The family feud at Lifeway Foods isn't over.
The mother and brother of CEO Julie Smolyansky are reviving efforts to oust her, alleging that a settlement agreement that laid out options — including a potential sale of the company — has been breached.
Ludmila, 74, and Edward Smolyansky own 29% of the drinkable-yogurt maker founded in 1986 by Michael Smolyansky, her late husband and his father. This time, they want to replace the company's seven directors with a slate of their own, Edward Smolyansky said Wednesday in an interview with Crain’s Chicago Business, a sibling publication of Crain Currency.
In a filing later with the U.S. Securities & Exchange Commission, which they termed a preliminary consent statement subject to completion, the Smolyanskys asked shareholders to consider seven board nominees including themselves and a former board member who was the lead independent director until his 2020 departure.
After reaching a truce in 2022, agreeing to hire a financial adviser to explore financial options for the Morton Grove, Illinois-based company, the sides filed competing claims in Cook County Circuit Court after the deal broke down last year.
In a press release filed with the SEC last month, Edward Smolyansky, 44, said, “Lifeway did not make a good-faith effort to honor its obligations under our settlement agreement, and by February 2023 it was apparent that it had breached the agreement.
"Lifeway’s marketing strategy and budget are totally disconnected from reality. It has completely failed to capitalize on the COVID 19 stay-at-home environment in 2020 and 2021."
Smolyansky added that Lifeway’s advertising expense as a percentage of revenue stagnated at an "unacceptable" 2.5% or so from 2020 through 2023.
Lifeway shares rose almost 50% Wednesday after the firm reported a nearly 10% rise in earnings, to $9 million, this year through June 30, compared with the same period last year. Revenue was up 22% to $93.8 million, mainly on higher sales of its kefir product. Shares, however, have lagged since a May peak of $27.
Lifeway did not respond to the Smolyansky filings but forwarded a statement attributed to Julie Smolyansky commenting on the financial results.
"Our incredible momentum continued in the second quarter as we delivered our 19th consecutive quarter of net sales growth and our 5th consecutive quarter breaking the Lifeway record on the top line," she said.