The ongoing family feud at Illinois-based kefir maker Lifeway Foods has reached new heights, as key shareholders once again call for the resignation of CEO Julie Smolyansky and other top executives. The tension within the Smolyansky family, who founded and have long managed the company, has been simmering for years and has now boiled over into public accusations and legal battles.
Lifeway Foods was established by Michael Smolyansky in the 1980s and has been under the leadership of his daughter Julie since his passing in 2002. Despite her long tenure, Julie’s leadership has been a point of contention within the family. Her brother Edward served as COO until his termination in early 2022, and their mother Ludmila remained on the board until the summer of that same year. The first public signs of discord appeared in February 2022, when Ludmila and Edward filed a form with the SEC advocating for Julie’s replacement and a strategic review of the company.
The Lifeway board’s independent directors responded by expressing full support for Julie, who emphasized her commitment to the company and her father’s legacy. By late July 2022, a temporary truce was reached, keeping Julie in place as CEO while agreeing to explore strategic alternatives for the company’s future.
However, the peace was short-lived. In June 2023, David Kanen, president and CEO of Kanen Wealth Management, a key shareholder, penned an open letter accusing Lifeway’s leadership of mismanagement and inadequate shareholder returns. Kanen criticized the company’s stagnant stock price and minimal profitability despite revenue growth, arguing that the brand could thrive under more effective management.
The situation escalated further in April 2024 when Lifeway Foods filed a lawsuit against Edward and Ludmila, accusing them of stealing trade secrets to launch a competing kefir brand, Pure Culture Organics. This lawsuit was voluntarily dismissed in June, but it underscored the deepening rift within the family.
This week, Ludmila and Edward, who collectively own approximately 29% of Lifeway’s outstanding common stock, issued a press release demanding the resignation of Julie and other top executives, including Pol Sikar, Jody Levy, Dorri McWhorter, and Perfecto Sanchez. They accused the current leadership of underperformance and mismanagement, claiming that Lifeway had breached its agreement to explore strategic alternatives.
The release also alleged that Julie had sought a “gift” of one million Lifeway shares from Ludmila and that the company had spent over a million dollars on lawsuits aimed at silencing them. Additionally, they accused Julie’s spouse, Jason Burdeen, of exercising significant managerial control despite not holding an official position within the company.
Lifeway Foods’ VP of communications, Derek Miller, did not immediately respond to requests for comment. Meanwhile, the company’s financial performance has shown some positive signs. Net sales rose 17.8% to $44.6 million in the quarter ending March 31, 2024, driven by higher volumes of its branded drinkable kefir, which accounts for 82% of revenues. Net profit for the quarter was $2.4 million, up from $0.8 million in the same period the previous year. For the full year 2023, net sales grew 13.1% to $160.1 million, with net profits reaching $11.4 million.
The ongoing turmoil at Lifeway Foods raises questions about the future of the company and its leadership. As the Smolyansky family feud continues to unfold, stakeholders are left to ponder the implications for the brand’s stability and growth prospects.