connection with this offering and in the future, and the amount of those payments are expected to be substantial.

Chobani Inc. will enter into the Tax Receivable Agreement with the TRA Parties. The Tax Receivable Agreement will provide for payment by Chobani Inc. to the TRA Parties of 85% of the amount of the net cash tax savings, if any, that Chobani Inc. realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Chobani Inc.’s acquisition of Class B Units and certain Class M Units in connection with this offering and in future exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Chobani Inc. will acquire in the Blocker Merger and (iii) any payments Chobani Inc. makes to the TRA Parties under the Tax Receivable Agreement (including tax benefits related to imputed interest). Chobani Inc. will retain the benefit of the remaining 15% of these net cash tax savings.

The term of the Tax Receivable Agreement will commence upon the completion of this offering and will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or have expired, unless we exercise our right to terminate the Tax Receivable Agreement (or it is terminated due to a change in control or our breach of a material obligation thereunder), in which case, Chobani Inc. will be required to make the termination payment specified in the Tax Receivable Agreement. In addition, payments we make under the Tax Receivable Agreement will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return. Based on certain assumptions, including no material changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefit of the increased amortization of our assets and the net operating losses (and similar items), we expect that future payments to the TRA Parties in respect of the initial public offering will equal $            million in the aggregate, based on an assumed price of our Class A common stock of $            per share (the midpoint of the price range set forth on the cover page of this prospectus), although the actual future payments to the TRA Parties will vary based on the factors discussed below, and estimating the amount and timing of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, as the calculation of amounts payable depends on a variety of factors and future events. We expect to receive distributions from Chobani Global Holdings in order to make any required payments under the Tax Receivable Agreement. However, we may need to incur debt to finance payments under the Tax Receivable Agreement to the extent such distributions or our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.

The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending on a number of factors, including the price of our Class A common stock at the time of the exchange; the timing of future exchanges; the extent to which exchanges are taxable; the amount and timing of the utilization of tax attributes; the amount, timing and character of Chobani Inc.’s income; the U.S. federal, state and local tax rates then applicable; the amount of each exchanging unitholder’s tax basis in its units at the time of the relevant exchange; the depreciation and amortization periods that apply to the increases in tax basis; the timing and amount of any earlier payments that Chobani Inc. may have made under the Tax Receivable Agreement; and the portion of Chobani Inc.’s payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis. We expect that, as a result of the increases in the tax basis of the tangible and intangible assets of                attributable to the initial acquisitions

 

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and exchanged Chobani Global Holdings interests, the Blocker Merger, and certain other tax benefits, the payments that Chobani Inc. will be required to make to the beneficiaries under the Tax Receivable Agreement will be substantial. There may be a material negative effect on our financial condition and liquidity if, as described below, the payments under the Tax Receivable Agreement exceed the actual benefits Chobani Inc. receives in respect of the tax attributes subject to the Tax Receivable Agreement and/or distributions to Chobani Inc. by Chobani Global Holdings are not sufficient to permit Chobani Inc. to make payments under the Tax Receivable Agreement.

In certain circumstances, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual tax benefits, if any, that Chobani Inc. actually realizes.

The Tax Receivable Agreement will provide that if (i) Chobani Inc. exercises its right to early termination of the Tax Receivable Agreement in whole (that is, with respect to all benefits due to all beneficiaries under the Tax Receivable Agreement) or in part (that is, with respect to some benefits due to all beneficiaries under the Tax Receivable Agreement), (ii) Chobani Inc. experiences certain changes in control, (iii) the Tax Receivable Agreement is rejected in certain bankruptcy proceedings, (iv) Chobani Inc. fails (subject to certain exceptions) to make a payment under the Tax Receivable Agreement within 180 days after the due date, or (v) Chobani Inc. materially breaches its obligations under the Tax Receivable Agreement, Chobani Inc. will be obligated to make an early termination payment to holders of rights under the Tax Receivable Agreement equal to the present value of all payments that would be required to be paid by Chobani Inc. under the Tax Receivable Agreement. The amount of such payments will be determined on the basis of certain assumptions in the Tax Receivable Agreement, including (i) the assumption that Chobani Inc. would have enough taxable income to fully utilize the tax benefit resulting from the tax assets that are the subject of the Tax Receivable Agreement, (ii) the assumption that any item of loss deduction, or credit generated by a basis adjustment or imputed interest arising in a taxable year preceding the taxable year that includes an early termination will be used by Chobani Inc. ratably from such taxable year through the earlier of (x) the scheduled expiration of such tax item or (y) 15 years; (iii) the assumption that any non-amortizable assets are deemed to be disposed of in a fully taxable transaction on the fifteenth anniversary of the earlier of the basis adjustment and the early termination date; (iv) the assumption that U.S. federal, state and local tax rates will be the same as in effect on the early termination date, unless scheduled to change; and (v) the assumption that any units of Chobani Global Holdings (other than those held by Chobani Inc.) outstanding on the termination date are deemed to be exchanged for an amount equal to the market value of the corresponding number of shares of Class A common stock on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates. The amount of the early termination payment is determined by discounting the present value of all payments that would be required to be paid by Chobani Inc. under the Tax Receivable Agreement at a rate equal to the lesser of (a) 6.5% and (b) LIBOR (as defined in the Tax Receivable Agreement), plus 400 basis points.

Moreover, as a result of an elective early termination, a change in control or Chobani Inc.’s material breach of its obligations under the Tax Receivable Agreement, Chobani Inc. could be required to make payments under the Tax Receivable Agreement that exceed its actual cash savings under the Tax Receivable Agreement. Thus, Chobani Inc.’s obligations under the Tax Receivable Agreement could have a substantial negative effect on its financial condition and liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control. We cannot assure you that we will be able to finance any early termination payment. It is also possible that the actual benefits ultimately realized by us may be significantly less than were projected in the computation of the early termination payment. We will not be reimbursed if the actual benefits ultimately realized by us are less than were projected in the computation of the early termination payment.

 

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Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we will determine and the IRS or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions we take, and a court could sustain such challenge. If any tax benefits that have given rise to payments under the Tax Receivable Agreement are subsequently disallowed, Chobani Inc. would be entitled to reduce future amounts otherwise payable to a holder of rights under the Tax Receivable Agreement to the extent the holder has received excess payments. However, the required final and binding determination that a holder of rights under the applicable Tax Receivable Agreement has received excess payments may not be made for a number of years following commencement of any challenge, and Chobani Inc. will not be permitted to reduce its payments under the Tax Receivable Agreement until there has been a final and binding determination, by which time sufficient subsequent payments under such Tax Receivable Agreement may not be available to offset prior payments for disallowed benefits. Chobani Inc. will not be reimbursed for any payments previously made under the Tax Receivable Agreement if the basis increases described above are successfully challenged by the IRS or another taxing authority. As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement that are significantly in excess of the benefit that Chobani Inc. actually realizes in respect of the increases in tax basis (and utilization of certain other tax benefits) and Chobani Inc. may not be able to recoup those payments, which could adversely affect Chobani Inc.’s financial condition and liquidity.

In certain circumstances, Chobani Global Holdings will be required to make distributions to us and the continuing members of Chobani Global Holdings, and the distributions that Chobani Global Holdings will be required to make may be substantial.

Chobani Global Holdings is expected to continue to be treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to U.S. federal income tax. Instead, taxable income will be allocated to members, including Chobani Inc. Pursuant to the CGH LLC Agreement, Chobani Global Holdings will make pro rata tax distributions to its members, including Chobani Inc., which generally will be pro rata based on the ownership of Chobani Global Holdings units, calculated using an assumed tax rate, to enable each of the members to pay taxes on that member’s allocable share of Chobani Global Holdings’s net taxable income. Under applicable tax rules, Chobani Global Holdings is required to allocate net taxable income disproportionately to its members in certain circumstances. Because tax distributions will be determined based on assumptions, including an assumed tax rate that is the highest individual rate, but will be made pro rata based on ownership of Chobani Global Holdings units, Chobani Global Holdings will be required to make tax distributions that, in the aggregate, will likely exceed the aggregate amount of taxes payable by its members with respect to the allocation of Chobani Global Holdings income.

Funds used by Chobani Global Holdings to satisfy its tax distribution obligations (other than to us) will not be available for reinvestment in our business. Moreover, the tax distributions Chobani Global Holdings will be required to make may be substantial, and may significantly exceed (as a percentage of Chobani Global Holdings’s income) the overall effective tax rate applicable to a similarly situated corporate taxpayer. In addition, because these payments will be calculated with reference to an assumed tax rate, and because of the disproportionate allocation of net taxable income, these payments likely will significantly exceed the actual tax liability for FHU US Holdings and CGH Management Holdings, the existing members of Chobani Global Holdings.

As a result of potential differences in the amount of net taxable income allocable to us and to Hamdi Ulukaya, the controlling member of Chobani Global Holdings, as well as the use of an assumed tax rate in calculating Chobani Global Holdings’s distribution obligations, we may receive distributions significantly in excess of our tax liabilities and obligations to make payments under the Tax Receivable Agreement. We may choose to manage these excess distributions through a number of different approaches, including through the payment of dividends to our Class A common stockholders or by applying them to other corporate purposes.

 

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We may incur tax and other liabilities attributable to HOOPP as a result of certain reorganization transactions.

HOOPP holds its interest in Chobani Global Holdings through HOOPP Blocker, an entity that is taxable as a corporation for U.S. federal income tax purposes. Chobani Inc. will form a new merger subsidiary, and contemporaneously with this offering, the merger subsidiary will merge with and into the HOOPP Blocker, with HOOPP Blocker surviving. Immediately thereafter, HOOPP Blocker will merge with and into Chobani Inc., with Chobani Inc. surviving. In connection with the Blocker Merger, Chobani Inc. will pay HOOPP a combination of cash from the net proceeds of this offering and shares of Class A common stock as merger consideration. See “Organizational Structure—The Reorganization.” As the successor to these merged entities, Chobani Inc. generally will succeed to and be responsible for any outstanding or historical tax or other liabilities of HOOPP Blocker, including any liabilities that might be incurred as a result of the Blocker Merger. Any such liabilities for which Chobani Inc. is responsible could have an adverse effect on our liquidity and financial condition.

Pursuant to regulations issued under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), Chobani Inc. may not be permitted to deduct its distributive share of compensation expense to the extent that the compensation was paid by Chobani Global Holdings to certain of Chobani Inc.’s covered employees, potentially resulting in additional U.S. federal income tax liability for Chobani Inc. and reducing cash available for distribution to Chobani Inc.’s stockholders and/or for the payment of other expenses and obligations of Chobani Inc.

Section 162(m) of the Code disallows the deduction by any publicly held corporation of applicable employee compensation paid with respect to any covered employee to the extent that such compensation for the taxable year exceeds $1,000,000. A “covered employee” means any employee of the taxpayer if the employee (a) is the chief executive officer (“CEO”) or chief financial officer (“CFO”) of the taxpayer at any time during the taxable year, or was an individual acting in such a capacity, (b) was among the three highest compensated executive officers for the taxable year (other than the CEO or CFO or an individual acting in such a capacity), or (c) was a covered employee of the taxpayer (or any predecessor) for any preceding taxable year beginning after December 31, 2016. Pursuant to final regulations released for publication in the Federal Register by the IRS and the United States Department of the Treasury on December 30, 2020 (the “Section 162(m) Regulations”), Chobani Inc. will not be permitted to claim a deduction for the distributive share of compensation expense of Chobani Global Holdings allocated to it to the extent that such distributive share, plus the amount of any compensation paid directly by Chobani Inc., exceeds $1,000,000 with respect to a covered employee, even if Chobani Global Holdings, rather than Chobani Inc., pays the compensation. The Section 162(m) Regulations were effective upon publication of final regulations in the Federal Register but apply to any deduction for compensation that is otherwise allowable for a taxable year ending on or after December 20, 2019. However, the Section 162(m) Regulations do not apply to compensation paid pursuant to a written binding contract in effect on December 20, 2019 that is not materially modified after that date. Accordingly, to the extent that Chobani Inc. is disallowed a deduction for its distributive share of compensation expense under Section 162(m) of the Code, it may result in additional U.S. federal income tax liability for Chobani Inc. and/or reduce cash available for distribution to Chobani Inc.’s stockholders or for the payment of other expenses and obligations of Chobani Inc.

Future changes to tax laws or our effective tax rate could materially and adversely affect our company and reduce net returns to our stockholders.

Our tax treatment is subject to the enactment of, or changes in, tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in various jurisdictions. Such changes may include (but are not limited to) the taxation of

 

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operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid, or the taxation of partnerships and other passthrough entities. In addition, the Group of Twenty, the OECD, the U.S. Congress and Treasury Department and other government agencies in jurisdictions where we and our affiliates do business have focused on issues related to the taxation of multinational corporations, including, transfer pricing, country-by-country reporting and base erosion. As a result, the tax laws in the United States and in jurisdictions which we do business could change on a prospective or retroactive basis, and any such changes could have an adverse effect on our worldwide tax liabilities, business, financial condition and results of operations. We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax rates in the future in countries where we have operations, reduce post-tax returns to our stockholders, and increase the complexity, burden and cost of tax compliance.

Our businesses are subject to income taxation in the United States, as well as other tax jurisdictions throughout the world, including Canada, Australia and Mexico. Tax rates in these jurisdictions, including at the federal, state and local levels in the United States, may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, projected levels of taxable income in each jurisdiction, tax audits conducted and settled by various tax authorities, and adjustments to income taxes upon finalization of income tax returns.

We may be required to pay additional taxes because of the U.S. federal partnership audit rules and potentially also state and local tax rules.

Under the U.S. federal partnership audit rules, subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) are determined, and taxes, interest, and penalties attributable thereto, are assessed and collected at the entity level. Chobani Global Holdings (or any of its applicable subsidiaries or other entities in which Chobani Global Holdings directly or indirectly invests that are classified as partnerships for U.S. federal income tax purposes) may be required to pay additional taxes, interest and penalties as a result of an audit adjustment, and Chobani Inc., as a member of Chobani Global Holdings (or such other entities), could be required to indirectly bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. Audit adjustments for state or local tax purposes similarly could result in Chobani Global Holdings (or any of its applicable subsidiaries or other entities in which Chobani Global Holdings directly or indirectly invests) being required to pay or indirectly bear the economic burden of state or local taxes and associated interest, and penalties.

Under certain circumstances, Chobani Global Holdings or an entity in which Chobani Global Holdings directly or indirectly invests may be eligible to make an election to cause members of Chobani Global Holdings (or such other entity) to take into account the amount of any understatement, including any interest and penalties, in accordance with such member’s share in Chobani Global Holdings in the year under audit. We will decide whether or not to cause Chobani Global Holdings to make this election; however, there are circumstances in which the election may not be available and, in the case of an entity in which Chobani Global Holdings directly or indirectly invests, such decision may be outside of our control. If Chobani Global Holdings or an entity in which Chobani Global Holdings directly or indirectly invests does not make this election, the then-current members of Chobani Global Holdings (including Chobani Inc.) could economically bear the burden of the understatement.

 

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If Chobani Global Holdings were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, Chobani Inc. and Chobani Global Holdings might be subject to potentially significant tax inefficiencies, and Chobani Inc. would not be able to recover payments previously made by it under the Tax Receivable Agreement, even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.

We intend to operate such that Chobani Global Holdings does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is an entity that otherwise would be treated as a partnership for U.S. federal income tax purposes, the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. From time to time the U.S. Congress has considered legislation to change the tax treatment of partnerships and there can be no assurance that any such legislation will not be enacted or if enacted will not be adverse to us.

If Chobani Global Holdings were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for Chobani Inc. and Chobani Global Holdings, including as a result of Chobani Inc.’s inability to file a consolidated U.S. federal income tax return with Chobani Global Holdings. In addition, Chobani Inc. may not be able to realize tax benefits covered under the Tax Receivable Agreement and would not be able to recover any payments previously made by it under the Tax Receivable Agreement, even if the corresponding tax benefits (including any claimed increase in the tax basis of Chobani Global Holdings’s assets) were subsequently determined to have been unavailable.

Risks Relating to this Offering and Ownership of Our Common Stock

No public market for our Class A common stock currently exists, and an active trading market may not develop or be sustained following this offering.

Prior to this offering, there has been no public market for our Class A common stock. Although we have applied to list our Class A common stock on                under the symbol “CHO,” an active trading market may not develop following the closing of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration. The initial public offering price was determined by negotiations among us and the underwriters and may not be indicative of the future prices of our Class A common stock.

 

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The market price of our Class A common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

The market price of our common stock is likely to be volatile and you could lose all or part of your investment. Stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies in our industry. If you purchase shares of our Class A common stock in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. Following the completion of our initial public offering, the market price of our Class A common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our operating performance, including:

 

   

announcements of new products, commercial relationships, acquisitions or other events by us or our competitors;

 

   

price and volume fluctuations in the overall stock market from time to time;

 

   

significant volatility in the market price and trading volume of food and beverage companies;

 

   

addition or loss of significant customers or other developments with respect to significant customers or in customer needs or expectations or trends in markets in which we operate;

 

   

fluctuations in the trading volume of our shares or the size of our public float;

 

   

sales of our Class A common stock or any securities into Class A common stock by us, our executive officers, directors or our stockholders in the future;

 

   

actual or anticipated changes or fluctuations in our operating results;

 

   

our ability to implement our business strategy;

 

   

our ability to complete and integrate acquisitions;

 

   

whether our operating results meet the expectations of securities analysts or investors;

 

   

actual or anticipated changes in the expectations of investors or securities analysts and their perception of us, our competitors and our industry;

 

   

litigation or investigations or regulatory scrutiny involving us, our industry, or both;

 

   

regulatory developments in the United States, foreign countries, or both applicable to our products;

 

   

global economic conditions or activity levels in our industry;

 

   

economic, political, legal and regulatory factors unrelated to our performance;

 

   

major catastrophic events;

 

   

lockup releases or sales of large blocks of our Class A common stock or securities convertible into shares of Class A common stock;

 

   

departures of key employees;

 

   

changes in accounting principles;

 

   

any adverse consequences related to our multi-class capital structure, such as stock index providers excluding companies with multi-class capital structures from certain indices; or

 

   

an adverse impact on the company from any of the other risks cited in this prospectus.

In addition, if the stock market for food and beverage companies, or the stock market generally, experiences a loss of investor confidence, the trading price of our Class A common stock could decline

 

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for reasons unrelated to our business, operating results or financial condition. Stock prices of many food and beverage companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. The trading price of our Class A common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

Sales of substantial blocks of our Class A common stock into the public market after this offering, including when the “lock-up” periods end, or the perception that such sales might occur, could cause the market price of our Class A common stock to decline.

Sales of substantial blocks of our Class A common stock into the public market after this offering, including when any “lock-up” periods end, or the perception that such sales might occur, could cause the market price of our Class A common stock to decline and may make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate. Based on the total number of outstanding shares of our Class A common stock as of                 , 2021, upon completion of this offering, we will have                shares of Class A common stock outstanding (assuming no exercise of the underwriters’ option to purchase additional shares) and                shares of Class A common stock issuable upon exchange of Class B Units and Class M Units. All of the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares held by our “affiliates” as defined in Rule 144 under the Securities Act.

All of our directors and executive officers and certain holders of any shares of Class A common stock and securities exercisable for or convertible into such shares of common stock, are subject to lock-up agreements that restrict their ability to offer, sell or agree to sell, directly or indirectly, any shares of Class A common stock for a period of                 days after the date of this prospectus. When the applicable lock-up period expires, we, our directors and officers and locked-up equity holders will be able to sell shares into the public market. The underwriters may, in their sole discretion, permit our directors and officers and locked-up equity holders to sell shares prior to the expiration of the restrictive provisions contained in the “lock-up” agreements with the underwriters.

Pursuant to the Registration Rights Agreement, and subject to the lock-up agreements described herein, holders of Class B Units in Chobani Global Holdings will have rights to require us to file registration statements covering the sale of shares of Class A common stock issuable upon exchange of such units or to include such shares in registration statements that we may file for ourselves or other stockholders. See “Organizational Structure—Registration Rights Agreement.” For more information regarding the lock-up agreements, see the description included in the section entitled “Underwriting.” We also intend to register the offer and sale of all shares of common stock that we may issue under our equity compensation plans.

You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.

We expect the initial public offering price of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of our Class A common stock, after giving effect to the exchange of all outstanding Class B Units, Class M Units and other awards under our employee incentive plans, for shares of our Class A common stock or, at the election of Chobani Inc., for cash. Therefore, investors purchasing shares of Class A common stock in this offering will pay a price per

 

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share that substantially exceeds our pro forma net tangible book value per share after this offering. As a result, investors will:

 

   

incur immediate dilution of $            per share; and

 

   

contribute the total amount invested to date to fund Chobani Inc., but will own only approximately    % of the shares of our Class A common stock outstanding, assuming all Class B Units and Class M Units outstanding immediately after the Reorganization and this offering were exchanged for shares of our Class A common stock. See “Dilution.”

Investors in this offering will experience further dilution upon the issuance of shares underlying awards made pursuant to any equity incentive plans. See “Organizational Structure—The CGH LLC Agreement—Classes of Chobani Global Holdings Units.”

We have broad discretion in the use of net proceeds that we receive in this offering and we may not use them effectively.

After giving effect to the use of proceeds described in “Use of Proceeds” and the Reorganization, we expect to have remaining net proceeds, which we currently intend to use for working capital and other general corporate purposes. Our management will have broad discretion in the application of the net proceeds, including possible acquisitions of, or investments in, businesses or technologies. The failure by our management to apply these funds effectively could harm our business, operating results and financial condition.

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.

We do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management, and may adversely affect the market price of our stock.

Our certificate of incorporation and amended and restated bylaws (the “bylaws”), which we expect to be in effect upon completion of this offering contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. Among other things, these provisions:

 

   

authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

 

   

if Hamdi Ulukaya ceases to own at least 50% of the combined voting power of our then-outstanding capital stock entitled to vote generally in director elections (the “Trigger Date”), establish a classified board of directors, with each class serving three-year staggered terms, subject to a 7-year sunset, so that not all members of our board of directors are elected at one time;

 

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from and after the Trigger Date as long as our board is classified, provide that directors can be removed only for cause and only upon the affirmative vote of the holders of at least 6623% of voting power of the outstanding shares of our capital stock entitled to vote thereon;

 

   

prohibit the use of cumulative voting for the election of directors;

 

   

from and after the Trigger Date, eliminate the ability of stockholders to call special meetings;

 

   

from and after the Trigger Date, prohibit stockholder action by written consent and instead require stockholder actions to be taken at a meeting of our stockholders;

 

   

from and after the Trigger Date, prohibit our stockholders from being able to fill vacancies on our board of directors;

 

   

reflect two classes of stock, with Class B common stock having ten votes per share and Class A common stock having one vote per share, until a Sunset becomes effective;

 

   

from and after the Trigger Date, require the approval of the holders of at least 6623% of voting power of the outstanding shares of our capital stock entitled to vote thereon to amend or repeal our bylaws and certain provisions of our certificate of incorporation; and

 

   

establish advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing other matters that can be acted upon by stockholders at stockholder meetings.

These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.

In addition, we are a Delaware corporation and governed by the Delaware General Corporation Law (the “DGCL”). In general, Section 203 of the DGC (“Section 203”), an anti-takeover law, prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation’s voting stock, which person or group is considered an interested stockholder under the DGCL, for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. We intend to elect in our certificate of incorporation not to be subject to Section 203. However, our certificate of incorporation will contain provisions that have the same effect as Section 203, except that they will provide Hamdi Ulukaya, his affiliates, and their respective successors (other than our company), as well as their direct and indirect transferees, will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions. For additional details, read “Description of Capital Stock.”

In addition, our existing debt agreements include, and other debt instruments we may enter into in the future may include, provisions entitling the lenders or bondholders, as applicable, to demand immediate repayment of all borrowings or outstanding indebtedness upon the occurrence of certain change of control events relating to our company, which also could discourage, delay or prevent a business combination transaction.

Our certificate of incorporation will include an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our certificate of incorporation will provide that, unless we, in writing, select or consent to the selection of an alternative forum, all complaints asserting any internal corporate claims (defined as

 

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claims, including claims in the right of our company: (i) that are based upon a violation of a duty by a current or former director, officer, employee, or stockholder in such capacity; or (ii) as to which the DGCL confers jurisdiction upon the Court of Chancery), to the fullest extent permitted by law, and subject to applicable jurisdictional requirements, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, subject matter jurisdiction, another state court or a federal court located within the State of Delaware). Further, unless we select or consent to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Our choice-of-forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in our common stock shall be deemed to have notice of and to have consented to the forum selection provisions described in our certificate of incorporation. These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and such persons. It is possible that a court may find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, in which case we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations. See the section entitled “Description of Capital Stock—Exclusive Forum Clause.”

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our bylaws will provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by the DGCL.

In addition, as permitted by Section 145 of the DGCL, our bylaws and our indemnification agreements that we expect to enter into with our directors and officers will provide that:

 

   

we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by the DGCL. The DGCL provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

 

   

we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

 

   

we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;

 

   

we will not be obligated pursuant to our bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification;

 

   

the rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and

 

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we may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

We expect to be a “controlled company” within the meaning of the                  rules and, as a result, will qualify for, and intend to rely on exemptions from certain corporate governance requirements.

Upon completion of this offering, Hamdi Ulukaya will beneficially own a majority of our outstanding voting power. So long as no Sunset has occurred, Hamdi Ulukaya is expected to hold a majority of the Company’s outstanding voting power and thereby will be able to control the outcome of matters submitted to a stockholder vote. As a result, we expect to be a “controlled company” within the meaning of the                corporate governance standards. Under the corporate governance rules of the                , a company of which more than 50% of the voting power with respect to director elections is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with certain corporate governance requirements thereunder, including the requirements that:

 

   

a majority of such company’s board of directors consist of independent directors;

 

   

that compensation of executive officers be determined, or recommended to the board of directors for determination, by a compensation committee composed solely of independent directors;

 

   

that director nominees be selected, or recommended for the board of directors’ selection, by a nominating and corporate governance committee composed solely of independent directors; and

 

   

such company conduct an annual performance evaluation of the nominating and governance and compensation committees.

These requirements will not apply to us as long as we remain a controlled company. We intend to rely on some or all of the controlled company exemptions. Accordingly, investors in our shares of common stock will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the                . See “Organizational Structure”; “Management—Controlled Company Exemption”.

Our dual class share structure may depress the trading price of our Class A common stock.

Our dual class share structure may result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500. These changes exclude companies with multiple classes of shares of common stock from being added to these indices. In addition, several stockholder advisory firms have announced their opposition to the use of dual or multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A common stock in these indices and may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our Class A common stock. Any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.

 

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Hamdi Ulukaya will have the ability to direct the voting of a majority of the voting power of our common stock, and his interests may conflict with those of our other stockholders.

Upon completion of this offering, we will have two classes of authorized common stock: Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote per share on all matters presented to our stockholders generally. Each share of Class B common stock is entitled to ten votes per share on all matters presented to our stockholders generally until a Sunset becomes effective. After a Sunset becomes effective (as described in “Organizational StructureVoting Rights of Common Stock”), each share of Class B common stock will be entitled to one vote per share instead of ten votes per share. Holders of common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our certificate of incorporation.

Upon completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares of our Class A common stock), Hamdi Ulukaya will indirectly own, through his controlling ownership of FHU US Holdings, 100% of our Class B common stock (representing    % of the total combined voting power of our issued and outstanding common stock). As a result, Hamdi Ulukaya will be able to control matters requiring stockholder approval, including the election and removal of directors, changes to our organizational documents and significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership makes it unlikely that any holder or group of holders of our Class A common stock will be able to affect the way we are managed or the direction of our business.

The interests of Hamdi Ulukaya with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders. Hamdi Ulukaya would have to approve any potential acquisition of us. The existence of significant stockholders may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management or limiting the ability of our other stockholders to approve transactions that they may deem to be in our best interests. Hamdi Ulukaya’s concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders.

Our certificate of incorporation will contain provisions renouncing our interest and expectation to participate in certain corporate opportunities identified by or presented to certain of our existing investors.

Each of Hamdi Ulukaya, HOOPP and their respective affiliates may engage in certain activities similar to ours or lines of business or have an interest in similar areas of corporate opportunities as we do. Our certificate of incorporation will provide that each of Hamdi Ulukaya, HOOPP and their respective affiliates will not have any duty to refrain from corporate opportunities of (1) engaging, directly or indirectly, in certain similar business activities or lines of business as us or (2) doing business with any of our clients, customers or vendors. In the event that Hamdi Ulukaya, HOOPP or any of their respective affiliates acquire knowledge of a potential business opportunity (except in their capacity as a director or officer) which may be a corporate opportunity for us, they will have no duty to communicate or offer such corporate opportunity to us. Our certificate of incorporation will also provide that, to the fullest extent permitted by law, none of Hamdi Ulukaya, HOOPP or their respective affiliates will be liable to us, for breach of any fiduciary duty or otherwise, by reason of the fact that any of them direct such corporate opportunity to another person, or otherwise do not communicate information regarding such corporate opportunity to us, and we will waive and renounce any claim that such business opportunity constituted a corporate opportunity that should have been presented to us. These potential conflicts of interest could have a material and adverse effect on our business, financial

 

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condition, operating results, cash flows and prospects if attractive business opportunities are allocated by Hamdi Ulukaya, HOOPP or any of their respective affiliates to themselves instead of to us. See “Description of Capital StockCorporate Opportunity.”

For additional information relating to Hamdi Ulukaya’s personal business endeavors and potential adverse impacts on our company see “—Our success depends in part on the services, reputation, and popularity of Hamdi Ulukaya. Any loss of his services or adverse reactions to publicity relating to Hamdi Ulukaya, could adversely affect our revenues, results of operations, our ability to maintain or generate a consumer base, and execute our business strategy.”

Risks Related to Being a Public Company

The requirements of being a public company, including compliance with reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and                , may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we will be subject to the reporting requirements of the Exchange Act, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of                , and other applicable securities rules and regulations. These requirements may place a strain on our management, systems and resources. Compliance with these rules and regulations have caused us to incur and will continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and operating results and maintain effective disclosure controls and procedures and internal controls over financial reporting.                 requires that we comply with various corporate governance requirements. Significant resources and management oversight will be required to maintain and, if required, improve our disclosure controls and procedures and internal controls over financial reporting to meet this standard. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results, which could have a material adverse effect on us and the market price of our Class A common stock. Although we have already hired additional employees and repurposed existing employees to comply with these requirements, we may need to hire even more employees in the future, which will increase our costs and expenses.

The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Class A common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Our management team has limited experience managing a public company.

Most members of our management team have limited or no experience managing a publicly-traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies. There are significant obligations we will now be subject to relating to reporting, procedures and internal controls, and our management

 

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team may not successfully or efficiently manage our transition to being a public company. These new obligations and added scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, operating results and financial condition. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is likely that we will be required to expand our employee base and hire additional employees to support our operations as a public company which will increase our operating costs in future periods.

We will incur increased costs as a result of becoming a public company and in the administration of our organizational structure.

As a public company, we will incur significant legal, accounting, insurance and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the Securities and Exchange Commission (“SEC”). Following the completion of this offering, we will incur ongoing periodic expenses in connection with the administration of our organizational structure, including obligations related to the Tax Receivable Agreement. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

Prior to the completion of this offering, we were a private company and were not required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Additionally, our independent public accounting firm will be required to report on the effectiveness of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. Our independent registered public accounting firm may issue a report that is adverse to us in the event it is not satisfied with the level at which our controls are documented, designed or operating.

To comply with the requirements of being a public company, we have undertaken various actions, and may need to take additional actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our

 

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business. Additionally, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected, and we could become subject to lawsuits, sanctions or investigations by regulatory authorities, which would require additional financial and management resources.

If we cannot maintain our company culture or focus on our purpose as we grow, our success and our business and competitive position may be harmed.

We believe our culture and our purpose have been key contributors to our success to date and that the critical nature of the platform that we provide promotes a sense of greater purpose and fulfillment among our employees. Any failure to preserve our culture or focus on our mission could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. As we continue to grow and develop the infrastructure associated with being a public company, we will need to maintain our unique and distinctive culture and align a greater number of employees with our mission to ensure our success through on-going, meaningful employee engagement and leadership development initiatives. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline.

The trading market for our Class A common stock will partially depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline. If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates or at all.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. For example, several of the reports rely on or employ projections of consumer adoption and incorporate data from secondary sources such as company websites as well as industry, trade and government publications. While our estimates of market size and expected growth of our market were made in good faith and are based on assumptions and estimates we believe to be reasonable, these estimates may not prove to be accurate. Even if the market in which we compete meets the size estimates and growth forecast in this prospectus, our business could fail to grow at the rate we anticipate or at all.

 

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Disruptions in the worldwide economy may adversely affect our business, results of operations and financial condition.

Our results of operations could be adversely affected by general conditions in the global economy and in the global markets. For example, the COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, created significant volatility and disruption in financial markets and increased unemployment levels, all of which may become heightened concerns upon any subsequent wave of infection or future developments. Adverse and uncertain economic conditions may impact distributor, retailer and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, manufacturers, distributors, retailers and creditors may suffer. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns. In addition, consumers may choose to purchase private label products rather than branded products because they are generally less expensive. Distributors and retailers may become more conservative in response to these conditions and seek to reduce their inventories. Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with our existing distributors, retailer customers, our ability to attract new consumers, the financial condition of our consumers and our ability to provide products that appeal to consumers at the right price. Prolonged unfavorable economic conditions may have an adverse effect on our sales and profitability.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements regarding, among other things, our market opportunities, anticipated improvements or challenges in operations, regulatory developments, our plans, earnings, cash flow and expense estimates, strategies and prospects (both business and financial) and our results of operations, financial position, and future prospects following the offering described herein. All statements other than statements of historical fact, including statements regarding guidance, industry prospects, or future results of operations or financial position, are forward-looking. We use words such as “anticipate,” “believe,” “expect,” “estimate,” “intend,” “objective,” “plan,” “project,” “seek,” “strategy,” “target,” “will” and similar expressions to identify forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from those expressed in forward-looking statements include, among others:

 

   

prices and availability of raw materials that we use to manufacture our products, including, milk;

 

   

disruption to our manufacturing or distribution operations;

 

   

changes in our relationships with significant customers, suppliers, and other business relationships;

 

   

our ability to anticipate consumer demand and preferences for our products, to offer new products to meet those changes, and to respond to competitive innovation;

 

   

uncertainties associated with our ability to implement our business strategy and to innovate successfully;

 

   

our ability to drive revenue growth in our key product categories, increase our market share, or add products that are in faster-growing and more profitable categories;

 

   

consolidation or loss of our customers;

 

   

changes in consumer spending and general economic conditions;

 

   

any event that could have a material adverse effect on our brands or reputation, such as product contamination or protracted quality control difficulties;

 

   

factors affecting our ability to compete;

 

   

costs associated with product processing and transportation;

 

   

the impact of present or future domestic and

 

   

international government regulations affecting our operations, including worker safety and environmental laws;

 

   

our ability to hire and maintain key personnel or a highly skilled and diverse workforce;

 

   

the impact of restrictive debt covenants on our operating flexibility;

 

   

risks associated with our leverage and debt service obligations;

 

   

our ability to obtain, protect, maintain, and enforce our intellectual property rights;

 

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significant disruptions in our information technology systems, including data security breaches, cyber-attacks, and other unauthorized or improper access;

 

   

our ability to insure against any potential losses;

 

   

the nature, duration, or scope of the overall impact of the COVID-19 pandemic on our business, financial condition, and results of operations; and

 

   

other risks, uncertainties and factors set forth in this prospectus, including those set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

 

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ORGANIZATIONAL STRUCTURE

On June 15, 2021, Chobani Inc. was incorporated as a Delaware corporation. Prior to this offering, Chobani Inc. had no business operations. Our business is currently conducted through Chobani Global Holdings.

Historical Ownership Structure

Chobani Global Holdings is owned by Hamdi Ulukaya, employees and HOOPP. Immediately prior to the Reorganization described below, the outstanding equity capital of Chobani Global Holdings consists of two classes of membership units (which we refer to collectively as the “Pre-IPO Units”):

 

   

Pre-IPO Class A Units.    All of the Pre-IPO Class A Units are held by FHU US Holdings. FHU US Holdings is controlled by:

 

   

Hamdi Ulukaya, who beneficially owns 80% of the membership units of FHU US Holdings; and

 

   

HOOPP Blocker, an entity that is taxable as a corporation for U.S. federal income tax purposes that is controlled by HOOPP, which owns 20% of the membership units of FHU US Holdings.

 

   

Pre-IPO Class B Units.    All of the Pre-IPO Class B Units are held on behalf of certain Chobani employees indirectly through CGH Management Holdings. CGH Management Holdings holds the Pre-IPO Class B Units to satisfy its obligations under grants to certain of our employees.

 

   

Incentive Plans.    Chobani Global Holdings has historically maintained a number of employee incentive plans, pursuant to which our employees and directors and CGH Management Holdings (which issues grants to certain of our employees), are eligible to receive awards with respect to which we have allocated an aggregate 12.5% stake in Chobani Global Holdings (or        % after giving effect to the offering). These plans are the 2016 Growth Sharing Plan and the 2020 Value Sharing Plan, the 2016 Management Plan and the 2020 Management Plan.

 

   

Chobani Global Holdings maintains the 2016 Growth Sharing Plan pursuant to which employees, officers, directors, consultants, and service providers were eligible to receive an award of “growth units” entitling the participant to receive consideration in excess of a threshold value determined by the administrator subject to specified vesting requirements upon an initial public offering or sale of Chobani Global Holdings. Effective January 1, 2020, the 2016 Growth Sharing Plan was replaced by the 2020 Value Sharing Plan. Growth units are not membership interests in Chobani Global Holdings. Following the Reorganization, at the election of Chobani Global Holdings, growth units may be settled for participants to whom they were granted into cash or shares of Class A common stock of Chobani Inc.

 

   

Chobani Global Holdings maintains the 2020 Value Sharing Plan pursuant to which employees, officers, directors, consultants, and service providers are eligible to receive an award of “value units,” which are full value awards subject to specified vesting requirements entitling the participant to receive consideration upon an initial public offering or sale of Chobani Global Holdings. Value units are not membership interests in Chobani Global Holdings. Following the Reorganization, at the election of Chobani Global Holdings, value units may be settled for participants to whom they were granted into cash or shares of Class A common stock of Chobani Inc.

 

   

Chobani Global Holdings maintains the Chobani Global Holdings Incentive Plan, pursuant to which employees, officers, directors, consultants, and service providers, as well as CGH Management Holdings (which issues grants to certain of our employees) are eligible to

 

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receive awards of Pre-IPO Class B Units in excess of a threshold value determined by the administrator subject to specified vesting requirements upon an initial public offering or sale of Chobani Global Holdings. The only holder of outstanding Pre-IPO Class B Units is CGH Management Holdings. CGH Management Holdings then in turn grants awards of Class B Units of CGH Management Holdings to employees, officers, directors, consultants, and service providers of Chobani Global Holdings and its affiliates. Historically these grants were made under the 2016 Management Plan, and since 2020, grants have been made under the 2020 Management Plan.

The diagram below summarizes the ownership structure of Chobani Global Holdings’s consolidated operations prior to the Reorganization.

 

 

LOGO

The Reorganization

The following actions will be taken in connection with the closing of this offering:

 

   

Chobani Inc. will amend and restate its certificate of incorporation to, among other things, provide for two classes of authorized common stock: Class A common stock and Class B common stock. Each share of Class A common stock is entitled to one vote per share on all matters presented to our stockholders generally. Each share of Class B common stock is entitled to ten votes per share on all matters presented to our stockholders generally until a Sunset becomes effective. After a Sunset becomes effective (as described in “—Voting Rights of Common Stock”), each share of our Class B common stock will entitle its holder to one vote per share instead of ten votes per share. The holders of Class B common stock will not have any economic rights, including any of the economic rights (including the rights to dividends) provided to holders of Class A common stock.

 

   

Holders of our common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise provided in our certificate of incorporation or as required by applicable law. See “Description of Capital Stock.”

 

   

Chobani Inc. will sell to the underwriters in this offering                 shares of our Class A common stock.

 

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Chobani Inc. will issue shares of Class B common stock to FHU US Holdings, with the result that Hamdi Ulukaya will directly or indirectly own all the outstanding shares of Class B common stock.

 

   

We do not intend to list our Class B common stock on any stock exchange.

 

   

HOOPP holds its interest in Chobani Global Holdings through HOOPP Blocker. HOOPP Blocker will merge with a newly-formed, wholly-owned subsidiary of Chobani Inc., with HOOPP Blocker surviving, and, subsequently, merging with and into Chobani Inc. (the two mergers, together, the “Blocker Merger”), with Chobani Inc. surviving. Chobani Inc. will transfer to HOOPP a combination of cash funded by a portion of the net proceeds of this offering and will issue shares of Class A common stock as merger consideration in connection with the Blocker Merger. As a result of the Blocker Merger, HOOPP effectively will have indirectly transferred Pre-IPO Class A Units representing a         % interest in Chobani Inc. and, following completion of the Reorganization and the offering, HOOPP will indirectly own, through its ownership of Class A common stock, approximately        % of Chobani Inc. on a fully-diluted basis.

 

   

The operating agreement of Chobani Global Holdings will be amended and restated (as amended and restated, the “CGH LLC Agreement”) (See “—The CGH LLC Agreement”) to cause its membership units to be reclassified into:

 

   

new Class A Units, held only by Chobani Inc., as the sole managing member of Chobani Global Holdings;

 

   

new Class B Units (formerly Pre-IPO Class A Units) held by FHU US Holdings; and

 

   

new Class M Units (formerly Pre-IPO Class B Units) held on behalf of certain Chobani employees indirectly through CGH Management Holdings.

 

   

Chobani Inc. will use approximately $                 million of the net proceeds of this offering to purchase Class B Units held directly by FHU US Holdings and indirectly by Hamdi Ulukaya at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock in this offering (or $                million if the underwriters exercise their option to purchase additional shares in full). As a result, Hamdi Ulukaya effectively will have sold Class B Units representing a         % interest in Chobani Inc. and, following completion of the Reorganization and the offering, will directly or indirectly own approximately         % of Chobani Inc. on a fully-diluted basis.

Our Class A Common Stock

We expect                shares of our Class A common stock to be outstanding after this offering (or                shares if the underwriters exercise their option to purchase additional shares in full), all of which will be sold pursuant to this offering. Each share of Class A common stock will entitle the holder to one vote per share. See “—Voting Rights of Common Stock.”

Holders of Class A common stock are entitled to receive dividends when, as and if declared by our board of directors out of legally available funds.

Our Class B Common Stock

For each Class B Unit (formerly, a Pre-IPO Class A Unit) of Chobani Global Holdings acquired from FHU US Holdings, we will issue one corresponding share of our Class B common stock. Immediately following the Reorganization, we will have outstanding                shares of Class B common stock, all of which will be beneficially owned by Hamdi Ulukaya assuming no exercise of the underwriters’ option to purchase additional shares and                shares of Class B common stock will

 

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be directly and indirectly held by Hamdi Ulukaya if the underwriters exercise their option to purchase additional shares in full. Each share of our Class B common stock will entitle its holder to ten votes per share until a Sunset becomes effective. After a Sunset becomes effective, each share of Class B common stock will entitle its holder to one vote per share instead of ten votes per share. Because a Sunset may not take place for some time, it is expected that the Class B common stock will continue to entitle its holder to ten votes per share, and such holder will continue to exercise voting control of the Company, for the near future. See “—Voting Rights of Common Stock.”

Hamdi Ulukaya will directly or indirectly control approximately                % of the combined voting power of our common stock (or                % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). When a Class B Unit is exchanged for a share of our Class A common stock, the corresponding share of our Class B common stock will automatically be retired.

Holders of Class B common stock will not be entitled to dividends distributed by Chobani Inc. because such shares are non-economic interests. The shares of Class B common stock are expected to have no (or nominal) value because such shares are non-economic interests and are expected to be generally non-transferable.

Post-Offering Holding Company Structure

This offering is being conducted through what is commonly referred to as an “UP-C” structure. The UP-C structure is often used by partnerships and limited liability companies undertaking an initial public offering. The UP-C structure provides the existing partners or members, as applicable, with the tax advantage of continuing to own interests in a pass-through structure and provides potential future tax benefits for the public company and economic benefits for the continuing partners or members, as applicable when they ultimately exchange their pass-through interests and corresponding shares of Class B common stock for shares of Class A common stock. See “—Tax Receivable Agreement.”

Chobani Inc. will be a holding company and, following this offering, its only business will be to act as the managing member of Chobani Global Holdings, and its only material assets will be Class A Units representing approximately        % of Chobani Global Holdings units (or        % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). In its capacity as the managing member, Chobani Inc. will operate and control all of Chobani Global Holdings’s business and affairs. We will consolidate the financial results of Chobani Global Holdings and will report non-controlling interests (“NCI”) related to the interests held by FHU US Holdings and CGH Management Holdings, the continuing members of Chobani Global Holdings, in our consolidated financial statements. The membership interests of Chobani Global Holdings owned by us will be classified as Class A Units. Approximately        % of Chobani Global Holdings units (or        % if the underwriters exercise their option to purchase additional shares of Class A common stock in full), held by FHU US Holdings, will be classified as Class B Units.    Approximately         % of Chobani Global Holdings units (or        % if the underwriters exercise their option to purchase additional shares of Class A common stock in full), held on behalf of certain Chobani employees indirectly through CGH Management Holdings, will be classified as Class M Units. Chobani Inc. consolidates Chobani Global Holdings due to Chobani Inc.’s power to control Chobani Global Holdings, making it the primary beneficiary and sole managing member of the variable interest entity.

Pursuant to the CGH LLC Agreement, each Class B Unit will be exchangeable for one share of Chobani Inc.’s Class A common stock or, at Chobani Inc.’s election, for cash, subject to certain restrictions pursuant to the CGH LLC Agreement. The exchange ratio is subject to appropriate adjustment by Chobani Inc. in the event Class A Units are issued to Chobani Inc. without issuance of a corresponding number of shares of Class A common stock or in the event of certain reclassifications,

 

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reorganizations, recapitalizations or similar transactions. When Class B Units are exchanged for cash or shares of our Class A common stock, at the election of Chobani Inc., it will result in the automatic retirement of the corresponding number of shares of our Class B common stock and, therefore, will decrease the aggregate voting power of the Class B common stock.

Subject to certain restrictions, the CGH LLC Agreement will entitle any holder of Class M Units to exchange their vested Class M Units for cash or a number of shares of Class A common stock, at the election of Chobani Inc., that will generally be equal in value to the implied “spread value” of the corresponding Class M Units (calculated based on the excess of the public trading price of Class A common stock at the time of the exchange over the participation threshold of such Class M Units).

The diagram below depicts our organizational structure following the consummation of the Reorganization and this offering.

 

 

LOGO

 

(1)

Chobani Inc. will own all of the Class A Units of Chobani Global Holdings after the Reorganization, which upon the completion of this offering will represent the right to receive approximately        % of any distributions made by Chobani Global Holdings assuming no exercise of the underwriters’ option to purchase additional shares and approximately        % of any distributions made by Chobani Global Holdings if the underwriters exercise their option to purchase additional shares in full. While this interest represents a minority of economic interests in Chobani Global Holdings, it represents 100% of the voting power of Chobani Global Holdings, and Chobani Inc. will act as the managing member of Chobani Global Holdings. As a result, Chobani Inc. will operate and control all of Chobani Global Holdings’s business and affairs and will be able to consolidate its financial results into Chobani Inc.’s financial statements.

Subject to the availability of net cash flow at the Chobani Global Holdings level, Chobani Inc. intends to cause Chobani Global Holdings to distribute to Chobani Inc. and the other members of Chobani Global Holdings pro rata cash distributions for the purposes of funding tax obligations in respect of the taxable income and net capital gain that is allocated to the members of Chobani Global Holdings and Chobani Inc.’s obligations to make payments under the Tax Receivable Agreement. In addition, Chobani Global Holdings will reimburse Chobani Inc. for corporate and other overhead expenses.

Assuming Chobani Global Holdings makes distributions to its members in any given year, the determination to pay dividends, if any, to our Class A stockholders out of the portion, if any, of such distributions remaining after our payment of taxes, Tax Receivable Agreement payments and

 

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expenses (any such portion, an “excess distribution”) will be made by our board of directors. Because our board of directors may determine to pay or not pay dividends to our Class A stockholders, our Class A stockholders may not necessarily receive dividend distributions relating to our excess distributions, even if Chobani Global Holdings makes such distributions to us.

The CGH LLC Agreement

As a result of the Reorganization, Chobani Inc., as sole managing member, will control the business of Chobani Global Holdings and its consolidated subsidiaries. The operations of Chobani Global Holdings, and the rights and obligations of its members, are set forth in the CGH LLC Agreement, a form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part. The following is a description of certain terms of the CGH LLC Agreement.

Classes of Chobani Global Holdings Units

Chobani Global Holdings will cause its membership units to be reclassified into (i) new Class A Units held only by Chobani Inc., as the sole managing member of Chobani Global Holdings; (ii) Class B Units (formerly Pre-IPO Class A Units) held by FHU US Holdings; and (iii) Class M Units (formerly Pre-IPO Class B Units) held on behalf of certain Chobani employees indirectly through CGH Management Holdings.

After the closing of this offering, Class B Units may be exchanged for Class A common stock or, at the election of Chobani Inc., for cash, subject to certain restrictions pursuant to the CGH LLC Agreement. When Class B Units are exchanged for cash or shares of our Class A common stock, at the election of Chobani Inc., it will result in the automatic retirement of the corresponding number of shares of our Class B common stock and, therefore, will decrease the aggregate voting power of the Class B common stock.

All of the Pre-IPO Class B Units are held on behalf of certain Chobani employees indirectly through CGH Management Holdings. Following the adoption of the CGH LLC Agreement, the Pre-IPO Class B Units will be reclassified into Class M Units. Subject to certain restrictions, the CGH LLC Agreement will entitle any holder of Class M Units to exchange their vested Class M Units for cash or a number of shares of Class A common stock, at the election of Chobani Inc., that will generally be equal in value to the implied “spread value” of the corresponding Class M Units (calculated based on the excess of the public trading price of Class A common stock at the time of the exchange over the participation threshold of such Class M Units).

Economic Rights of Unitholders

Class A Units and Class B Units will have the same economic rights per unit. After the closing of this offering, the holders of Chobani Inc.’s Class A common stock (indirectly through Chobani Inc.) and the holder of Class B Units of Chobani Global Holdings, Hamdi Ulukaya, will hold approximately        % and        %, respectively, of the economic interests in Chobani Inc.’s business (or         % and        %, respectively, if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

Net profits and net losses of Chobani Global Holdings generally will be allocated on a pro rata basis in accordance with the number of units held by such holder; however, under applicable tax rules, Chobani Global Holdings will be required to allocate taxable income disproportionately to its members in certain circumstances. The CGH LLC Agreement will provide for quarterly cash distributions, which we refer to as “tax distributions,” to the holders of the units generally equal to the taxable income

 

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allocated to each holder of units (with certain adjustments) multiplied by an assumed tax rate. It is intended that tax distributions by Chobani Global Holdings will be made to each of its members in an amount to enable each member to pay all applicable taxes on taxable income allocable to such member. The CGH LLC Agreement generally will require tax distributions to be pro rata based on the ownership of Chobani Global Holdings units, however, if the amount of tax distributions to be made exceeds the amount of funds available for distribution, Chobani Inc. shall receive a tax distribution before the other members receive any distribution, and the balance, if any, of funds available for distribution shall be distributed to the other members pro rata in accordance with their assumed tax liabilities, and then to all members (including Chobani Inc.) pro rata until each member receives the full amount of its tax distribution using the individual tax rate. For a more complete overview of the assumed tax rate calculation, see “—Certain Tax Consequences to Chobani Inc.” In addition, Chobani Global Holdings will make non-pro rata payments to reimburse Chobani Inc. for corporate and other overhead expenses (which payments from Chobani Global Holdings will not be treated as distributions under the CGH LLC Agreement). However, Chobani Global Holdings may not make distributions or payments to its members if doing so would violate any applicable law or result in Chobani Global Holdings or any of its subsidiaries being in default under any material agreement governing indebtedness (which we do not expect to be the case upon the closing of this offering and the Reorganization).

Voting Rights of Unitholders

After the closing of this offering, Chobani Inc. will act as the managing member of Chobani Global Holdings. In its capacity as the managing member of Chobani Global Holdings, Chobani Inc. will control Chobani Global Holdings’s business and affairs. Chobani Global Holdings will issue Class A Units to Chobani Inc., and Class B Units to FHU US Holdings. The Class B Units will have no voting or management rights with respect to Chobani Global Holdings or otherwise. Class M Units will be held on behalf of certain Chobani employees indirectly through CGH Management Holdings. The Class B Units and Class M Units will have no voting or management rights with respect to Chobani Global Holdings or otherwise.

Coordination of Chobani Inc. and Chobani Global Holdings

Any time Chobani Inc. issues a share of its Class A common stock for cash, unless used to settle an exchange of a Class B Unit for cash, the net proceeds received by Chobani Inc. will be promptly transferred to Chobani Global Holdings, and Chobani Global Holdings will issue to Chobani Inc. a Class A Unit. If at any time Chobani Inc. issues a share of its Class A common stock upon an exchange of a Class B Unit or Class M Unit or settles such exchange for cash as described below under “—Exchange Rights,” Chobani Inc. will contribute the exchanged unit to Chobani Global Holdings and such Class B Units or Class M Units will convert into a Class A Unit in Chobani Global Holdings. In the event that Chobani Inc. issues other classes or series of its equity securities (other than pursuant to our incentive compensation plans), Chobani Global Holdings will issue to Chobani Inc. an equal amount of equity securities of Chobani Global Holdings with designations, preferences and other rights and terms that are substantially the same as Chobani Inc.’s newly issued equity securities. If at any time Chobani Inc. issues a share of its Class A common stock pursuant to our 2021 Plan or other equity plan, Chobani Inc. will contribute to Chobani Global Holdings all of the proceeds that it receives (if any) and Chobani Global Holdings will issue to Chobani Inc. an equal number of its Class A Units, having the same restrictions, if any, as are attached to the shares of Class A common stock issued under the plan. If Chobani Inc. repurchases, redeems or retires any shares of its Class A common stock (or its equity securities of other classes or series), Chobani Global Holdings will, immediately prior to such repurchase, redemption or retirement, repurchase, redeem or retire an equal number of Class A Units (or its equity securities of the corresponding classes or series) held by Chobani Inc., upon the same terms and for the same consideration, as the shares of our Class A

 

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common stock (or our equity securities of such other classes or series) are repurchased, redeemed or retired. In addition, Chobani Global Holdings units, as well as Chobani Inc.’s common stock, will be subject to equivalent stock splits, dividends, reclassifications and other subdivisions. Chobani Inc. may issue additional shares of Class B common stock from time to time. Chobani Inc. will issue additional shares of Class B common stock only to holders of Class B Units in a number necessary to maintain a one-to-one ratio between the number of Class B Units and the number of shares of Class B common stock outstanding.

Issuances and Transfer of Chobani Global Holdings Units

Class A Units will be issued only to Chobani Inc. and are non-transferable except as provided in the CGH LLC Agreement. Class B Units will be issued in connection with the Reorganization as described herein and may be issued pursuant to the CGH LLC Agreement, provided that a corresponding number of shares of Class B common stock is issued to the holder of such Class B Units. Class B Units may not be transferred, except with Chobani Inc.’s consent or to a permitted transferee, subject to such conditions as Chobani Inc. may specify. In addition, Hamdi Ulukaya (or any other holder) may not transfer any Class B Units unless he (or such other holder) transfers an equal number of shares of Chobani Inc.’s Class B common stock to the same transferee. Class M Units may be issued from time to time pursuant to the CGH LLC Agreement.

Under the CGH LLC Agreement, Chobani Inc. can require the holders of Class B Units and Class M Units to sell all of their interests in Chobani Global Holdings in the event of certain acquisitions of Chobani Global Holdings.

Certain Tax Consequences to Chobani Inc.

The holders of Chobani Global Holdings units, including Chobani Inc., generally will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Chobani Global Holdings. Net income and net losses of Chobani Global Holdings generally will be allocated to its members pro rata in proportion to their respective membership units, though certain non-pro rata adjustments may be made to reflect depreciation, amortization and other allocations. In accordance with the CGH LLC Agreement, we intend to cause Chobani Global Holdings to make pro rata distributions to each of its members, including Chobani Inc., in an amount intended to enable each member to pay all applicable taxes on taxable income allocable to such member, and to make non-pro rata payments to Chobani Inc. to reimburse it for corporate and other overhead expenses (which payments from Chobani Global Holdings will not be treated as distributions under the CGH LLC Agreement). If the amount of tax distributions to be made exceeds the amount of funds available for distribution, Chobani Inc. shall receive a tax distribution before the other members of Chobani Global Holdings receive any distribution, and the balance, if any, of funds available for distribution shall be distributed first to the other members of Chobani Global Holdings pro rata in accordance with their assumed tax liabilities, and then to all members (including Chobani Inc.) pro rata until each member receives the full amount of its tax distribution using the individual tax rate. Generally, these tax distributions will be computed based on our estimate of the net taxable income of Chobani Global Holdings allocable per unit (based on the member which is allocated the largest amount of taxable income on a per unit basis) multiplied by an assumed tax rate equal to the highest combined U.S. federal and applicable state and local tax rate applicable to any natural person residing in, or corporation doing business in New York, New York that is taxable on that income (taking into account certain other assumptions, and subject to adjustment to the extent that state and local taxes are deductible for U.S. federal income tax purposes).

Chobani Global Holdings will have in effect an election under Section 754 of the Code for the taxable year of the offering and each taxable year in which an exchange of Class B Units for shares of

 

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our Class A common stock occurs. As a result of this election, the initial acquisitions and future exchanges of Class B Units for shares of our Class A common stock are expected to result in increases in the tax basis of the tangible and intangible assets of Chobani Global Holdings, which will be allocated to Chobani Inc. and are expected to increase the tax depreciation and amortization deductions available to Chobani Inc. and decrease gains, or increase losses, on a sale or other taxable disposition, if any, of such assets and therefore may reduce the amount of tax that Chobani Inc. would otherwise be required to pay.

Tax Receivable Agreement

Chobani Inc. will enter into the Tax Receivable Agreement for the benefit of the TRA Parties pursuant to which Chobani Inc. will pay to the TRA Parties 85% of the amount of the net cash tax savings, if any, that Chobani Inc. realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Chobani Inc.’s acquisition of Class B Units and certain Class M Units in connection with this offering and in future exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Chobani Inc. will acquire in the Blocker Merger and (iii) any payments Chobani Inc. makes to the TRA Parties under the Tax Receivable Agreement (including tax benefits related to imputed interest).

Voting Rights of Common Stock

Except as provided in our certificate of incorporation or as required by applicable law, holders of our common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval. Holders of the Class A common stock and Class B common stock, as the case may be, would have a separate class vote if we subdivide, combine or reclassify shares of the other class without concurrently subdividing, combining or reclassifying shares of such class in a proportional manner. Pursuant to the DGCL, the holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the par value of the shares of such class or alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely. Each share of Class A common stock is entitled to one vote per share on all matters presented to our stockholders generally. Each share of Class B common stock is entitled to ten votes per share on all matters presented to our stockholders generally until a Sunset becomes effective. After a Sunset becomes effective, each share of Class B common stock will entitle its holder to one vote per share instead of ten votes per share.

A “Sunset” becomes effective when Hamdi Ulukaya or his affiliates or permitted transferees cease to maintain beneficial ownership of at least 15% of the aggregate number of shares of our issued and outstanding common stock beneficially owned as of the date of completion of this offering.

Because a Sunset may not take place for some time, it is expected that the Class B common stock will continue to entitle its beneficial owner, Hamdi Ulukaya, to ten votes per share, and such holder will continue to exercise voting control of our company for the near future.

Immediately after this offering, Hamdi Ulukaya will indirectly own, through his controlling ownership FHU US Holdings, approximately        % of the combined voting power of our common stock (or        % if the underwriters exercise their option to purchase additional shares in full). When Hamdi Ulukaya (or any other holder) exchanges Class B Units for cash or shares of our Class A common stock, at the election of Chobani Inc., it will result in the automatic cancellation of the corresponding number of shares of our Class B common stock and, therefore, will decrease the aggregate voting power of the Class B common stock.

 

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Exchange Rights

The CGH LLC Agreement will entitle any holder of Class B Units to exchange their Class B Units for Class A common stock on a one-for-one basis, or, at the election of Chobani Inc., for cash. The exchange ratio is subject to appropriate adjustment by Chobani Inc. in the event Class A Units are issued to Chobani Inc. without issuance of a corresponding number of shares of Class A common stock or in the event of certain reclassifications, reorganizations, recapitalizations or similar transactions.

The CGH LLC Agreement will provide that any holder of Class B Units will not have the right to exchange Class B Units if we determine that such exchange would be prohibited by law or regulation or would violate other agreements with the Company, Chobani Global Holdings or any of their subsidiaries to which Chobani Global Holdings unitholder is subject. We intend to impose additional restrictions on exchanges that we determine to be necessary or advisable so that Chobani Global Holdings is not treated as a “publicly traded partnership” for U.S. federal income tax purposes.

The CGH LLC Agreement also provides for mandatory exchanges under certain circumstances, including at the option of Chobani Inc. if the number of Class A Units and Class B Units outstanding and held by its members (other than those held by Chobani Inc.) is less than 10% of the outstanding Class A Units and Class B Units of Chobani Global Holdings or in the discretion of Chobani Inc. with the consent of holders of at least 50% of the outstanding Class B Units.

Shares of Class B common stock retired upon an exchange will be restored to the status of authorized but unissued shares of Class B common stock.

Subject to certain restrictions, the CGH LLC Agreement will entitle any holder of Class M Units to exchange their vested Class M Units for cash or a number of shares of Class A common stock, at the election of Chobani Inc., that will generally be equal in value to the implied “spread value” of the corresponding Class M Units (calculated based on the excess of the public trading price of Class A common stock at the time of the exchange over the participation threshold of such Class M Units).

Registration Rights Agreement

Prior to the completion of this offering, we intend to enter into the Registration Rights Agreement with Hamdi Ulukaya and HOOPP. This agreement will provide Hamdi Ulukaya with certain registration rights whereby, at any time following the lockup restrictions described in this prospectus, he will have the right to require us to register under the Securities Act the shares of Class A common stock issuable upon exchange of Class B Units. The Registration Rights Agreement will also provide for piggyback registration rights for Hamdi Ulukaya and HOOPP, subject to certain conditions and exceptions.

 

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USE OF PROCEEDS

We estimate that the net proceeds from this offering, based on an assumed initial public offering price of $                per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), after deducting estimated underwriting discounts and commissions, but before deducting expenses of this offering and the Reorganization payable by us, will be approximately $                million, or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock.

Each $1.00 increase or decrease in the assumed initial public offering price of $                per share of Class A common stock would increase or decrease the net proceeds to us from this offering by approximately $                million, assuming that the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions but before deducting expenses of this offering and the Reorganization payable by us. Similarly, each increase or decrease of one million in the number of shares of Class A common stock offered by us would increase or decrease the net proceeds to us from this offering by approximately $                million, assuming no change in the assumed initial public offering price of $                per share and after deducting estimated underwriting discounts and commissions but before deducting expenses of this offering and the Reorganization payable by us.

The principal purposes of this offering are to increase our financial flexibility, create a public market for our Class A common stock, and facilitate our future access to the capital markets. We intend to cause Chobani Global Holdings to use

 

   

$                million of the net proceeds to repay up to $530.0 aggregate principal amount outstanding of the 7.50% Senior Unsecured Notes due April 2025 (the “Senior Unsecured Notes”) and to repay other indebtedness;

 

   

$                million, or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, of the net proceeds to purchase Class B Units of Chobani Global Holdings indirectly held by Hamdi Ulukaya, at a per-unit price equal to the per-share price paid by the underwriters for shares of the Class A common stock in this offering. Accordingly, we will not retain any portion of such proceeds; and

 

   

$                million, or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, of the net proceeds to pay the cash consideration to HOOPP in connection with the Blocker Merger. Accordingly, we will not retain any portion of such proceeds.

We intend to cause Chobani Global Holdings to use the remaining net proceeds to pay the expenses incurred by us in connection with this offering and the Reorganization and for capital investment or other general corporate purposes.

The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and intermediate-term, interest-bearing, investment-grade securities.

 

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DIVIDEND POLICY

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends on our common stock for the foreseeable future. Any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our existing and any future debt and other factors that our board of directors deems relevant. Prior to our Reorganization, in April 2018, Hamdi Ulukaya received a distribution in accordance with the terms of the operating agreement of FHU US Holdings in the amount of $23.6 million.

Following the Reorganization and this offering, Chobani Inc. will be a holding company and its sole asset will be ownership of the Class A Units of Chobani Global Holdings, of which it will be the managing member. Subject to funds being legally available, we intend to cause Chobani Global Holdings to make pro rata distributions to each of its members, including Chobani Inc., in an amount intended to enable each member to pay all applicable taxes on taxable income allocable to such member and to allow Chobani Inc. to make payments under the Tax Receivable Agreement, and non-pro rata payments to Chobani Inc. to reimburse it for corporate and other overhead expenses. If the amount of tax distributions to be made exceeds the amount of funds available for distribution, Chobani Inc. shall receive the full amount of its tax distribution before the other members receive any distribution and the balance, if any, of funds available for distribution shall be distributed to the other members pro rata in accordance with their assumed tax liabilities. Holders of our Class A common stock are entitled to receive dividends when, as and if declared by our board of directors out of legally available funds. Holders of our Class B common stock will not be entitled to dividends distributed by Chobani Inc. because such shares are non-economic interests. The shares of Class B common stock are expected to have no (or nominal) value because such shares are non-economic interests and are expected to be generally non-transferable.

To the extent that the tax distributions Chobani Inc. receives exceed the amounts Chobani Inc. actually requires to pay taxes and other expenses and make payments under the Tax Receivable Agreement (because of the lower tax rate applicable to Chobani Inc. than the assumed tax rate on which such distributions are based or because a disproportionate share of the taxable income of Chobani Global Holdings may be required to be allocated to members in Chobani Global Holdings other than Chobani Inc.), our board of directors, in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, including potentially causing Chobani Inc. to contribute such excess cash (net of any operating expenses) to Chobani Global Holdings. Concurrently with any potential contribution of such excess cash, in order to maintain the intended economic relationship between the shares of Class A common stock and Chobani Global Holdings units after accounting for such contribution, Chobani Global Holdings and Chobani Inc., as applicable, may undertake ameliorative actions, which may include reverse splits, reclassifications, combinations, subdivisions or adjustments of outstanding units of Chobani Global Holdings and corresponding shares of Class A common stock of Chobani Inc., as well as corresponding adjustments to the shares of Class B common stock of Chobani Inc. To the extent that Chobani Inc. contributes such excess cash to Chobani Global Holdings (and undertakes such ameliorative actions), a holder of Class A common stock would not receive distributions in cash and would instead benefit through an increase in the indirect interest in Chobani Global Holdings represented by such holder’s Class A common stock. To the extent that Chobani Inc. does not distribute such excess cash as dividends on the Class A common stock or otherwise undertake such ameliorative actions and instead, for example, holds such cash balances, the members of Chobani Global Holdings (not including Chobani Inc.) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following an exchange of their Class B Units for shares of the Class A common stock, notwithstanding that such members may previously have participated as holders of Class B Units in distributions by Chobani Global Holdings that resulted in such excess cash balances at Chobani Inc.

 

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CAPITALIZATION

The following table sets forth the cash and capitalization as of March 27, 2021 of Chobani Global Holdings on a historical basis and Chobani Inc. on a pro forma basis to give effect to the Reorganization and the issuance and sale of shares of Class A common stock in this offering at an assumed initial public offering price of $                per share, the midpoint of the price range set forth on the cover page of this prospectus, after (i) deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the application of the proceeds from this offering, as described under “Use of Proceeds.”

You should read this information together with the information in this prospectus under “Selected Historical Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Capital Stock,” and with the consolidated financial statements and the related notes to those statements included elsewhere in this prospectus.

 

     As of March 27, 2021  
(in thousands, except per share amounts and unit data)    Historical
Chobani Global
Holdings, LLC
    Pro Forma
Chobani Inc.
 

Cash:

   $ 67,210     $                

Debt:

    

Trade Finance Facility

        

Revolving Credit Facility

        

Term Loan Facility

     399,000    

Australian Debt

        

Equipment Finance Facility

     36,583    

Finance Leases

     648    

Senior Unsecured Notes

     530,000    

Senior Secured Notes

     425,000    

Total debt(1):

   $ 1,391,231     $    

(1)  Amount excludes unamortized original issue discount, premium and debt issuance costs in the amount of $(21,631).

    

Class A Units (redeemable common units), no par value (298,451,086 Class A Units authorized, issued and outstanding at March 27, 2021;             Class A Units authorized,             Class A Units issued and outstanding, pro forma)

     2,213,062    

Members’ deficit:

    

Class B Units, no par value (42,635,870 Class B Units authorized, 22,771,875 Class B Units issued and outstanding at March 27, 2021, actual;             Class B Units authorized,             Class B units issued and outstanding, pro forma)

     16,798    

Class A common stock, $0.001 par value (no shares authorized, issued and outstanding, actual;             shares authorized,             shares issued and outstanding, pro forma)

            

Class B common stock, $0.001 par value (no shares authorized, issued and outstanding, actual;             shares authorized, no shares issued and outstanding, pro forma)

            

Accumulated deficit

     (2,866,801  

Accumulated other comprehensive loss

     19,866    

Total members’ deficit

   $ (2,869,869  

Total redeemable common units and members’ deficit:

   $ (656,807   $    

Total capitalization:

   $ 712,793     $    
  

 

 

   

 

 

 

 

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The above table does not include:

 

   

            shares of Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares;

 

   

                shares of Class A common stock reserved for issuance upon exchange of Class B Units beneficially owned by Hamdi Ulukaya;

 

   

                shares of Class A common stock reserved for issuance upon exchange of vested Class M Units held on behalf of certain Chobani employees indirectly through CGH Management Holdings;

 

   

            shares of Class A common stock issuable under the 2021 Plan (under which no equity awards have been granted as of                , 2021), including:

(i)                shares of Class A common stock underlying restricted stock units or other awards to be granted to certain employees and non-employee directors pursuant to the 2021 Plan immediately after the closing of this offering; and

(ii)                additional shares of Class A common stock to be reserved for future issuance of awards under the 2021 Plan;

 

   

            shares of Class A common stock reserved for issuance upon the conversion of vested value units issued or issuable under the 2020 Value Sharing Plan into shares of Class A common stock at settlement (under which                 Pre-IPO Class A Units are issued and outstanding as of                , 2021); and

 

   

            shares of Class A common stock reserved for issuance upon the conversion of vested growth units issued or issuable under the 2016 Growth Sharing Plan into shares of Class A common stock at settlement (under which                 Pre-IPO Class A Units are issued and outstanding as of                , 2021).

 

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DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A common stock immediately after the completion of this offering. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the book value per share attributable to the existing equity holders.

Our pro forma net tangible book value as of March 27, 2021 was approximately $                million, or $                per share of our Class A common stock. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, and pro forma net tangible book value per share represents pro forma net tangible book value divided by the number of shares of Class A common stock outstanding, after giving effect to the Reorganization and assuming the exchange of all Class B Units and Class M Units outstanding immediately following the completion of the Reorganization and this offering for newly issued shares of our Class A common stock on a one-for-one basis as if such units were immediately exchangeable.

 

     (in thousands)  

Pro forma assets

   $                

Pro forma liabilities

  
  

 

 

 

Pro forma book value

   $    

Less:

  

Goodwill

  

Intangible assets, net

  
  

 

 

 

Pro forma net tangible book value after this offering

   $    

Less:

  

Proceeds from offering net of underwriting discounts

  

Purchase of Class B Units in Chobani Global Holdings, LLC

  

Offering expenses

  
  

 

 

 

Pro forma net tangible book value as of March 27, 2021

   $    
  

 

 

 

After giving effect to (i) the Reorganization, (ii) the issuance and sale by us of                shares of our Class A common stock in this offering at an assumed initial public offering price of $                per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and assuming the exchange of all Class B Units and Class M Units outstanding immediately following the completion of the Reorganization and this offering for shares of our Class A common stock as if such units were immediately exchangeable; and (iii) the application of such proceeds as described in the section entitled “Use of Proceeds,” our net tangible book value, our pro forma net tangible book value as of March 27, 2021 would have been $                million, or $                per share. This represents an immediate increase in pro forma net tangible book value of $                per share to existing equity holders and an immediate dilution in net tangible book value of $                per share to new investors.

 

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The following table illustrates this dilution on a per share basis assuming the underwriters do not exercise their option to purchase additional shares:

 

Assumed initial public offering price per share

      $                

Pro forma net tangible book value per share of Class A common stock as of March 27, 2021

   $                   

Increase in pro forma net tangible book value per share attributable to new investors

   $       
  

 

 

    

Pro forma net tangible book value per share after the offering

      $    
     

 

 

 

Dilution in pro forma net tangible book value per share to new investors

      $    
     

 

 

 

The information in the preceding table is based on an assumed offering price of $                per share, the midpoint of the price range set forth on the cover page of this prospectus. A $1.00 increase or decrease in the assumed price per share would increase or decrease, respectively, the pro forma net tangible book value after this offering by approximately $                million and increase or decrease the dilution per share of Class A common stock to new investors in this offering by $                per share, in each case calculated as described above and assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, each increase or decrease of one million shares in the number of shares of our Class A common stock offered by us would increase or decrease, as applicable, our pro forma net tangible book value by approximately $                per share and increase or decrease, as applicable, the dilution to new investors in this offering by $                per share, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, on the same pro forma basis as of March 27, 2021, the total number of shares of Class A common stock purchased from us, the total cash consideration paid to us and the average price per share paid by the existing equity holders and by new investors purchasing shares in this offering, assuming the exchange of all outstanding Class B Units and Class M Units for shares of our Class A common stock on a one-for-one basis as if such units were immediately exchangeable.

 

     Shares purchased(1)     Total consideration(2)     Average
price
per share
 
       Number              %             Number              %      

Existing stockholders

                                                                             

New investors

                          
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

        100        100  

 

(1)

If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own approximately        % and our new investors would own approximately        % of the total number of shares of our Class A common stock outstanding after this offering.

(2)

If the underwriters exercise their option to purchase additional shares in full, the total consideration paid by our new investors would be approximately $                 (or         %).

The above table does not include:

 

   

            shares of Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares;

 

   

                shares of Class A common stock reserved for issuance upon exchange of Class B Units beneficially owned by Hamdi Ulukaya;

 

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                shares of Class A common stock reserved for issuance upon exchange of vested Class M Units held on behalf of certain Chobani employees indirectly through CGH Management Holdings;

 

   

            shares of Class A common stock issuable under the 2021 Plan (under which no equity awards have been granted as of                , 2021), including:

(i)                    shares of Class A common stock underlying restricted stock units or other awards to be granted to certain employees and non-employee directors pursuant to the 2021 Plan immediately after the closing of this offering; and

(ii)                    additional shares of Class A common stock to be reserved for future issuance of awards under the 2021 Plan;

 

   

            shares of Class A common stock reserved for issuance upon the conversion of vested value units issued or issuable under the 2020 Value Sharing Plan into shares of Class A common stock at settlement (under which                 Pre-IPO Class A Units are issued and outstanding as of                , 2021); and

 

   

            shares of Class A common stock reserved for issuance upon the conversion of vested growth units issued or issuable under the 2016 Growth Sharing Plan into shares of Class A common stock at settlement (under which                 Pre-IPO Class A Units are issued and outstanding as of                , 2021).                

 

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

The following unaudited pro forma consolidated balance sheet as of March 27, 2021 gives pro forma effect to the Reorganization (see the transactions described under “Organizational Structure”), the completion of this offering and our intended use of proceeds therefrom after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us (collectively, the “Transactions”), as though such transactions had occurred as of March 27, 2021. The unaudited pro forma consolidated statements of operations for the three months ended March 27, 2021 and the year ended December 26, 2020 present our consolidated results of operations giving pro forma effect to the transactions described above as if they had occurred as of December 27, 2020.

The pro forma adjustments are based on available information and upon assumptions that management believes are reasonable in order to reflect, on a pro forma basis, the effect of these transactions on the historical financial information of Chobani Global Holdings. The unaudited pro forma consolidated balance sheet and unaudited pro forma consolidated statements of operations may not be indicative of the results of operations or financial position that would have occurred had this offering and the related transactions taken place on the dates indicated, or that may be expected to occur in the future. The adjustments are described in the notes to the unaudited pro forma consolidated balance sheet and the unaudited pro forma consolidated statements of operations. The unaudited pro forma consolidated financial information and other data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

The pro forma adjustments in the Reorganization and Offering Adjustments column principally give effect to:

 

   

the Reorganization as described in “Organizational Structure”;

 

   

the issuance of                shares of our Class A common stock to the investors in this offering in exchange for net proceeds of approximately $                (based on an assumed initial public offering price of $                per share, the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions but before offering expenses;

 

   

the payment of fees and expenses related to this offering and the application of the net proceeds from the sale of Class A common stock in this offering to purchase Class A Units directly from Chobani Inc., at a purchase price per Class A Unit equal to the initial public offering price per share of Class A common stock less the underwriting discount, with such Class A Units representing                % of the outstanding units of Chobani Global Holdings; and

 

   

the provision for corporate income taxes on the income of Chobani Inc. that will be taxable as a corporation for U.S. federal and state income tax purposes. Except as otherwise indicated, the unaudited pro forma consolidated financial information presented assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us in the offering.

Chobani Global Holdings is considered our predecessor for accounting purposes, and its consolidated financial statements will be our historical financial statements following this offering.

Chobani Inc. will enter into the Tax Receivable Agreement for the benefit of the TRA Parties, pursuant to which Chobani Inc. will pay them 85% of the amount of the net cash tax savings, if any, that Chobani Inc. realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Chobani Inc.’s acquisition of Class B Units and certain Class M Units in connection with this offering and in future

 

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exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Chobani Inc. will acquire in the Blocker Merger and (iii) any payments Chobani Inc. makes to the TRA Parties under the Tax Receivable Agreement (including tax benefits related to imputed interest). See “Organizational Structure” and “Certain Relationships and Related Person Transactions—Proposed Transactions with Chobani Inc.—Tax Receivable Agreement.”

We have not made any pro forma adjustments relating to reporting, compliance and investor relations costs that we will incur as a public company. No pro forma adjustments have been made for these additional expenses as an estimate of such expenses is not determinable.

The unaudited pro forma consolidated financial information is included for informational purposes only. The unaudited pro forma consolidated financial information should not be relied upon as being indicative of our results of operations or financial condition had the Transactions, including this offering, occurred on the dates assumed. The unaudited pro forma consolidated financial information also does not project our results of operations or financial position for any future period or date. The unaudited pro forma consolidated statement of operations and balance sheet should be read in conjunction with the “Risk Factors,” “Prospectus Summary—Summary Historical Consolidated Financial Information,” “Selected Historical Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

Chobani Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Balance Sheet as of March 27, 2021

 

    Historical
Chobani Global
Holdings, LLC
    Transaction
Adjustments
    As Adjusted
Before
Offering
    Offering
Adjustments
    Pro Forma
Chobani
Inc.
 
    (in thousands)  

Assets

         

Current assets:

         

Cash and cash equivalents

  $ 67,210     $                   $                   $                   $                

Accounts receivable, net

    63,070          

Due from related party

             

Inventories, net

    60,874          

Other current assets

    40,648          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    231,802          

Property, plant, and equipment, net

    645,180          

Operating lease right of use assets

    31,162          

Goodwill

    22,951          

Intangible assets, net

    10,337          

Deferred income taxes

    4,058          

Other assets, net

    28,873          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 974,363     $       $       $       $    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and deficit

         

Current liabilities:

         

Current portion of long-term debt

  $ 10,768     $       $       $       $    

Accounts payable

    123,162          

Accrued liabilities

    111,974          

Due to related party

    36          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    245,940          

Long-term debt

    1,358,184          

Operating lease liabilities

    26,529          

Other long-term liabilities

    517          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    1,631,170          

Commitments and contingencies (Note 16)

         

Class A Units (redeemable common units), no par value (298,451,086 units authorized, issued and outstanding at March 27, 2021)

    2,213,062          

Member’s Deficit:

         

Class B Units, no par value (42,635,870 Class B Units authorized, 22,771,875 and 21,079,488 Class B Units issued and outstanding at March 27, 2021)

    16,798          

Accumulated deficit

    (2,866,801        

Accumulated other comprehensive loss

    (19,866        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total members’ deficit

    (2,869,869        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total redeemable common units and members’ deficit

    (656,807        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and redeemable common units and members’ deficit

  $ 974,363     $       $       $       $    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited pro forma consolidated balance sheet.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

Notes to Unaudited Pro Forma Consolidated Balance Sheet

 

(1)

Reflects the net effect on cash of the receipt of offering proceeds to us of $                , based on the sale of                 shares of Class A common stock at an assumed initial public offering price of $                per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

(2)

As described in greater detail under “Organizational Structure” and “Certain Relationships and Related Person Transactions—Proposed Transactions with Chobani Inc.—Tax Receivable Agreement,” in connection with the completion of this offering, we will enter into the Tax Receivable Agreement with the TRA Parties, which will provide for the payment by Chobani Inc. to the TRA Parties of 85% of the amount of the net cash tax savings, if any, that Chobani Inc. realizes, or under certain circumstances is deemed to realize, as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Chobani Inc.’s acquisition of a continuing member’s Chobani Global Holdings units in connection with this offering and in future exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Chobani Inc. will acquire in the Blocker Merger and (iii) any payments Chobani Inc. makes to the TRA Parties under the Tax Receivable Agreement (including tax benefits related to imputed interest).

 

(3)

Due to the uncertainty in the amount and timing of future exchanges of Chobani Global Holdings units by the continuing members of Chobani Global Holdings, and the uncertainty of when those exchanges will ultimately result in tax savings, the unaudited pro forma consolidated financial information assumes that no exchanges of Chobani Global Holdings units have occurred and therefore no increases in tax basis in Chobani Inc.’s assets or other tax benefits that may be realized thereunder have been assumed in the unaudited pro forma consolidated financial information. However, if all of the continuing members were to exchange their Chobani Global Holdings units, we would recognize a deferred tax asset of approximately $                and a liability of approximately $                , assuming (i) that the continuing members redeemed or exchanged all of their Chobani Global Holdings units immediately after the completion of this offering at an assumed initial public offering price of $                per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), (ii) no material changes in relevant tax law, (iii) a constant combined effective income tax rate of        % and (iv) that we have sufficient taxable income in each year to realize on a current basis the increased depreciation, amortization and other tax benefits that are the subject of the Tax Receivable Agreement. These amounts are estimates and have been prepared for informational purposes only. The actual amount of deferred tax assets and related liabilities that we will recognize will differ based on, among other things, the timing of the exchanges, the price of shares of our Class A common stock at the time of the exchange and the tax rates then in effect.

We will hold an economic interest of        % in Chobani Global Holdings subsequent to the Reorganization and this offering. The        % interest that we do not own represents a non-controlling interest for financial reporting purposes. Chobani Global Holdings has been and will continue to be treated as a partnership for U.S. federal and state income tax purposes. Following the Transactions, Chobani Inc. will be subject to United States federal income taxes, in addition to state and local taxes, with respect to our allocable share of any net taxable income generated by Chobani Global Holdings.

As a result of this offering, we recorded a deferred tax asset of $                million in the unaudited pro forma consolidated balance sheet as of March 27, 2021, as a result of the difference between the financial reporting value and the tax basis of Chobani Inc.’s investment in Chobani Global Holdings. The Company analyzes the likelihood that its deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset related to

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

acquiring its interest in Chobani Global Holdings through newly issued LLC units is not expected to be realized unless the Company disposes of its investment in Chobani Global Holdings. Chobani Inc. has recognized a valuation allowance of $                million against the deferred tax asset (resulting in a net deferred tax asset of zero) which is considered capital in nature as it was not more likely than not that this portion of deferred tax assets would be realized.

As of March 27, 2021, we did not have any material net operating loss or credit carryforwards.

 

(4)

Reflects deferred costs associated with this offering, including certain legal, accounting and other related costs, which have been recorded in prepaid expenses and other current assets on the consolidated balance sheet. Upon completion of this offering, these deferred costs will be charged against the proceeds from this offering with a corresponding reduction to additional paid-in capital.

 

(5)

Upon completion of the Transactions, we will become the sole managing member of Chobani Global Holdings. Although we will have a minority economic interest in Chobani Global Holdings, we will have 100% of the voting power in, and control of the management of, Chobani Global Holdings. As a result, we will consolidate the financial results of Chobani Global Holdings and will report non-controlling interests related to the interests in Chobani Global Holdings held by FHU US Holdings and CGH Management Holdings, the continuing members of Chobani Global Holdings, on our consolidated balance sheet. Immediately following the Transactions, the economic interests held by the non-controlling interests will be approximately        %. If the underwriters were to exercise their option to purchase additional shares of our Class A common stock in full, the economic interests held by the non-controlling interests would be approximately        %. Through his ownership of shares of Class B common stock, Hamdi Ulukaya will directly or indirectly control a majority of the voting power of the common stock of Chobani Inc., the managing member of Chobani Global Holdings, and will therefore have indirect control over Chobani Global Holdings.

 

(6)

The components of increase to additional paid-in capital as a result of the amounts allocable to Chobani Inc. from net proceeds of this offering are set forth below:

 

     Pro Forma
Reorganization
Adjustments
     Pro Forma
Offering
Adjustments
     Chobani Inc.
Pro Forma
 

Reclassification of members’ equity and convertible preferred units

   $                    $                    $                

Proceeds from offering net of underwriting discounts

        

Payment of estimated offering costs

        

Transaction costs incurred prior to this offering deferred as prepaid expenses and other current assets(4)

        

Par value of Class A common stock

        

Par value of Class B common stock

        

Non-controlling interests

        
  

 

 

    

 

 

    

 

 

 

Additional paid-in capital

   $        $        $    
  

 

 

    

 

 

    

 

 

 

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

Chobani Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Statements of Operations for the

Year Ended December 26, 2020

 

     Historical
Chobani Global
Holdings, LLC
    Transaction
Adjustments
     As Adjusted
Before
Offering
     Offering
Adjustments
     Pro Forma
Chobani
Inc.
 
     (in thousands)  

Net Sales

   $ 1,401,371     $                    $                    $                    $                

Cost of sales

     1,091,156             
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     310,215             

Selling, general, and administrative expenses

     266,135             

Restructuring costs

     2,330             
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     41,750             

Other (expense) income:

             

Interest expense, net

     (96,278           

Other (expense) income, net

     (1,050           

Currency (loss) gain

     (39           
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total other expense

     (97,367           
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Loss before income taxes

     (55,617           

Income tax provision

     3,105             
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

   $ (58,722   $        $        $        $    
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

Chobani Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Statements of Operations for the

Three Months Ended March 27, 2021

 

     Historical
Chobani Global
Holdings, LLC
    Transaction
Adjustments
     As Adjusted
Before
Offering
     Offering
Adjustments
     Pro Forma
Chobani
Inc.
 
     (in thousands)  

Net Sales

   $ 385,039     $                    $                    $                    $                

Cost of sales

     304,538             
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     80,501             

Selling, general, and administrative expenses

     67,942             

Restructuring costs

     3,275             
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     9,284             

Other (expense) income:

             

Interest expense, net

     (23,081           

Other (expense) income, net

     (558           

Currency (loss) gain

     (50           
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total other expense

     (23,689           
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Loss before income taxes

     (14,405           

Income tax provision

     67             
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

   $ (14,472   $        $        $        $    
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes to unaudited pro forma consolidated statement of operations and comprehensive income.

Notes to Unaudited Pro Forma Consolidated Statement of Operations

 

(1)

Following the Transactions, we will be subject to United States federal income taxes, in addition to state and local taxes, with respect to our allocable share of any net taxable income of Chobani Global Holdings. As a result, the unaudited pro forma consolidated statements of operations reflect adjustments to our income tax expense of $                 for the year ended December 26, 2020.

The following table sets forth the computation of pro forma effective tax rate for the periods presented:

 

     Year Ended
December 26,
2020
 

Federal statutory rate

             

State tax, net of federal effect

             

Income attributable to non-controlling interests

             

Other

             
  

 

 

 

Pro forma effective tax rate

             
  

 

 

 

 

(2)

Following the Transactions, we will become the managing member of Chobani Global Holdings. We will own        % of the economic interest in Chobani Global Holdings but will have        % of the voting interest in and control the management of Chobani Global Holdings. The continuing members will own the remaining        % of the economic interest in Chobani Global Holdings, which will be accounted for as non-controlling interests in our future consolidated financial results.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

  Through his ownership of shares of Class B common stock, Hamdi Ulukaya will directly or indirectly control a majority of the voting power of the common stock of Chobani Inc., the managing member of Chobani Global Holdings, and will therefore have indirect control over Chobani Global Holdings.

 

(3)

Pro forma basic and diluted earnings per share is computed by dividing the net income attributable to holders of Class A common stock by the weighted-average shares of Class A common stock outstanding during the period. Shares of Class B common stock do not participate in the earnings of Chobani Inc. As a result, the shares of Class B common stock are not considered participating securities and are not included in the weighted average shares outstanding for purposes of computing pro forma earnings per share.

The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted earnings per share of Class A common stock (amounts in millions except for share counts, which are in thousands):

 

     Chobani Inc. Pro
Forma
 
     Year Ended
December 26, 2020
 

Numerator

  

Pro forma net income

   $                

Less: Pro forma net income attributable to non-controlling interests

  
  

 

 

 

Pro forma net income attributable to Chobani Inc.

   $    
  

 

 

 

Denominator

  

Shares of Class A common stock issued in connection with this offering

  
  

 

 

 

Pro forma weighted-average shares of Class A common stock outstanding—basic

  
  

 

 

 

Effect of dilutive securities

  
  

 

 

 

Pro forma weighted-average shares of Class A common stock outstanding—diluted

  
  

 

 

 

Pro forma earnings per share of Class A common stock—basic

   $    
  

 

 

 

Pro forma earnings per share of Class A common stock—diluted

   $    
  

 

 

 

Anti-dilutive shares excluded from pro forma earnings per shares of Class A common stock—diluted:

  

Shares of Class B common stock issued in connection with this offering

  
  

 

 

 

Total shares excluded from pro forma earnings per share of Class A common stock—diluted

  
  

 

 

 

Shares of our Class B common stock do not share in the earnings or losses of Chobani Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of our Class B common stock are, however, considered potentially dilutive shares of Class A common stock. Amounts have been excluded from the computations of diluted earnings per share of Class A common stock because the effect would have been anti-dilutive under the if-converted and two-class methods.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected financial information and other data of Chobani Global Holdings on a historical basis. Chobani Global Holdings is considered our predecessor for accounting purposes and its consolidated financial statements will be our historical financial statements following this offering. The selected historical consolidated financial data for the years ended December 31, 2016, December 30, 2017, December 29, 2018, December 28, 2019 and December 26, 2020 have been derived from our audited consolidated financial statements prepared in accordance with U.S. GAAP. The selected historical consolidated financial data for the three months ended March 27, 2021 and March 28, 2020 have been derived from our unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP, which financial statements include, in the opinion of our management team, all normal and recurring adjustments that are considered necessary for the fair presentation of the results for the period and dates presented. Our historical results and growth rates are not necessarily indicative of results or growth rates to be expected in future periods.

You should read the following information in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain Relationships and Related Person Transactions” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

    Year Ended
December 31,
2016(1)
    Year Ended
December 30,
2017
    Year Ended
December 29,
2018
    Year Ended
December 28,
2019
    Year Ended
December 26,
2020
    Three
Months
Ended
March 27,
2021
    Three
Months
Ended
March 28,
2020
 
    (in thousands)  

Income Statement Data:

             

Net sales

  $ 1,289,182     $ 1,379,549     $ 1,289,811     $ 1,331,697     $ 1,401,371     $ 385,039     $ 365,682  

Costs and expenses

             

Costs of sales

    928,550       986,392       956,452       1,003,948       1,091,156       304,538       293,292  

Gross profit

    360,632       393,157       333,359       327,749       310,215       80,501       72,390  

Selling, general and administrative

    302,197       281,357       272,243       250,650       266,135       67,942       67,710  

Restructuring and other costs

          644       1,707       446       2,330       3,275        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

    58,435       111,156       59,409       76,553       41,750       9,284       4,680  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other (expense):

             

Interest expense

    (150,289     (114,303     (93,201     (95,135     96,278       (23,081     (22,910

(Loss)/gain on extinguishment of debt

    (1,567     (109,242     17,721                          

Other income (expense)

    1,239       2,094       (9,076     1,321       (1,050     (558     88  

Currency (loss) / gain

    (199     (2,132     169       (786     (39     (50     (8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

    (150,816     (223,583     (84,387     (94,600     97,367     (23,689     (22,830
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

    (92,381     (112,427     (24,978     (17,947     (55,617     (14,405     (18,150

Income tax provision

    2,776       2,287       1,440       1,484       3,105       67       424  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (95,157   $ (114,714   $ (26,418   $ (19,431   $ (58,722   $ (14,472   $ (18,574
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

2016 contained 53 weeks while each of the other years presented contained 52 weeks.

 

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Confidential Treatment Requested by Chobani Inc. Pursuant to 17 C.F.R. Section 200.83

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by reference to, the section entitled “Selected Historical Consolidated Financial Information” and the consolidated financial statements of Chobani Global Holdings and the related notes included within this prospectus. For the purposes of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” references to “we,” “our,” “us,” and “Chobani” refer to Chobani Global Holdings. The historical consolidated financial data discussed below reflect the historical results of operations and financial position of Chobani Global Holdings. The consolidated financial statements of Chobani Global Holdings, our predecessor for accounting purposes, will be our historical financial statements following this offering. The historical financial data discussed below relate to periods prior to the Reorganization described in “Organizational Structure” and do not give effect to pro forma adjustments. As a result, the following discussion does not reflect the significant effects that such events will have on us. See “Organizational Structure” and “Unaudited Pro Forma Consolidated Financial Information and Other Data” for more information.

This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in such forward-looking statements, including, risks and uncertainties discussed under the heading “Forward-Looking Statements,” “Risk Factors” and elsewhere in this prospectus. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Our fiscal year is comprised of 52 or 53 weeks, ending on the last Saturday of the calendar month of December. Throughout this section, references to “2021” refer to our 2021 fiscal year, which will end on December 25, 2021, references to “2020” refer to our 2020 fiscal year, which ended on December 26, 2020, references to “2019” refer to our 2019 fiscal year, which ended on December 28, 2019 and references to “2018” refer to our 2018 fiscal year, which ended on December 29, 2018. Fiscal years 2020, 2019 and 2018 included and 2021 will include, 52 weeks.

Company Overview

Hamdi Ulukaya founded Chobani in 2005 when he purchased a shuttered manufacturing plant in New Berlin, New York with a dream of bringing healthy, high-quality food to more people. From the purchase of our first plant in 2005 with a handful of employees, we invented an entirely new food category in the United States—Greek yogurt—that completely disrupted an old one. Since June 2020, Chobani has been the #1 brand in the total Yogurt category with     % market share. Chobani is also the market leader within Greek Yogurt, and currently holds     % market share.

In 2007, we offered only two yogurt SKUs. Now we feature approximately 245 yogurt SKUs under the Chobani brand across channels, geographies, and formats. This includes Chobani Core (our plain, blended and fruit-on-the-bottom Greek yogurt products), Chobani Flip yogurt snacks, Chobani Less Sugar Greek yogurt, drinkable yogurt, Chobani Complete lactose-free Greek Yogurt, and more. Our success in the yogurt category has allowed us to successfully expand into adjacent categories with the introduction of Chobani non-dairy yogurt alternatives, Chobani Oat Milk, Chobani dairy and non-dairy Coffee Creamers, ready-to-drink Chobani Coffee and Chobani Probiotic beverages. Recently, we launched Chobani with Zero Sugar, a groundbreaking new sugar-free dairy product with only natural ingredients, further transforming the yogurt category by addressing consumers’ desire for no-sugar options. Over the years, we have continued to innovate, allowing us to build out a comprehensive product portfolio that extends across day parts and need-states, expands into different eating, drinking, and cooking occasions, and supports a wide range of consumer lifestyles and preferences.

 

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We were early to identify a once-in-a-generation mega-trend towards healthier eating preferences and leveraged our innovation and brand-building capabilities to create a portfolio of high-quality yogurt products that rapidly gained market share. We distributed these products into mass market channels—not just specialty stores—where nutritious packaged food typically had not been available and positioned our offerings with pricing that was attractive and accessible to all consumers. This strategy allowed Chobani to reach approximately $1.1 billion in net sales in 2013, while building the key relationships, brand awareness, trust, and scale that we benefit from today.

Today we believe that the Chobani brand is synonymous with high-quality, delicious, healthy food and making a social and environmental impact, both of which resonate very strongly in the current marketplace. This creates authentic, mutual connections with consumers who are increasingly seeking an emotional, values-based relationship with the brands they choose—a core insight of our business since day one. As we advance our mission and our social impact grows, so too will the value of our brand in the eyes of our customers and consumers.

Our differentiated, owned infrastructure represents a key strategic asset that has positioned Chobani as a fierce and formidable competitor and has allowed us to disrupt an industry dominated by legacy packaged food companies wedded to highly-processed lower cost ingredients made with artificial sweeteners. As we continue to leverage our production facilities and in-house go-to-market capabilities, we have ample capacity to support future growth. Since the commencement of product sales in 2007, Chobani has demonstrated strong financial performance. We have historically driven robust topline growth, reaching $1.1 billion in net sales after only the first six years of operations, and generating over $1.4 billion in net sales in 2020. From 2010 to 2020 we grew net sales at a 19.1% CAGR. From 2018 to 2020, we continued to grow net sales at a 4.2% CAGR, while the broader United States yogurt market grew at only 1.6%. In 2020, we recorded $58.7 million in net loss, which increased 200% year-over-year, and $191.0 million in Adjusted EBITDA, which increased 7.8% year-over-year. As our original and most established product category, yogurt has provided the growth and profitability from which we independently funded broader capital investment and extension into new categories.

Post-Offering Taxation

After the consummation of this offering, we will become subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Chobani Global Holdings and will be taxed at prevailing corporate tax rates. Our actual effective tax rate will be impacted by our ownership share of Chobani Global Holdings, which will increase over time as the continuing members exchange their Class B Units for Class A common stock on a one-for-one basis or, at Chobani Inc.’s election, for cash. In addition to tax expenses, we also will incur expenses related to our operations. Furthermore, in connection with this offering, we will enter into the Tax Receivable Agreement pursuant to which we will make payments that we expect to be significant. We intend to cause Chobani Global Holdings to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including payments under the Tax Receivable Agreement. See “Certain Relationships and Related Party TransactionsProposed Transactions with Chobani Inc.CGH LLC Agreement.”

Key Line Items of Our Consolidated Statements of Operations

Net Sales

Our net sales are primarily derived from the sale of our products to a diverse customer base including leading national and regional retailers, food service distributors and wholesalers. As of March 27, 2021, two customers individually accounted for approximately 10% of our net sales. Net

 

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sales reflects the sale of all our products and sales of cream, which is a natural byproduct of our yogurt making process, net of certain costs. These costs include trade promotions, slotting fees, discounts, coupons, returns and reclamation claims. Management believes that net sales is the most appropriate measure of our revenues and a useful measure for investors in understanding our business over time.

Our net sales can be affected by the timing and outcome of store resets. A store “reset” is a process whereby our customers rearrange and reallocate shelf space, which is an opportunity for our products and our brand overall to gain (or potentially lose) shelf space in retail stores. Generally, our customers engage in store resets early in the first and second half of each year, but may adjust these reset windows from time to time depending on market conditions. We do not typically experience any material impact to net sales due to seasonal factors.

Gross Profit

Our gross profit reflects net sales less cost of sales, which consists of cost of raw materials, depreciation, direct labor, manufacturing plant overhead and freight and distribution costs (including costs associated with shipping and handling).

Milk, fruit, nuts, and other dry ingredients are available from numerous independent suppliers but are subject to price fluctuations due to a number of factors, including changes in crop size, federal and state agricultural programs, demand, and weather conditions, among others. Our broad array of products results in significant costs for packaging, which is subject to fluctuations in the price of resin, film, cartons, foils and corrugated cardboard. Raw milk, fruit, nuts and our primary packaging materials are our largest input costs, representing approximately 55% of our North America segment cost of sales in 2020 and approximately 54% of our North America segment cost of sales for the three months ended March 27, 2021.

We consistently assess and execute operational cost reduction programs in an effort to improve our profitability and margin profile, mitigate the effects of price inflation, maintain our competitive position and support our growth strategy. We believe these efforts, including targeting capital investments with attractive returns, enhanced supply chain productivity and reductions in waste, can improve our operational efficiency in order to improve cash flow generation, which ultimately can be reinvested in our business. We expect these reinvestments to support the enhancement of the Chobani brand through growth initiatives including new product introductions while also driving margin improvements through the achievement of operational efficiencies. This strategy permits scalability, while at the same time allowing our business to continue to provide exceptional service to our customers and superior products to our consumers.

We seek to mitigate the effects of adverse movement in raw materials and packaging costs through a combination of promotional price management and cost reduction initiatives. Milk is our most significant raw material cost. We are generally unable to pass through increases in raw material costs to consumers due to pricing pressure, and generally do not hedge milk prices or other raw or packaging materials. However, in the future, we may use futures, financial swaps and option contracts to hedge pricing or availability of milk and other raw or packaging materials. We also skim the milk as part of our manufacturing process, generating cream that we utilize in various products and sell to third parties.

Our gross profit margins are impacted by these costs, which are subject to pricing movements driven by market supply and demand. We view gross profit as the primary driver of the success of our business. Continued growth of gross profit will depend on increasing sales while managing operating efficiency and costs.

 

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Selling, General and Administrative Expenses

Selling, General and Administrative (“SG&A”) expenses include costs related to advertising and marketing, brand enhancement activities, selling costs, administrative expenses, research and development costs, and stock-based compensation. Advertising and other marketing expenses represent costs for advertising and other consumer and customer marketing programs. We seek to drive increased brand and category awareness through effective product positioning and marketing. Selling costs consist of personnel expenses, broker fees, and other related selling costs. SG&A also reflects investments made to support our growth, the impact of inflation and labor costs. We have made significant investments in SG&A expenses to support our growth. We have invested in a direct sales force, an in-house retail merchandising team, an in-house creative agency and supported marketing programs to drive our growth initiatives. We view marketing expenditures as a controllable cost that can be modified to support growth objectives. We expect to continue to invest in marketing behind our Chobani brand to drive future growth.

We have also made significant investments in our research and development capabilities. Research and development expenses consist of charges to develop new products and enhance our existing product portfolio, as well as enhance our in-house capabilities.

Administrative expenses include personnel and facility expenses as well as third-party professional fees.

Interest Expense

Interest expense consists of interest, the amortization of debt issuance discounts and premiums, and the amortization of deferred financing costs relating to our debt facilities, Senior Unsecured Notes and Senior Secured Notes, as defined and outlined below. We have substantial debt and debt service obligations.

Adjusted EBITDA

EBITDA consists of net (loss) before interest expense, income tax provision, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted for unusual items and other adjustments such as gain on extinguishment of debt, asset impairment and gain or loss on disposals, restructuring costs, stock based compensation expense, costs related to new platforms, and non-recurring and other charges. We do not believe these items and adjustments are indicative of our ongoing operating performance.

 

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However, EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP and our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA or Adjusted EBITDA as an alternative to net (loss) determined in accordance with U.S. GAAP, as an indicator of our operating performance or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, or as an indicator of cash flows, or as a measure of liquidity. The following is a reconciliation of EBITDA and Adjusted EBITDA to net loss.

 

     Year Ended     Three Months Ended  
     December 26,
2020
    December 28,
2019
    December 29,
2018
    March 27,
2021
    March 28,
2020
 
     (in thousands)  

Net loss

   $ (58,722   $ (19,431   $ (26,418   $ (14,472   $ (18,574

Interest Expenses

     96,278       95,135       93,201       23,081       22,910  

Income Tax Expense

     3,105       1,484       1,440       67       424  

Depreciation and Amortization Expense

     108,986       96,515     101,166     26,689     26,941  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 149,647     $ 173,703     $ 169,389     $ 35,365     $ 31,701  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs related to new platforms(a)

     16,284       54           $ 973     $ 8,691  

Stock Based Compensation Expense

     4,429       3,975       1,483       907       1,615  

Restructuring Expense

     2,330       446       1,707       3,275        

Non-recurring and other charges(b)

     3,351       (1,852           2,124       301  

Asset impairment and gain / loss on disposals

     14,972       844       3,553       (108     (16

Gain on extinguishment of debt

                 (17,721            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 191,013     $ 177,170     $ 158,411     $ 42,536     $ 42,292  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a)

Represents the costs associated with the launch of new product platforms.

  (b)

Represents one-time charges, initial public offering transaction costs, COVID-19 expenses and income effect from swap derivative.

Our Reportable Segments

The summary that follows includes a discussion of the results of operations of our two reportable segments North America and International for the three months ended March 27, 2021 and March 28, 2020, and the years ended December 26, 2020, December 28, 2019 and December 29, 2018. The segments reflect our operations on a geographic basis. The Chief Operating Decision Maker (the “CODM”) evaluates segment performance based on several factors, including net sales, and adjusted EBITDA. EBITDA consists of net income (loss) before interest expense, income tax provision and depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted for unusual items and other adjustments such as gain on extinguishment of debt, asset impairment and gain or loss on disposals, restructuring costs, stock based compensation expense, costs related to new platforms, and non-recurring and other charges. Adjusted EBITDA is a measurement that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations. The CODM uses this measurement to evaluate segment performance and allocate resources. EBITDA and Adjusted EBITDA, which are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be an alternative or superior to, the comparable financial measures by generally accepted accounting principles

The North America segment includes the United States, Canada, Mexico and export markets where we market, sell or distribute our products from the United States. This segment represents results of operations conducted by us or indirectly through distributors located in such countries. The North America segment is responsible for our yogurt, Oat Milk, Coffee Creamers and Coffee products,

 

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as well as our food service market positions in the United States, Canada and Mexico. Our North America segment accounted for approximately 91% of our net sales for each of the three months ended March 27, 2021 and March 28, 2020. Such segment accounted for approximately 91%, 90% and 90% of our net sales for the years ended December 26, 2020, December 28, 2019 and December 29, 2018, respectively.

The International segment includes Australia and other countries where we currently manufacture, market, sell or distribute our products from Australia. In Australia, we sell our yogurt under the Chobani and Gippsland Dairy brands. Our International segment accounted for approximately 9% of our net sales for each of the three months ended March 27, 2021 and March 28, 2020. Such segment accounted for approximately 9%, 10% and 10% of our net sales for the years ended December 26, 2020, December 28, 2019 and December 29, 2018, respectively.

Results of Operations

Impact of COVID-19 on Our Business

The COVID-19 pandemic has impacted our business operations and customer and consumer demand. Throughout the pandemic, our first priority was to protect the health and safety of our employees. To do so, certain of our operating expenses increased, including labor costs, and costs to procure personal protective equipment and supplies for our personnel and facility cleaning expenses.    

In terms of our sales, we have experienced a decrease in sales of certain of our products in certain markets and distribution channels, due in part to shifting consumer behaviors in light of widespread social disruption in the United States and abroad. These include our café business and the food service channel. However, we also experienced increased consumer demand for grocery products, due in part to consumer health concerns related to the COVID-19 pandemic.    

During the pandemic, we have continued to innovate and have seen the successful introduction and growth of several product lines, including our oat milk, coffee creamer and coffee offerings.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act provided a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. We have utilized the payroll tax relief provided by the CARES Act; however this did not have a material impact on our consolidated financial statements for the year ended December 26, 2020 and the three months ended March 27, 2021.

For additional information see “Risk Factors—The outbreak of the COVID-19 pandemic and associated responses have had, and we expect will continue to have, negative impacts on our business, financial condition and results of operations.

 

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Operating Results: Three Months Ended March 27, 2021 Compared to the Three Months Ended March 28, 2020

The table below presents our operating results for the three months ended March 27, 2021 compared to the three months ended March 28, 2020 and the related year-over-year changes:

 

     Three Months Ended              
     March 27, 2021     March 28, 2020              
           % of net
sales
          % of net
sales
    Increase/(Decrease)  
     $     $             $                     %          
     (in thousands except percentages)              

Statements of Income Data:

            

Net Sales

   $ 385,039       100   $ 365,682       100   $ 19,357       5

Cost of sales

     304,538       79     293,292       80     11,246       4