In a dramatic turn of events at Lifeway Foods, a faction of shareholders led by Edward and Ludmila Smolyansky has filed a consent statement with the U.S. Securities and Exchange Commission (SEC) demanding the removal of the current board of directors, including CEO Julie Smolyansky. The Illinois-based kefir maker, known for its probiotic dairy products, has become the epicenter of a heated family feud that threatens to reshape its leadership and strategic direction.
Edward and Ludmila Smolyansky, who collectively hold 29% of Lifeway’s common stock, have voiced their dissatisfaction with the company’s current trajectory. “Lifeway has been on autopilot for far too long,” they declared in a statement. Edward elaborated further in an interview with AgFunderNews, accusing the company of lacking true leadership under Julie’s direction. He criticized her for missing significant opportunities due to a lack of innovation and strategic foresight, and for allowing corporate governance to deteriorate. According to Edward, Julie’s early ideas showed promise, but she has been distracted for years, delegating too much responsibility to her husband, Jason Burdeen, who lacks industry experience.
Edward’s vision for Lifeway is ambitious. He aims to refocus the company on growth, innovation, and ethical governance. “This company is my life; I know it inside and out, and feel a deep responsibility to restore strategic vision, transparency, and accountability to its leadership team,” he said.
In response, Lifeway Foods has highlighted its recent financial successes. The company reported a 25.3% increase in net sales to $49.2 million for the quarter ending June 30, 2024, with profits of $3.8 million, up from $3.2 million during the same period in 2023. A spokesperson for Lifeway emphasized that Julie Smolyansky has led the company to historic, record-breaking levels. “Julie Smolyansky was recently granted an Order of Protection against Edward, who appears to be engaged in a personal vendetta with no regard for potential negative impacts on Lifeway’s stakeholders,” the spokesperson added.
The roots of this family conflict trace back to the company’s founding by Michael Smolyansky in the 1980s. Julie took over as CEO after Michael’s death in 2002, while Ludmila remained on the board until mid-2022. Edward served as COO until early 2022, when he was terminated with cause. The first public signs of discord emerged in February 2022, when Ludmila and Edward filed a form with the SEC arguing that Julie should be replaced as CEO. Despite a temporary truce in July 2022, tensions flared again in June 2023 when David Kanen, president and CEO of key shareholder Kanen Wealth Management, accused the board of mismanagement and failing to act in shareholders’ best interests.
The conflict escalated further in April 2024 when Lifeway Foods filed a lawsuit against Edward and Ludmila, accusing them of stealing trade secrets to manufacture a competing kefir product under the brand Pure Culture Organics. Although the case was voluntarily dismissed in June, Edward and Ludmila continued to push for Julie’s resignation, citing concerns about underperformance and mismanagement.
Edward defended his creation of Pure Culture Organics, stating that it was intended to explore innovations in kefir production. “My father entrusted me with his secret kefir formulas, and I’ve always been committed to building on his legacy,” he said.
The stakes are high, with key shareholders like dairy giant Danone North America holding a significant 23.4% stake in Lifeway Foods. The record date for stockholders to respond to the consent filing has yet to be set but is expected to be agreed upon within the next two weeks.
As the battle for control of Lifeway Foods intensifies, the outcome will likely have profound implications for the company’s future. Whether the company will continue under Julie Smolyansky’s leadership or pivot to Edward’s bold vision remains to be seen, but one thing is clear: the Smolyansky family’s legacy is at a critical juncture.