Lifeway Foods shareholders Edward and Ludmila Smolyansky and other “concerned shareholders” at the Illinois-based kefir maker have filed a consent statement* with the SEC urging stockholders to agree to remove the company’s current board of directors, including CEO Julie Smolyansky.
According to Ludmila and Edward, who own 29% of the common stock, “Lifeway has been on autopilot for far too long.”
Edward told AgFunderNews: “Lifeway Foods lacks a true leader. Under Julie’s direction, the company has missed significant opportunities due to a lack of innovation and strategic foresight, and corporate governance has also deteriorated. Julie’s early ideas showed promise, but she’s been distracted for years, delegating too much to her husband [chief of staff Jason Burdeen], who lacks industry experience.
“There’s no clear strategic plan or vision for employees to rally behind, and many have expressed concerns. With new leadership, Lifeway can finally reach its full potential.”
Asked what he would do differently, he said: “I have a bold vision to refocus Lifeway Foods 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.”
Lifeway Foods responded by sharing the company’s latest quarterly figures, which show a 25.3% increase in net sales to $49.2 million in the three months ended June 30, 2024 and profits of $3.8 million vs $3.2 million during the same period in 2023.
A spokesperson added: “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 facts are clear. Lifeway is performing at historic, record-breaking levels, and we are proud of the outstanding work and contributions from the entire team… the company has successfully grown revenues from $94m in 2019 to $160m in 2023.”
Board should explore ‘strategic alternatives’
Founded by Michael Smolyansky in the 1980s, the publicly listed company has been run by his daughter Julie as CEO since Michael’s death in 2002, while Ludmila (Julie’s mother) remained on the board until summer 2022. Julie’s brother Edward was COO until early 2022, when he was terminated with cause.
The first public signs that the Smolyansky family members were not on the same page emerged in February 2022 in a form filed with the SEC in which Ludmila and Edward argued that Julie should be replaced as CEO.
The independent directors of the Lifeway board responded with a statement saying that they fully supported Julie Smolyansky, who stressed that her “loyalty lies with our company, our brand, our customers, our employees, our shareholders, and my father’s legacy.”
By late July 2022, things appeared to have calmed down, with an agreement between the company and Edward and Ludmila to keep Julie in place as CEO but committing the board to explore “strategic alternatives” for the company.
‘Edward appears to be engaged in a personal vendetta’
In June 2023, however, David Kanen, president and CEO at key shareholder and activist investor Kanen Wealth Management, wrote an open letter to Julie Smolyansky and Lifeway directors accusing them of “mismanaging the business and not acting in the best interest of its shareholders.”
He added: “The company’s stock is undervalued but cannot realize a greater value with the current CEO and board. This has been proven by five years of revenue growth with minimal to no profitability.”
In April 2024, the feud ratcheted up further as Lifeway Foods filed a lawsuit vs Edward and Ludmilla Smolyansky accusing them of stealing trade secrets to manufacture a directly competing product (kefir brand Pure Culture Organics). The parties agreed to voluntarily dismiss the case in June.
In July, Edward and Ludmila issued a press release calling on Julie and other top execs to resign “to avoid further underperformance and mismanagement of company assets.” The SEC filing
‘This isn’t about pursuing a sale…’
Asked about the status of Pure Culture Organics, Edward told AgFunderNews: “My father entrusted me with his secret kefir formulas, and I’ve always been committed to building on his legacy. I created Pure Culture Organics to research potential innovations and techniques in kefir production. Pure Culture does not have any employees, as its sole assets are its brand and proprietary trade secrets.”
As to what “strategic alternatives” he thought the company should pursue, Edward told us: “This isn’t about pursuing a sale or simply shaking things up; it’s about implementing a viable growth strategy that delivers immediate and long-term shareholder value, and positions Lifeway Foods for sustainable success.”
According to SEC filings, as of April 29, 2024, key shareholders at Lifeway Foods include dairy giant Danone North America (23.4%), Edward Smolyansky (21.03%), Julie Smolyansky (17.58%), and Ludmila Smolyansky (9.04%).
The record date by which stockholders are asked to respond to the consent filing hasn’t been set yet, but “will likely be agreed on by both sides in the next two weeks,” said a spokesperson for the “concerned shareholders.”
*A solicitation of written consents is a process that allows a company’s shareholders to act by submitting written consents to any proposed shareholder action in lieu of voting at a shareholder meeting.
