As a small food maker with heavy ownership by the founding family, the outcome over what has suddenly become a very public dispute could hinge on the position of a very well-known dairy giant: Danone. As of last September, Danone owned 22.4% of Lifeway, making it the company’s single-largest shareholder.
Danone, should it align with Ludmila and Edward Smolyansky, would effectively push Lifeway to at least consider a sale since they would hold more than half of the company’s stock. It also could provide momentum for the appointment of a new CEO.
Lifeway’s kefir and fermented probiotic products would make it a logical acquisition for Danone given its sizable stake and familiarity with the company, or for another large dairy maker that could provide similar support for the smaller company’s brands through innovation and marketing. Danone could fold Lifeway into its portfolio of other dairy brands like Activia or Oikos as well as its plant-based items like Silk and So Delicious.
With a market capitalization under $100 million, any potential buyer could snap up Lifeway for a minimal amount without disrupting their balance sheet.
While Lifeway has expanded into other products in recent years, its drinkable kefir offering is responsible for 82% of its sales, a regulatory filing shows. Cheese is a distant second at 11%.
Lifeway has struggled in recent years with declining sales. In 2016, the company posted sales of $124 million, which have largely trended downward in recent years. For 2020, the last full year Lifeway announced results, sales came in at $102 million.
As a smaller company, Lifeway is more susceptible to volatile swings in commodity prices and it doesn’t have the same deep pockets as its larger CPG competitors like Danone, General Mills and Chobani. Folding Lifeway into one of these companies would alleviate these challenges.
Lifeway has attempted to make inroads recently in other better-for-you categories during the pandemic like a plant-based oat line and the rollout of adaptogenic functional mushroom beverages. It also spent $5.8 million in 2021 to purchase GlenOaks Farms, a probiotic drinkable yogurt brand.
In a statement released on March 1 in response to the regulatory filing, Lifeway’s independent directors issued their support for Julie Smolyansky and the company’s strategy, citing eight consecutive quarters of year-over-year net sales increases. Lifeway has been among the companies in the food space to benefit from the acceleration of consumers turning to healthier offerings during COVID-19.
The release pointed to product innovation and acquisition as platforms to “drive future success,” and said that the directors “look forward to continued growth under her leadership.”
“We believe the Company is reaching an important inflection point supported by ongoing research around probiotics and their influence on gut health, mental health and immunity,” they said.
Julie Smolyansky became the youngest female CEO of a publicly held firm when she took over Lifeway at the age of 27 in 2002, according to the company’s website. Revenue was $12 million when she took the helm.