The secret to Lifeway Foods’ success | Dairy Foods

Lifeway Foods' CEO Julie Smolyansky predicts big things in the future for Farmer Cheese (pictured lower center).

Photos courtesy of Lifeway Foods.

On Sept. 23, Danone offered to pay some $283 million — $25 per share — to purchase the 76.6% of Lifeway Foods it does not already own.

Whether this transaction is consummated depends on several factors, including a shareholder vote. But what cannot be denied is Lifeway Foods’ impressive growth, based primarily on sales of its popular ready-to-drink (RTD) kefir products. Lifeway’s net sales reached a record $160.1 million for the year ending Dec. 31, with net income coming in at $11.4 million during that time period.

Earnings this year are expected to surpass 2023 levels, with CEO Julie Smolyansky telling Dairy Foods that net sales could reach $200 million for 2024.

“We have had 19 consecutive quarters of year-over-year top-line growth. The company’s revenues have increased from $93 million at the peak of the plant-based movement in 2019 to $160 million last year,” she continues. “It is also not private-equity money that assisted us. It is organic growth we strategically went after.”

Smolyansky adds that five years ago, the Morton Grove, Ill.-based company announced its “Lifeway 2.0” plan, several strategic measures it continues to execute.

“Our [growth] did not happen with luck. It took blood, sweat, and tears and a bunch of strategic steps,” she states. “I am not one to obsess about a stock price, but it is a way to measure things. Our share price has increased 1,200% in the five years since we announced Lifeway 2.0, our gross profit increased 91.6% and our gross margins had a 290-basis point increase. I am so proud of these numbers and our team. We are all aligned on a mission to bring good health to our customers.”

“Our [growth] did not happen with luck. It took blood, sweat and tears and a bunch of strategic steps.”

One big reason for Lifeway’s success is the great advice Julie Smolyansky learned from her father: “always be prepared for a crisis.” This advice has served the company well during economic recessions, labor shortages, a pandemic, and supply chain interruptions.

“During those times, we executed perfectly. Every single order that came through, we produced and delivered. We never had to ‘short’ a customer,” Julie Smolyansky asserts. “I remember being all prepared for the Expo West [trade show] in Anaheim in 2020. We all had to go home. I told our production team to make eight weeks’ supply of kefir and Farmers Cheese. I sent a letter to every one of our category buyers, telling them to stack up on kefir, because it is known to help your immune system, and people will be seeking these products. It all sold very quickly.

A period of crisis like the COVID-19 pandemic was a big test, but Lifeway knew to be nimble and follow current trends. “That is one thing that has led to our success,” Julie Smolyansky reveals. “And our culture is incredible. During the pandemic, we knew we are on the front line and everyone showed up for work. That was amazing.”

Beyond impressive growth, Lifeway Foods has a unique dairy story to tell. The company was founded in 1986 by Julie’s dad, Michael Smolyansky, a refugee from the former Soviet Union.

“My dad grew up with kefir. In the Soviet Union and other Slavic countries, kefir is a staple. It is part of everyday life. My ancestors consumed kefir for 2,000 years. It is in my DNA,” Julie Smolyansky explains. “It has long been known that kefir has many benefits. Even before science started catching up, my ancestors knew kefir contributed to their longevity. Some of them lived past 100 years of age, attributing it to kefir.”

Kefir is fortified with protein, vitamins and calcium, as well as several strains of probiotic bacteria, something Smolyansky’s ancestors did not know. “They did think kefir contributed to their well-being. They were right. Today, science shows the gut and mind are connected and kefir can help reduce stress, depression, and anxiety,” Smolyansky says.

However, although the Smolyansky family has long enjoyed the benefits of kefir, convincing the Western world of its benefits proved challenging. The family moved to Illinois in 1976, where Julie’s mother learned English by watching “General Hospital.” “I was a 1-year-old baby and I can actually remember it as a core memory,” Julie Smolyansky recalls.

Once arriving in America, Michael Smolyansky was shocked to observe the plethora of food options, including things he had never seen before, such as pineapples and bananas. However, one thing was missing from American grocery shelves: kefir.

“My dad had Crohn’s disease and his health started to deteriorate without kefir,” Julie Smolyansky remembers. “He was also entrepreneurial and believed in the American dream. That was a big reason he left the Soviet Union.”

Michael Smolyansky also was fascinated by a free enterprise economy and the stock market, which led him to list Lifeway Foods as a publicly traded stock in 1988. “He was really happy that he brought a company to the public markets,” Julie Smolyansky maintains. “… We are a remarkable story of a ‘Little Engine That Could.’ We survived against all odds, competing against behemoth companies with significantly more resources.”

In the 1970s and 1980s, little was known about gut health and immunology, but Michael Smolyansky closely followed the work of Élie Metchnikoff, known as the “father of innate immunity,” who researched fermented milk, probiotics, and kefir.

“My dad would tout his research. He found that fermented milk and kefir contributed to the body’s overall health and wellness. That research dates back to the early 1900s, but it was in another language, so it took decades for it to be translated,” Julie Smolyansky states. “But in the period during and post-COVID, there was a race to find ways to boost the immune system. The science and research about the topic in the past five years exploded.”

The genesis of the Lifeway name was Michael Smolyansky, who passionately believed kefir consumption should be a “way of life” for everyone. “It was a one-man show originally. I remember my dad making kefir and having me try it while I played the game ‘Hungry Hippos’ in my basement,” Julie Smolyansky recalls vividly. “At first, he would deliver it to grocery stores; primarily ethnic stores in the deli space. That led to some mass-market retailers because a lot more people emigrated from the Soviet Union to the United States, having already known what kefir was.”

But convincing the rest of the American public about the beverage proved more difficult.

“I remember being 12 years old at a [supermarket] offering Lifeway kefir to shoppers. Nobody knew what it was. Some people were afraid to take a sample,” Julie Smolyansky says. “We had a lot of barriers to break. In the ’80s and ’90s, we had to work really hard to get the word out about our products. Back then people didn’t even like drinkable yogurt, so we had to carve out our own space. We created a category that did not exist.”

Michael Smolyansky, unfortunately, didn’t get to see Lifeway kefir become the large brand name it is today. He sadly passed away in 2002, but since that time, Julie Smolyansky has taken on the role of the “daughter of kefir.”

“He groomed me to take the company to the next level. He believed my abilities empowered me to be the best I could be,” Julie Smolyansky stressed.

Today, Lifeway is the No. 1 processor of kefir. Just last month, the company announced its most recent product line: Flavor Fusions. With 10 new flavors of its on-the-go, 8-ounce line of organic kefir, the line of RTD beverages contains protein, calcium, and 12 live and active probiotic cultures, the company says. The flavors are Pink Dragon Fruit, Passionfruit Lychee, Hot Honey, Guava Jackfruit, Coconut Pineapple, Pistachio Rose Vanilla, Grapefruit Elderflower, Wild Blueberry Lavender, Taro Ube Latte and Matcha Latte.

Several of these flavors also are popular on social media, with the CEO specifically citing Taro Ube Latte and Pink Dragon Fruit. “Pistachio and Guava also have cult followings. People want to be wowed and feel like they are on an adventure at the grocery store,” she points out.

In addition to its well-known kefir products, Lifeway makes Farmer Cheese, a pressed cottage cheese which Julie Smolyansky believes will be a major source of the company’s future growth. Cottage cheese has had a big moment recently on the heels of influencers on TikTok using the dairy product. Lifeway’s CEO suggests Farmer Cheese will also capitalize on this social media trend.

“We are the No. 1 manufacturer of Farmer Cheese and have spent a massive amount of money on new equipment to make more of the product,” Julie Smolyansky relays. “We will be scaling it nationwide in January.

“In fact, Bethenny Frankel just made a TikTok video about farmers cheese. It had 200,000 views in just a few hours,” she continues. “People are now using it for all sorts of recipes.”

As mentioned, Lifeway Foods is always prepared for the next crisis, but with the COVID-19 pandemic in the past, Julie Smolyansky refers to the company today as having its “time in the sun.”

“We have incredible momentum and are a brand on the move. I feel like we are just getting started,” she concludes.

Brian Berk has been a writer and editor for 21 years. He has served as editor-in-chief of the Music & Sound Retailer and managing editor of Convenience Store News, both the top-circulated magazines in their respective fields. Berk has also held editing and writing roles in drug store retail, photography, and natural health products. Holding a bachelor’s degree from SUNY Cortland and a master’s degree from Quinnipiac University, Berk lives in Port Washington, N.Y., with his wife and two children.