Dive Brief:
- The board and CEO of kefir maker Lifeway Foods “have been mis-managing the business and not acting in the best interest of its shareholders,” David Kanen at Kanen Wealth Management said in a letter to the company.
- Kanen Wealth Management, which said it has a 4.1% stake in Lifeway, said the company’s stock is undervalued, but the price cannot be fully realized with the board and CEO in place. He called for a sale of Lifeway, which he estimated could receive between $15 and $20 a share compared to its current price of $7.
- Lifeway has been embroiled in turmoil for more than a year amid fighting between family members. Last year, there was a push to oust the CEO and explore “strategic alternatives” before the sides reached an agreement.
Dive Insight:
The drama continues to unfold at Lifeway, an Illinois-based manufacturer of on-trend offerings, such as drinkable kefir and probiotic oat milk.
In a letter to the company’s board, Kanen outlined a list of reasons for change at Lifeway. He said the board and its CEO, Julie Smolyansky, are overpaid and not as actively involved in the company as they should be.
The letter also claimed the company has employees who are friends or related to the CEO, including a chief of staff who is her spouse and does not have any formal employment agreement but receives a six-figure salary.
“We believe the board is misaligned with shareholders and is unwilling to stand-up to the current CEO and address the ongoing profitability issues,” Kanen said. “We are formally putting all directors on notice. You have a fiduciary responsibility to maximize shareholder value!”
In an email, a Lifeway spokesperson noted the recent success of the company, including record revenue in 2022 and 14 straight quarters of year-over-year growth.
“Management will not be distracted or deterred from our core mission of expanding access to Lifeway products and creating shareholder value,” the spokesperson said. “Leadership is focused on pursuing the best outcomes for the company, our customers and shareholders.”
Julie Smolyansky has come under fire before. Ludmila Smolyansky, who founded Lifeway, and her son Edward Smolyansky pushed for her ouster last year. Julie is their daughter and sister, respectively. Edward and Ludmilla Smolansky currently own 31.3%, according to Kanen’s letter.
Kanen said he plans to vote his firm’s shares in favor of a board slate nominated by Edward and Ludmilla Smolyansky.
A wildcard in the ongoing dispute could be Danone. The global company currently owns about 24% of Lifeway’s outstanding stock, according to a regulatory filing. Danone could be influential should it push for a sale or seek to acquire the rest of the company it doesn’t already own.
In 2022, Lifeway recorded net sales of $141.5 million, an increase of $22.5 million, or 18.9% from the prior year, the company said in a press release. The net sales increase was primarily driven by higher volumes, price increases and an acquisition. The company reported net income of $900,000 during the period compared to $3.3 million in 2021.
