Latest news with #Smolyansky
Yahoo
02-06-2025
- Business
- Yahoo
Edward Smolyansky Announces Campaign Updates, Files Revised Preliminary Consent Statement to Remove and Replace Lifeway Foods' Directors
CHICAGO, June 2, 2025 /PRNewswire/ -- Edward and Ludmila Smolyansky, beneficial owners of approximately 27% of Lifeway Foods (NASDAQ: LWAY), today issued a statement expressing serious concerns about the company's Q1 2025 performance and what they describe as the Board's ongoing pattern of poor governance and misaligned priorities. Although Lifeway reported a 44% year-over-year increase in GAAP earnings per share, Mr. Smolyansky emphasized that this was entirely due to a one-time $3.4 million gain from an investment sale, not from any improvement in the company's underlying kefir business. He and Mrs. Smolyansky cited several troubling operational trends, including: Income from operations declined nearly 55% year-over-year. Operating margin fell to approximately 3.4%, down from 7.9% in Q1 2024. Net sales increased only 3.3% year-over-year and declined 1.8% sequentially from Q4 2024. Revenue from the 2021 acquisition of Glen Oaks, a Laguna Beach, California-based drinkable yogurt company lacking any tangible assets, has declined approximately 50% to date. Notably, only two Directors – Edward and Ludmila Smolyansky – voted against this acquisition. Selling expenses rose sharply – up 27% year-over-year and 35% from Q4, without a corresponding increase in sales. Gross margin contracted by 180 basis points to 24.0%; SG&A expenses climbed to 20.2% of sales. Insider stock sales by Director Pol Sikar and CEO Julie Smolyansky following the May 15, 2025 earnings release raised additional concerns about management's confidence in the company's outlook. Ludmila and Edward Smolyansky also criticized the Board's governance and oversight, highlighted by its handling of the Danone offer, the subsequent attempt to nullify the Company's 1999 Stockholder Agreement with Danone, and the award of $8.5 million in cash and shares granted to CEO/Chair Julie Smolyansky by the Board shortly thereafter. The Smolyanskys also shared their views that: The combined CEO/Chair role, while occupied by Ms. Smolyansky, has been a significant governance failure resulting in lack of independent oversight; The handling of Danone's offer and subsequent attempt to sever ties may have market implications that the Board has failed to consider; The questionable compensation awards granted to CEO/Chair Julie Smolyansky at the end of 2024 were in flagrant opposition to shareholder sentiment conveyed at last year's annual meeting; and Only a reconstituted Board with an independent committee tasked with assessing strategic alternatives and potentially re-engaging with Danone, in the manner deserving of a 25-year investor and partner, can produce a more favorable outcome for shareholders. Edward Smolyansky stated, "After carefully considering our options, we have determined that this consent path offers the quickest and most efficient route to achieving our goals and objectives." He added, "I feel confident, based on outreach I have received from the investment community, that there is broad support for swift and decisive change." Today's revised filing follows a preliminary consent statement submitted in August 2024. The Smolyanskys also filed a preliminary proxy statement on March 28, 2025, and an amended version on May 5, which included a full slate of independent director nominees. They are calling for immediate action to restore operational discipline, shareholder alignment, and long-term value creation. Additional information about the 2025 Lifeway Foods Proxy Campaign, including nomination materials and Securities and Exchange Commission ("SEC") filings, is available at and via Edward Smolyansky's LinkedIn profile. Important Information and Where to Find It This communication is not a request for a proxy to vote on, or shareholder consent with respect to, any matter. Any written solicitation of a proxy or shareholder consent by Mr. Smolyansky will be made through a definitive proxy statement or definitive consent statement. Promptly after Mr. Smolyansky files a definitive proxy statement or definitive consent statement with the SEC, he intends to mail the definitive proxy statement and accompanying proxy card (or a notice of internet availability of proxy materials), or the definitive consent statement and accompanying consent card to requisite shareholders. Lifeway shareholders are urged to read Mr. Smolyansky's proxy statement or consent statement, as the case may be, including any amendments or supplements thereto, and his other soliciting materials, if any, when they become available because they will contain important information. Shareholders may obtain, free of charge, copies of the proxy statement or consent statement, and other relevant documents, when filed with the SEC at Participants in the Solicitation Mr. Smolyansky has filed (i) a preliminary consent statement (the "Preliminary Consent Statement") with the SEC on June 2, 2025, relating to, among other matters, his intent to seek shareholder consents to elect each of Ludmila Smolyansky, Edward Smolyansky, Richard Beleutz, Cindy Curry, Michael Leydervuder, George Sent and Robert Whalen (each, a "Nominee") as directors of Lifeway, and (ii) a preliminary proxy statement (the "Preliminary Proxy Statement") with the SEC on April 16, 2025, relating to his intent to nominate each Nominee for election as directors of Lifeway at its 2025 annual meeting of shareholders. Each Nominee may be deemed to have an interest in any solicitation of written consents or proxies by Mr. Smolyansky. The participants (the "Participants") in any solicitation of shareholder consents or proxies by Mr. Smolyansky may be deemed to be Mr. Smolyansky and each of the other Nominees. Lifeway shareholders can obtain information regarding the Participants and their direct and indirect interests, by security holdings or otherwise, in Appendix B to the Preliminary Consent Statement and in the Schedule 13D/A filed by Mrs. Smolyansky, Mr. Smolyansky and The Edward Smolyansky Trust 2/2/16 with the Securities and Exchange Commission on June 2, 2025, which information is incorporated herein by reference. View original content: SOURCE Edward and Ludmila Smolyansky Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
Lifeway Foods EPS Increases 44% Year-Over-Year as Kefir Company Announces Results for the First Quarter Ended March 31, 2025
Net sales of $46.1 million; up 3.3% year-over-year Consumer demand for probiotic Lifeway products drives 22nd consecutive quarter of year-over-year sales growth MORTON GROVE, Ill., May 13, 2025 /PRNewswire/ -- Lifeway Foods, Inc. (Nasdaq: LWAY) ("Lifeway" or "the Company"), a leading U.S. supplier of kefir and fermented probiotic products to support the microbiome, reported financial results for the first quarter ended March 31, 2025. "We're thrilled to begin 2025 with continued topline momentum, delivering our 22nd consecutive quarter of year-over-year net sales growth," commented Julie Smolyansky, President and Chief Executive Officer of Lifeway Foods. "Our Q1 performance builds on the foundation of our record-breaking 2024, as we continued to see consistent volume growth in our flagship drinkable Lifeway Kefir. Our topline growth follows a very strong first quarter in 2024 in which we delivered 18% growth. There are several important factors that highlight the underlying strength of the business that led to year-over-year growth. First, in the second half of last year we strategically eliminated a retail relationship to prioritize our branded offerings over private label and enhance our margins. Additionally, a sizeable distributor adjusted orders from delivery to direct pick-ups in late 2024, this leads to lower billed sales and correspondingly lower freight costs. Excluding the impact from both of these strategic adjustments, on a like-for-like basis, we delivered nearly 11% volume-led growth in the quarter, underscoring the power of our Lifeway branded products and the loyalty of our growing customer base." added Ms. Smolyansky. Ms. Smolyansky continued, "The accelerating consumer focus on health and wellness continues to be a tailwind for our business, with demand rising for protein-rich, probiotic and bioavailable foods, including our Lifeway Kefir and Farmer Cheese. Our strategic sales and marketing investments are clearly paying dividends, driving increased brand recognition, strong product velocities, and introducing the Lifeway brand to more and more customers who value premium, nutritious offerings. We see no impact of tariffs on our business at this time or in the foreseeable future. We expect consumer visits to grocery and club stores to increase amid tightening consumer spending, as shoppers seek better-for-you and nutritionally valuable foods and beverages, such as the highly bioavailable protein options and gut-healthy products that Lifeway offers. This focus on protein, gut health and select nutrients is especially true for consumers currently using GLP-1 medications and those who are looking for foods that naturally stimulate GLP-1 hormone production. As a result, our target addressable market has rapidly grown, and we are successfully capitalizing on that trend alongside our retailer partners through expanded distribution of our key products. This year we have received commitments at key retailers for more than 2,000 total incremental points of distribution across our product lines, including Lifeway Farmer Cheese, our new Flavor Fusions and our Probiotic Smoothies with Collagen. Lifeway products can also now be found in 40 airports across the country. Notably, in the last full week of April, we surpassed $5 million in gross sales, a record week for our business, propelled by demand for Lifeway Kefir and Farmer Cheese. The second quarter is off to a good start, and we plan to continue our investments behind our core branded products in 2025 to further capitalize on the tremendous market opportunity in front of us and extend upon the vast momentum we have achieved." First Quarter 2025 Results Net sales were $46.1 million for the first quarter ended March 31, 2025, an increase of $1.5 million or 3.3% from the same period in 2024. The net sales increase was primarily driven by higher volumes of Lifeway's branded drinkable kefir. Gross profit as a percentage of net sales was 24.0% for the first quarter ended March 31, 2025. Selling, general and administrative expenses as a percentage of net sales was 20.2% for the first quarter ended March 31, 2025. The Company reported net income of $3.5 million or $0.23 per basic and diluted common share for the first quarter ended March 31, 2025. We remain confident that the Company is on track to deliver Adjusted EBITDA1 of $45 - $50mm in FY2027. 1. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as Operating Income, as reported, plus Depreciation and Amortization, plus Stock-Based Compensation. The Company does not provide guidance for GAAP Operating Income, nor a reconciliation of any forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis, because it is unable to predict certain items contained in the GAAP measures without unreasonable efforts. These forward-looking non-GAAP financial measures do not include certain items, which may be significant, including, without limitation, non-recurring or non-operational expenses such as stock-based compensation, gain/loss on sale of equipment, deferred revenue and gain/loss on investments prior to payment of bonuses to employees. Conference Call and WebcastA webcast with Lifeway's President and Chief Executive Officer discussing these results with additional comments and details is available through the "Investor Relations" section of the Company's website at About Lifeway Foods, Foods, Inc., which has been recognized as one of Forbes' Best Small Companies, is America's leading supplier of the probiotic, fermented beverage known as kefir. In addition to its line of drinkable kefir, the company also produces a variety of cheeses and a ProBugs line for kids. Lifeway's tart and tangy fermented dairy products are now sold across the United States, Mexico, Ireland, South Africa, United Arab Emirates, and France. Learn how Lifeway is good for more than just you at Forward-Looking Statements This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, the drivers of demand for Lifeway's products, consumer trends, the anticipated effects of scheduled upgrades at the Waukesha plant, expected operating efficiencies and expectations regarding future operating and financial performance. These statements use words, and variations of words, such as "will," "continue," "future," "increase," "believe," "outlook," "expect," and "predict." You are cautioned not to rely on these forward-looking statements. These forward-looking statements are made as of the date of this press release, are based on current expectations of future events and thus are inherently subject to a number of risks and uncertainties, many of which involve factors or circumstances beyond Lifeway's control. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from Lifeway's expectations and projections. These risks, uncertainties, and other factors include: price competition; the decisions of customers or consumers; the actions of competitors; changes in the pricing of commodities; the effects of government regulation; possible delays in the introduction of new products; customer acceptance of products and services; and uncertainty regarding proposals or other actions taken by shareholders related to the unsolicited proposal made by Danone North America PBC ("Danone") to acquire all of the shares of Lifeway stock that Danone does not already own. A further list and description of these risks, uncertainties, and other factors can be found in Lifeway's Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Copies of these filings are available online at or on request from Lifeway. Lifeway expressly disclaims any obligation to update any forward-looking statements (including, without limitation, to reflect changed assumptions, the occurrence of anticipated or unanticipated events or new information), except as required by law. Non-GAAP Financial Measures This press release refers to Adjusted EBITDA, which is a financial measure that has not been prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), and may exclude items that are significant to understanding and assessing financial results. This non-GAAP measure is provided to enhance investors' overall understanding of the Company's financial performance. Non-GAAP financial measures should be considered as supplements to GAAP measures reported, should not be considered replacements for, or superior to, GAAP measures reported and may not be comparable to similarly named measures used by other companies. The Company's calculation of non-GAAP financial measures may differ from methods used by other companies. Perceptual AdvisorsDan TarmanEmail: dtarman@ Derek Miller Vice President of Communications, Lifeway FoodsEmail: derekm@ General inquiries:Lifeway Foods, 847-967-1010Email: info@ LIFEWAY FOODS, INC. AND SUBSIDIARIES Consolidated Balance Sheets March 31, 2025 and December 31, 2024 (In thousands) March 31, 2025 December 31,(Unaudited) 2024Current assets Cash and cash equivalents$ 19,446 $ 16,728Accounts receivable, net of allowance for credit losses and discounts & allowances of $2,030 and $1,590 at March 31, 2025 and December 31, 2024, respectively 16,68415,424Inventories, net 9,2418,678Prepaid expenses and other current assets 2,0072,144Refundable income taxes –631Total current assets 47,37843,605 Property, plant and equipment, net 28,11226,862Operating lease right-of-use asset 109118Goodwill 11,70411,704Intangible assets, net 6,2236,358Other assets 1411,900Total assets$ 93,667 $ 90,547 Current liabilities Accounts payable$ 11,635 $ 10,401Accrued expenses 3,9395,103Accrued income taxes 795–Total current liabilities 16,36915,504Operating lease liabilities 6870Deferred income taxes, net 3,0623,062Total liabilities 19,49918,636 Stockholders' equity Preferred stock, no par value; 2,500 shares authorized; none issued ––Common stock, no par value; 40,000 shares authorized; 17,274 shares issued; 15,203 and 15,100 outstanding at March 31, 2025 and December 31, 2024, respectively 6,5096,509Treasury stock, at cost (13,383)(14,052)Paid-in capital 2,6804,632Retained earnings 78,36274,822Total stockholders' equity 74,16871,911 Total liabilities and stockholders' equity$ 93,667 $ 90,547 LIFEWAY FOODS, INC. AND SUBSIDIARIES Consolidated Statements of Operations For the three months ended March 31, 2025 and 2024 (Unaudited) (In thousands, except per share data) 2025 2024 Net Sales$ 46,091 $ 44,634 Cost of goods sold 34,25432,438Depreciation expense 802661Total cost of goods sold 35,05633,099 Gross profit 11,03511,535 Selling expense 4,6983,700General and administrative expense 4,6284,136Amortization expense 135135Total operating expenses 9,4617,971 Income from operations 1,5743,564 Other income (expense): Interest expense (14)(51)Gain on sales of investments 3,352–Other income (expense), net 54(5)Total other income (expense) 3,392(56) Income before provision for income taxes 4,9663,508 Provision for income taxes 1,4261,082 Net income$ 3,540 $ 2,426 Net earnings per common share: Basic$ 0.23 $ 0.17Diluted$ 0.23 $ 0.16 Weighted average common shares outstanding: Basic 15,13414,691Diluted 15,33315,222 LIFEWAY FOODS, INC. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three months ended March 31,2025 2024Cash flows from operating activities: Net income$ 3,540 $ 2,426Adjustments to reconcile net income to operating cash flow: Depreciation and amortization 937796Stock-based compensation 326673Non-cash interest expense 32Gain on sale of investments (3,352)–Fair value loss on investment 20–(Increase) decrease in operating assets: Accounts receivable (1,259)(1,189)Inventories (563)974Prepaid expenses and other current assets 13631Refundable income taxes 631(378)Increase (decrease) in operating liabilities: Accounts payable 1,401(6)Accrued expenses (2,765)(1,309)Accrued income taxes 795(474)Net cash (used in) provided by operating activities (150)1,546 Cash flows from investing activities: Purchases of property and equipment (2,219)(2,469)Proceeds from sale of investments 5,152–Net cash provided by (used in) investing activities 2,933(2,469) Cash flows from financing activities: Repayment of note payable –(250)Payment of deferred financing costs (65)–Net cash used in financing activities (65)(250) Net increase (decrease) in cash and cash equivalents 2,718(1,173) Cash and cash equivalents at the beginning of the period 16,72813,198 Cash and cash equivalents at the end of the period$ 19,446 $ 12,025 Supplemental cash flow information: Cash paid for income taxes, net of (refunds)$ – $ 1,934Cash paid for interest$ 11 $ 50 Non-cash investing activities Accrued purchase of property and equipment$ 239 $ 192Right-of-use assets obtained in exchange for lease obligations$ 8 $ – View original content to download multimedia: SOURCE Lifeway Foods, Inc. 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Forbes
18-04-2025
- Business
- Forbes
Fresh Take: Inside The Family Drama At Kefir Brand Lifeway
Kefir is a yogurt drink that is a staple in Eastern Europe. I'm back from a much-needed vacation, with an important investigation publishing while I was away. Did you catch my feature on the chaos at kefir brand Lifeway? It's a must-read saga, and I'll give you a taste of why: Lifeway is a business with a unique backstory: But now their American Dream story of success has turned into a nightmare. Recent unsolicited bids from Danone, a longtime investor in Lifeway, are the culmination of years of acrimony between Smolyansky and Danone, which Lifeway accuses of a host of nefarious behavior aimed at undermining the business including blocking the Illinois-based company from expanding internationally and refusing to help it source cheaper raw ingredients. Danone denies these criticisms, and there's a lot of layers to this story. Smolyansky calls Danone 'predatory' and says she believes a Danone takeover could ruin the family business—and recipe—that she's fought so hard to preserve. Tell me what you think after reading! Working on it even got me inspired to add more fermented foods like kefir into my diet. Kefir devotees claim a long list of benefits, including from immune support and help with weight loss to improved skin, hair and gut health. And I'll report, I've been enjoying my time on the kefir train so far. On that note, I'm excited to soon unveil a refresh for this newsletter. I'll be back with the next edition, featuring the new format, on April 30. Until then, enjoy spring! — Chloe Sorvino, Staff Writer This is Forbes' Fresh Take newsletter, which every Friday brings you the latest on the big ideas changing the future of food. Want to get it in your inbox every week? Sign up here. Chloe Sorvino A plate of the best lechon I've ever had, from my vacation last week in Puerto Rico, what many consider the world's oldest colony. Here at the iconic lechoneria, El Rancho de Apa, every bite was bliss. As were the accompaniments: beans, rice, escabeche yucca and the coldest Medalla beer maybe ever recorded. Thanks for reading the 140th edition of Forbes Fresh Take! Let me know what you think. Subscribe to Forbes Fresh Take here.
Forbes
05-04-2025
- Business
- Forbes
Inside The Battle Between Danone And Lifeway Foods—And Its Squabbling Founding Family
Last September, Julie Smolyansky, the CEO of kefir brand Lifeway Foods, saw an ominous email at 4 a.m. Chicago time (11 a.m. in Paris) from Danone, the French-based dairy giant that had first invested in her father's business back in 1999 and currently owns just under 25%. Danone was requesting a meeting in three hours. During the call, the executives revealed that they intended to buy a controlling stake in the Nasdaq-listed business—and they didn't seem to care much about what Smolyansky thought about it. 'I didn't even get the courtesy of 'let's have lunch' or 'let's talk,'' says Smolyansky, who has run the fermented beverage business—a cousin of drinkable yogurt—since 2002 and, who, along with her mother and brother, controls some 45% of Lifeway's stock. 'I'm not going to be bullied,' she says. 'I'm not afraid.' The phone call was the culmination of years of acrimony between Smolyansky and Danone, which Lifeway accuses of a host of nefarious behavior aimed at undermining the business including blocking the Illinois-based company from expanding internationally and refusing to help it source cheaper raw ingredients. Smolyansky also believes that Danone used their seat on Lifeway's board to access competitive information and trade secrets after Danone acquired Wallaby Yogurt in 2017. Danone denies these criticisms, and says that Lifeway regularly utilized its right to shield information from its board representative, though Lifeway didn't know about the acquisition until it was announced publicly. Smolyansky contends that Lifeway has been hamstrung for decades by her father's 1999 agreement with Danone, when the French company invested $6.5 million (or about $12 million in today's terms) for an initial 15% stake in the company. She insists that the agreement, and a 'support agreement' signed in conjunction, took advantage of her immigrant father's lack of a formal business education. She calls Danone 'predatory' and says she believes a Danone takeover could ruin the family business—and recipe—that she's fought so hard to preserve. Danone pushes back, responding that, despite the founding family's involvement in Lifeway, it must uphold the rights of all shareholders. 'Lifeway is a publicly owned company and not a 'family business,'' a Danone representative tells Forbes. 'Lifeway sought Danone's investment, and without it Lifeway would not be the company it is today.' Back From The U.S,S.R.: As a Soviet refugee in America, Michael Smolyansky founded Lifeway in 1986. Two years later, he became the first Soviet to take a company public. Lifeway Following their September call with Smolyansky, Danone offered shareholders a full buyout at $25 per share, a 19% premium over the share price. Lifeway's board, which is chaired by Smolyansky, rejected the offer. Two months later, Danone upped its bid to $390 million or $27 per share. Lifeway's board also rejected that offer, maintaining that despite the hefty premiums, that those prices undervalued the business. Lifeway's only analyst, Ben Klieve at Lake Street Capital Markets agrees, saying that 'a competitive bidding process would likely be well above.' Deals for natural foods, he notes, have commanded multiples of more than three times sales, and Danone's offers are less than two times. Lifeway shares are currently trading at around $24. Prior to the second bid, the Lifeway board agreed to a hostile takeover defense known as a 'poison pill'— which gives existing shareholders the right to buy additional shares, if any shareholder that owns more than 20%, like Danone, upped its stake, diluting any takeover attempt. The poison pill also prevents Smolyansky's mother Ludmila and her brother Edward from selling their shares to Danone, the largest individual shareholder with nearly 23% ownership. Currently, Smolyansky owns nearly 18% of Lifeway shares. Edward owns nearly 21% and Ludmila owns 6%. (Edward disputes his sister's total share count and believes more than 300,000 shares are invalid). The combined family stake had been over 50% for years but fell under the threshold as shares have been sold. The family can only sell up to 2% of shares annually, according to the 1999 shareholder agreement. If they sell more, Danone has the right of first refusal. Danone disputes that its takeover attempts have been hostile. The $29 billion (2024 revenue) dairy conglomerate filed a lawsuit last month in Illinois state court alleging that Lifeway violated its shareholder agreement with Danone by issuing about $7 million worth of shares to Smolyansky in December 2024. 'This was a flagrant breach of the shareholder agreement between Danone and Lifeway, which Lifeway had adhered to, acknowledged as valid, and cited in its SEC-filed documents for more than 25 years,' the Danone representative says. 'This litigation is intended to safeguard Danone's rights as a significant Lifeway shareholder and is unrelated to Danone's good faith attempts to negotiate an agreement to acquire Lifeway.' Lifeway filed a countersuit last week, denying it breached its contract or its fiduciary duty with Danone, and claiming that the French giant has 'unclean hands' by having 'caused damage to Lifeway and its shareholders.' Complicating matters – as if they needed to be more complex – is the fact that Smolyansky's mother and brother are not on her side. After the board fired her younger brother, Edward, in 2022, Smolyansky has been dealing with a three-year-long proxy battle led by Edward and their mother to replace her as CEO. In November of last year, two months after Danone's initial offer, Edward and Ludmila publicly proclaimed that they favor the buyout. 'We just want this to be wrapped up with no more bloodshed,' says Edward, 45. Their dispute took another turn in January when Smolyansky filed a lawsuit against her brother over 1.3 million shares, representing about 8.5% of the company. According to the lawsuit, their father's will split his shares evenly between her, Edward and their mother. But the then-20-something siblings, who lacked legal representation outside of the company's lawyers, allegedly agreed to have their portion of their father's shares transferred to their mother to avoid taxes. At the time, Smolyansky and her brother each already owned 1.9% of the company. The lawsuit claims that the plan was for Ludmila to eventually transfer the shares to each child equally. And that started in 2015. But the last evenly split transfer was in 2019. All shares since have gone to entities that Edward controls, according to the complaint, which contends that Ludmila offered to resume the even split if Edward were rehired at Lifeway with a $1 million salary. Edward declined to comment on the pending litigation and filed a motion to dismiss the case at the end of March. Smolyansky says she is prepared for a battle. 'I come from a long line of survivors in the Soviet Union, a land of war, scarcity and famine,' says Smolyansky, noting that her grandmother lived through the 1941 Babyn Yar massacre in Kyiv. 'All of my ancestors are with me and they're helping me. I have an obligation to continue to fight and survive.' Her 75-year-old mother, Ludmila, doesn't seem to see it that way. In an unflinching statement shared with Forbes through a spokesperson, she says: 'Under my daughter Julie's misguided leadership, the board has prioritized control over fairness, throwing away the values that made Lifeway successful. Instead of respecting shareholders and fostering open competition, they have used legal intimidation and corporate maneuvering to entrench their own power — ignoring the voices of those who helped build an outstanding company. That is not the American dream. That is not capitalism. It is hypocrisy.' Lifeway is a prize worth fighting for. Coming off more than five straight years of record growth, it now has a 95% market share of the kefir category it pioneered. Lifeway's gut-friendly fermented drinks are sold at nearly every major retailer nationwide, including Walmart, Amazon, Kroger, Costco, Safeway and Whole Foods. Annual sales hit $186 million last year, up 17% since the year prior. The company's net profit margin has doubled since 2021 to north of 6.5% and Lifeway has no debt. If Danone has been undermining the business for decades, they haven't done a very good job. Smolyansky contends, unsurprisingly, that Lifeway is thriving in spite of Danone's maneuvering. The story of Smolyansky and her parents, who started Lifeway after escaping the Soviet Union and defecting to America in the 1970s, was for decades a classic American dream success story. In 1976, the Kyiv-born Smolyansky, then one, fled the Soviet Union (from what is today Ukraine) with her parents. The family of three 'defected in the middle of the night' with the equivalent of $116 in their pockets. After three months in Rome as refugees, they settled in Chicago. Happier Days: Ludmila and Michael Smolyanksy fled the Soviet Union in 1976 with their one-year-old daughter, Julie. Lifeway Having worked in a hair salon and as a nail technician, Ludmila Smolyansky wept the first time she saw the abundance in an American supermarket—and soon she and her husband Michael opened Chicago's first Ukrainian deli in 1978. The next year Ludmila gave birth to Edward. Years later, as Ludmila and Michael, walked the aisles of a food trade show in Germany for a food import business they owned, they saw the fermented dairy drink kefir being marketed. 'America has everything,' he told her, 'but it doesn't have kefir." The Smolyanskys had been fermenting kefir in their homes for generations, so Michael convinced his mother back in Ukraine to secretly ship him some of his family's cultures. She hid the contraband in a roll of women's stockings. 'It's a real family legacy of this original recipe,' says Smolyansky. 'You can't make this up in a private equity office.' Thanks to the couple's deli and grocery connections, their kefir, which is a traditional health drink in large swaths of Eastern Europe, secured distribution in dozens of stores nationwide and found an instant audience among Soviet immigrants. But Michael was dreaming bigger. After researching IPOs at his local library and writing his own business plan, he became the first Soviet immigrant to take a company public in America, when Lifeway debuted on the Nasdaq in 1988. Glasnost: When Julie Smolyansky met former Soviet president Mikhail Gorbachev, he recalled Lifeway and her father. According to Smolyansky, Gorbachev told her: 'We're so proud of you. Keep going.' Lifeway Lifeway even played a small role in the end of the Cold War. During the Moscow Summit in 1988, President Ronald Reagan gifted a case of Lifeway's kefir to Soviet President Mikhail Gorbachev—as proof of what Soviet refugees can accomplish in a free market. By the age of 11, Julie Smolyansky was helping her father give out samples at local grocery stores. A year into her graduate program at the Illinois School of Professional Psychology in 1996, she quit to work at Lifeway full-time. The business had $6 million in annual revenue, the equivalent of around $12 million today. Smolyansky was being groomed to lead the business, but it came much sooner than she imagined—in 2002, Michael died of a sudden heart attack. While sitting shiva that night, Smolyansky recalls overhearing her father's friend saying 'there's no way a 27-year-old girl can run this company. Sell your stock.' The next day shares cratered nearly 30%. But thanks to her family's 51% ownership and the vote from Lifeway's independent board, Smolyansky still became CEO, fending off a company lawyer who she says had launched a covert bid to name himself as chief executive. At 27, she was America's youngest female CEO of a publicly traded company. Soon after she took the reins, Smolyansky says she realized the business was being held back by the deal her father had struck with Danone. Smolyansky says Lifeway was promised help with sales brokers and distribution as well as purchasing milk to secure cheaper prices, as detailed within the support agreement signed alongside the shareholder agreement. It lasted for three-years. But, Smolyansky says, nothing ever happened. And it never got renewed. Even worse, the shareholder deal stipulated that, without Danone's consent, Lifeway couldn't access other financing (no debt, no strategic investments) and Smolyansky couldn't earn stock options as CEO. 'They waved a carrot in front of my naive immigrant father who had this global company knock on his doors,' says Smolyansky. 'We can't move left or right, up or down. They stifled us. They lied to us.' Danone denies that it has impeded or obstructed Lifeway over the years, and describes Lifeway and the Smolyansky family as being 'sophisticated business counterparties represented by equally sophisticated counsel.' And even if Danone turned down helping Lifeway expand internationally, Smolyansky did it anyway. Lifeway is sold in at least seven countries outside the U.S., including France, Ireland, Mexico and South Africa. Growing Gains: Lifeway's products will soon be in more locations of Publix and CVS. lifeway Over the years, Smolyansky has tried to get out of the deal. Danone claims to have delivered on its obligations, after providing the Smolyanskys with the cash they desired, and that it is defending the shareholder agreement in court. But Smolyansky now argues that the agreement is illegal under Illinois state law because it was never voted on by all shareholders. And as the partnership soured, the Smolyanskys' American Dream has turned into a nightmare. The deal exacerbated fractures inside the family because it prevented Lifeway shareholders from freely considering an exit. 'This contract has hurt my family,' Smolyansky says. 'It has created an extra stress on us that was unnecessary.' The family drama has been brewing for nearly a decade. In 2019 the board hired an independent law firm to investigate Edward's conduct. It resulted in his removal as Lifeway's treasurer and being placed on administrative leave. The saga took an especially nasty turn in 2022, after a second independent investigation led to the board voting to fire him, with his sister abstaining. Then Lifeway's COO and board director, he had worked at the brand for 20 years. After that, Edward did not stand for reelection to the board. Ludmila's consulting agreement also ended. Soon after she resigned from the board. 'It was complete betrayal,' recalls Edward, who adds that, after being hospitalized in 2022, he's happier and healthier. Smolyansky currently has a restraining order against him. A shareholder-wide vote on the board is planned for Lifeway's annual meeting, likely this summer. Edward, whose shares have 18% of total voting power, predicts that his sister and the board to lose the election. Ludmila has 6%, and officially votes as a group with Edward. Smolyansky has 14.5% of the vote. 'We are on the side of all the shareholders, including my sister,' says Edward. 'But it's time for everyone to get out of the way. Let the professionals take over this brand.' Smolyansky responds that her brother isn't acting in shareholders' best interest but out of a vendetta against her. The company, she insists, has never been stronger. Over the past five years, shareholders have enjoyed returns of 1,175%. And Smolyansky points to Danone's past U.S. acquisitions—especially the 2017 purchase of Boulder, Colorado's WhiteWave Foods for $12.5 billion which included Horizon, the largest organic dairy brand in America, as well as Lifeway competitor Wallaby—as a cautionary tale. Under Danone, Horizon stopped sourcing milk in New England entirely and dropped 89 organic dairy farms, upending the businesses of families that had supplied Horizon for years. Then when the organic dairy division's subsequent weak performance dragged down Danone's sales and operating margin growth, it sold a majority stake in Horizon and Wallaby, then 3% of Danone's global revenues, to a California-based private equity firm. Smolyansky says of Danone, 'Are they going to wipe out my grandmother's recipe, our legacy, that Ukrainian history, all that we've done?'
Yahoo
07-03-2025
- Business
- Yahoo
Lifeway Foods hits back at Danone lawsuit linked to shareholder agreement
Lifeway Foods plans to pursue a 'counterclaim' against Danone after the dairy giant launched a lawsuit claiming a violation of a shareholder agreement. In reaction to the legal claim, filed in the Cook County Court in Illinois this week, the US-headquartered kefir drinks maker has accused Paris-based Danone of pursing a 'hostile takeover' of the business, at a price that 'undervalues the company". The latest actions by both companies prolongs a dispute dating back to last year, when Danone instigated a bid in September to acquire all of the shares in Lifeway Foods, having taken around a 23% stake in 1999. That bid triggered months of wrangling, with Lifeway Foods first rejecting the offer in November claiming it undervalued the company. Danone then put in a higher bid only to be turned down again by the kefir beverages manufacturer. As Lifeway Foods and Danone battle it out, a family feud continues to fester at the US firm, between its chair and CEO Julie Smolyansky, and her mother and brother, Ludmila and Edward Smolyansky, the company's largest shareholders. The latest gripe from Danone centres on a decision by Lifeway Foods board to award Julie Smolyansky with 283,337 shares in the kefir business, which the French giant said violated the 1999 shareholder agreement. Danone threatened to take legal action in January and has now instigated proceedings. In a so-called 13D filing with the US Securities and Exchange Commission on 3 March, Danone confirmed the lawsuit against Lifeway Foods' entire board, including the CEO. 'The lawsuit alleges that the issuer's directors breached their fiduciary duty of loyalty by choosing to enrich Ms. Smolyansky and entrench themselves as directors by knowingly approving the Smolyansky share issuance in violation of the shareholder agreement,' according to the filing. 'The lawsuit also alleges that the issuer and Ms. Smolyansky committed a breach of contract by violating the shareholder agreement through the Smolyansky share issuance (and, in the alternative, that their conduct was barred by promissory estoppel).' In retaliation, the kefir maker said in a statement yesterday (4 March) that 'Lifeway intends to file a counterclaim against Danone and will aggressively contest Danone's claims', accusing the Activia brand owner of 'predatory actions'. That same statement added: 'This is the latest aggressive action in Danone's campaign to execute a hostile takeover of Lifeway at a price that substantially undervalues the company. 'Danone is choosing to exploit its vast corporate power to bully Lifeway's board and its shareholders into accepting an undervalued transaction rather than negotiating with the company in good faith. 'Lifeway's board remains committed to maximising the value for all shareholders and will not be pressured into a transaction that fails to do that.' That commitment was evident in November, when the board said it was 'not opposed to the sale of the company at any price'. However, Lifeway Foods then claimed in January that the 1999 shareholder agreement was 'invalid'. Lifeway Foods repeated that assessment in yesterday's statement, although approached by Just Food today for comment on the proposed counterclaim, Danone said it had no further comment to make. 'The latest action by Danone follows a history of poor partnership since its investment in the company in 1999,' Lifeway Foods said in the statement. 'Danone has repeatedly leveraged the 1999 stockholders' agreement, which the company believes is invalid, to benefit itself at the expense of Lifeway shareholders... No amount of corporate bullying will deter Lifeway from remaining steadfast in safeguarding the interests of our shareholders and other stakeholders'. Danone countered in its legal filing: 'The reporting persons [Danone] waive none of their rights under the shareholder agreement, and demand that Lifeway and Ms. Smolyansky comply with their respective longstanding, legally required obligations by rescinding the Smolyansky share issuance and committing to abide by the shareholder agreement.' It continued: 'The reporting persons intend to continue to vigorously pursue the claims set forth in the lawsuit and any related claims, and to continue to assert and enforce their rights under the shareholder agreement. 'The reporting persons may in the future take any actions in connection therewith that they deem appropriate.' "Lifeway Foods hits back at Danone lawsuit linked to shareholder agreement" was originally created and published by Just Food, a GlobalData owned brand. 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