Lifeway Foods Profile
Lifeway Foods, Inc. (Lifeway) produces and markets probiotic-based products in the United States and internationally.
Products
The company’s primary product is drinkable kefir, a cultured dairy product. Lifeway Kefir is tart and tangy, high in protein, calcium and vitamin D. Each cup of kefir contains 12 live and active cultures and 25 to 30 billion beneficial CFU (Colony Forming Units) at the time of manufacture.
The company manufactures (directly or through co-packers) and markets products under the Lifeway, Fresh Made and Glen Oaks Farms brand names, as well as under private labels on behalf of certain customers.
The company’s product categories are:
Drinkable Kefir, sold in a variety of organic and non-organic sizes, flavors, and types;
European-style soft cheeses, including farmer cheese, white cheese, and Sweet Kiss;
Cream and other, which consists primarily of cream, a byproduct of making its kefir;
ProBugs, a line of kefir products designed for children;
Drinkable Yogurt, sold in a variety of sizes and flavors; and
Other Dairy, which consists primarily of Fresh Made butter and sour cream.
Product Innovation and New Product Development
Lifeway is committed to maintaining its positions as the leading producer of kefir and a recognized leader in the market for probiotic products. The company routinely evaluates opportunities for new product flavors and formulations, improved package design, new product configurations and other innovation avenues. Beyond its core drinkable kefir products, the company has an ongoing effort to extend the strength of the Lifeway brand and leverage the capabilities of the Lifeway organization into fresh categories and into additional channels of trade, such as Convenience; Foodservice; Club; and Drug. In 2022, the company maintained the level of focus on product innovations, packaging innovations, and growth opportunities. These product innovation and development efforts have led to additional revenue opportunities. Lifeway considers research and development of new products to be a significant part of the company’s overall business philosophy.
Sales and Distribution
Sales Organization
The company sells its products primarily through its direct sales force, brokers, and distributors. The company’s sales organization strives to cultivate strong, collaborative relationships with its customers that facilitate favorable shelf placement for its products, which will drive sales volumes when combined with its marketing efforts and its brand strength. The company’s relationships with food brokers provide additional customer coverage as a supplement to its direct sales force.
Distribution Inside the United States
Lifeway’s products reach the consumer through three primary route-to-market pathways, such as retail-direct; distributor; and direct store delivery (DSD).
Under the retail-direct channel, the company sells its products to retailers and delivers it through either the retailers’ carriers or third-party carriers that deliver to such retailers’ distribution centers. In turn, the company’s retailers then deliver the products to their respective stores. Customers in this route-to-market grouping include Kroger, Walmart and Trader Joe’s. Under the retail direct-model, optimal product merchandising, assortment and product presentation are attended to by the retailer. Sales to the company’s retail-direct customers represent approximately 50% of its total net sales for the year ended 2022.
Under the distributor channel, the company sells its products to distributors and deliver it through either the distributors’ carriers or third-party carriers that deliver to such distributors’ designated warehouses. In turn, the company’s distributors then sell and ship its products to their retail customers. The company’s distributors often use a DSD model of their own to make deliveries directly to individual stores, but they also make deliveries to retailers’ distribution centers. The company’s distributor customers include United Natural Foods (UNFI), KeHE Distributors, and C&S Wholesale Grocers. The distributor attends to optimal product merchandising, assortment, and product presentations at the retail end of the channel, with support from Lifeway’s direct sales force and broker network. Sales to its distributor customers represented approximately 48% of the company’s total net sales for the year ended 2022.
Under the direct store delivery (DSD) route to market, the company sells its products to retailers and deliver it directly to the store using company-owned vehicles and a team of Lifeway merchandisers who engage face-to-face with store management to ensure optimal product assortments and presentations. The company operates its DSD model in the Chicago, Illinois metropolitan area only. Sales to the company’s DSD customers represent approximately 2% of its total net sales for the year ended 2022.
Distribution Outside of the U.S.
Substantially all of Lifeway’s products are distributed within the United States; however, certain of the company’s distributors sell its products to retailers in Mexico and portions of South America and the Caribbean. Additionally, Lifeway products reach consumers in the United Kingdom, Ireland, and the Middle East under third party co-manufacturing agreements and in-country broker and distributor arrangements. Sales outside the United States represented approximately 1% of net sales for the year ended 2022.
Channel- and Market-Specific Distribution and Broker Representation Arrangements
Lifeway’s generally standardized agreements with independent distributors and food brokers allow the company the latitude to establish new relationships as opportunities and needs arise. Where appropriate given the relationship, market, and business opportunity, the company offers exclusive channels, markets, and/or territories to its distributors and brokers.
The company provides its independent distributors with products at wholesale prices for distribution to their retail accounts. Lifeway engages independent food brokers generally on a commission basis, subject in some cases to a minimum commission guarantee. The company’s brokers represent its products to a variety of prospective buyers. These buyers could be specialty stores, retail grocery chains, wholesalers, foodservice operators and distributors, drug chains, mass merchandisers, industrial users, schools and universities, or military installations. With support from the company’s direct sales force, brokers may provide other value-added services. These may include scheduling and coordinating promotions, merchandising, centralized ordering, and data collection services.
Marketing
The company uses a combination of sales incentives, trade promotions, and consumer promotions to market its products.
Sales Incentives and Trade Promotion Allowances
Lifeway offers various sales incentives and trade promotional programs to its retailer and distributor customers from time to time in the normal course of business. These sales incentives and trade promotion programs typically include rebates, in-store display and demo allowances, allowances for non-saleable product, coupons, and other trade promotional activities. Trade promotions support price features, displays, and other merchandising of the company’s products by its retail and distributor customers.
Consumer Promotions and Marketing Campaigns
The company engages in an ongoing and wide variety of marketing and media campaigns – primarily digital and social media, print advertising, television advertising, and event marketing. The company complements these marketing and media efforts with industry-related trade shows and in-store promotional events. The company’s consumer marketing efforts also include cooperative advertising programs with its retail customers and various couponing campaigns, online consumer relationship programs, and other similar forms of promotions.
The company’s marketing efforts are aimed at stimulating demand with new and existing consumers by elevating awareness and consumption of kefir and probiotics, as well as enhancing its brand equity. The company’s awareness marketing seeks to promote the positive nutritional attributes and flavor of its products.
Major Customers
During the year ended December 31, 2021, two customers collectively accounted for approximately 23% of the company’s total net sales. These customers collectively accounted for approximately 32% of net accounts receivable as of December 31, 2021.
DANONE SA
Since October 1999, Danone SA, through subsidiaries (collectively Danone), has been the beneficial owner of approximately 24% of the outstanding common stock of Lifeway.
Regulation
Lifeway is subject to extensive regulation by federal, state, and local governmental authorities. In the United States, agencies governing the manufacture, marketing, and distribution of the company’s products include among others, the Federal Trade Commission (FTC), the United States Food & Drug Administration (FDA), the United States Department of Agriculture (USDA), the United States Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), and their state and local equivalents.
For example, as required by the National Organic Program (NOP), the company relies on third parties to certify certain of its products and production locations as organic.
Internationally, the company is subject to the laws and regulatory authorities of the foreign jurisdictions in which it manufactures and sells its products, including the Food Standards Agency in the United Kingdom; the National Service of Health, Food Safety and Agro-Food Quality (known by its Spanish-language acronym SENASICA) and the Federal Commission for the Protection from Sanitary Risks (COFEPRIS) in Mexico; the Food Safety Authority in Ireland; and the European Food Safety Authority, which supports the European Commission, as well as individual country, province, state, and local regulations.
In addition to routine inspections by state and federal regulatory agencies, including the USDA and FDA, the company has instituted company-wide quality systems that address topics such as supplier control; ingredient, packaging, and product specifications; preventive maintenance; pest control; and sanitation.
To the extent that the federal Food Safety Modernization Act applies to Lifeway’s business, the company develops food safety plans and implement preventive measures to protect against food contamination.
History
Lifeway Foods, Inc., an Illinois corporation, was founded in 1986. The company was incorporated in 1986.
