Family Feud Clouds Future of Kefir Leader Lifeway Foods
Behind the steady revenue growth of Lifeway Foods, Inc. (NASDAQ: LWAY), the leading U.S. producer of kefir, lies a protracted and costly battle for control that is drawing scrutiny from investors. The company's shares, trading around $21.83 with a trailing P/E of 29.59, tell only part of the story of a firm caught between operational success and internal strife.
The core of the turmoil is a deep-seated rift within the Smolyansky family, which collectively controls over 50% of the company. Founder Ludmila Smolyansky and her son, former COO Edward, have been locked in a series of proxy fights and legal disputes with Julie Smolyansky, Ludmila's daughter and the current CEO, since late 2021. The conflict has seen Julie consolidate power by ending her mother's consulting role and firing her brother, while Ludmila and Edward have repeatedly challenged the board's decisions.
This governance drama escalated in mid-2024 when Danone, which holds a 25% stake in Lifeway, made an unsolicited acquisition offer. The board's rejection of the bid further strained relations and triggered legal tensions over shareholder agreements. Analysts note that the company has reportedly spent over $10 million on legal fees related to the feud—capital that critics argue could have been better deployed for growth or returned to shareholders.
Despite the boardroom battles, Lifeway's business fundamentals appear robust. The company has doubled its annual revenue to over $200 million, capitalizing on the growing consumer demand for probiotic and fermented dairy products like its flagship drinkable kefir, soft cheeses, and yogurts.
Investor Perspectives:
"This is a classic case of a great business trapped in a bad ownership structure," says Michael Rourke, a portfolio manager at Horizon Capital. "The growth trajectory is undeniable, but the constant shadow of litigation and family discord creates a persistent overhang that caps the valuation. Until governance is stabilized, it remains a 'show me' story."
Offering a more critical take, Sarah Chen, an independent activist shareholder, argues: "It's a textbook example of value destruction. The Smolyanskys are prioritizing personal grievances and control over the interests of all shareholders. That $10+ million in legal fees? That's directly out of investors' pockets. The board's dismissal of Danone's interest without serious exploration looks increasingly like entrenchment, not stewardship."
Other observers urge a longer-term view. David Fischer, a consumer staples analyst, notes: "The brand loyalty and market position Lifeway has built in the functional foods space are significant assets. For patient investors, the current discount due to the feud could present an opportunity—if and when the family finds a resolution, whether through a settlement, a strategic transaction, or a clear leadership path forward."
The situation at Lifeway serves as a stark reminder of the unique risks in family-controlled public companies, where personal dynamics can profoundly impact corporate strategy and shareholder value. The market now watches to see if the company's operational momentum can ultimately outweigh the drag of its internal conflicts.