Lifeway Foods' President and CEO Julie Smolyansky and her brother, CFO Edward Smolyansky, presided over the closing bell ceremony of the NASDAQ stock market on January 4, the second trading day of 2006.



Lifeway Foods' President and CEO Julie Smolyansky and her brother, CFO Edward Smolyansky, presided over the closing bell ceremony of the NASDAQ stock market on January 4, the second trading day of 2006. At the time the company was celebrating much more than America's most popular New Year's resolution: a healthy and active start to a new year. That's because the Smolyanskys knew 2006 would be an especially healthy and active year for the company. Not only did Lifeway have numerous innovations in the development pipeline, there were noteworthy acquisitions and distribution deals in the works. Plus, the company would be celebrating its 20th anniversary.

That's right, 20 years of providing functional dairy foods to Americans thanks to their late father's dream of making his home country's (Russia) cultured dairy beverage-kefir-a mainstay in America's refrigerated dairy cases. Their father, Lifeway Foods' founder Michael Smolyansky, must be smiling in heaven during this special year. He sought the American dream for his family, while bringing the tastes of the old world to the American consumer.

"It's a wonderful milestone for Lifeway Foods. We are thrilled to be celebrating 20 years of making kefir and other dairy products that are enjoyed for their great nutritional value and delicious taste," says Julie Smolyansky. "Celebrating the New Year by ringing the NASDAQ closing bell was a fantastic way for Lifeway to start the year out fresh-as we knew we had one busy year ahead of us!"

It is for what has happened since that day in January, and the 19 years leading up to this year, that Dairy Foods recognizes Lifeway Foods as its New Products Company of 2006. Congratulations to the Smolyanskys and their dedicated employees.

Lifeway aims to make a kefir that appeals to every consumers' tastes and nutritional needs.

Targeting kids with kefir

Lifeway Foods started with kefir, a milk-based beverage that contains 10 active probiotic bacteria, and it continues to grow with innovative derivations of this Eastern European classic. At the start of 2006 much of America was focused on the future health of today's youth, and the Smolyanskys knew that 2006 was going to be the year that American kids would get their own kefir.

"My brother and I grew up drinking kefir and believe in its functional properties," says Smolyanksy. "With all the concerns about childhood obesity and nutrition, we knew this would be the year to make sure kids would be asking their parents for kefir."

Lifeway aims to make a kefir that appeals to every consumers' tastes and nutritional needs.
Lifeway is accomplishing this through the introduction of ProBugs, an organic whole milk kefir targeted to growing kids under 10 years old. Three things make it kid friendly: the product, the package and the fun name.

For starters, the brand ProBugs is a reference to "probiotics" and the "friendly" bugs found in kefir. It also comes in two kid-friendly organic flavors: Sublime Slime Lime and Orange Creamy Crawler. There's more. ProBugs come in packs of four 5-oz packages shaped like cartoon bug characters. "The packages have a patented no-spill spout, making it easy for kids to consume, while eliminating messes," Smolyanksy says. "The pouch is designed in such a way that little hands can hold easily."

Lifeway aims to make a kefir that appeals to every consumers' tastes and nutritional needs.
From years of watching the company grow, and eventually being in the driver's seat, Julie Smolyansky knows there is a lot more to a successful new product launch than simply great product, cool package and fun name. "There's a great deal of promotion and education involved," she says.

Thus, ProBugs sponsors and exhibits at many kid-focused events. "We held this great event one weekend at a nature museum in Chicago where we taught kids about ‘good bugs' and ‘bad bugs,'" says Smolyansky. "The phone was ringing off the hook the following week with parents asking where they can find ProBugs. Let's just say in the Chicago market, we are replenishing retailers' dairy cases almost every day."

Lifeway aims to make a kefir that appeals to every consumers' tastes and nutritional needs.

Lucky number 13

ProBugs wasn't the company's only near-overnight success. Lifeway has had similar experience with the roll out of its 13th flavor of kefir-pomegranate. "Introduced a little more than a year ago, Lowfat Pomegranate Kefir is now one of our top-selling flavors," Smolyansky says.

"With the Pomegranate variety we also set in motion a change in sweetener-from high-fructose corn syrup to organic cane juice," she continues. "Organic cane juice is now used in all of Lifeway's low-fat kefirs, as we consider it a much healthier alternative." The company always used organic cane juice for the organic line of kefir.

"We are very excited to sweeten our main line of kefir with organic cane juice. The adjustment was made because of overwhelming demand from current and potential Lifeway customers," says Smolyansky.

Lifeway aims to make a kefir that appeals to every consumers' tastes and nutritional needs.
Indeed, enticing potential customers is very important, as Lifeway Foods knows that one of the ways to grow its business is to grow its customer base. "If you go into any ethnic Eastern European home in the States today, you most likely will find kefir," she says. "We know that my dad's original target consumer is drinking kefir. It's all the other ethnic groups and ‘Americans' who we want to get on board," Smolyansky says.

It's that mindset that paved the way for another 2006 innovation: Greek Style Kefir. This exceptionally tangy, rich and decadent product mimics old-world Mediterranean kefir. Made with full-fat milk and cream, it tastes authentic on its own, or mixed with honey or poured over fruit. And, much as they do in Greece, this kefir can be used in a variety of recipes-from soup to salad dressing.

"The growing popularity of Greek-style yogurt inspired us to create this product," Smolyansky says. "We are in the midst of rolling out other ethnic drinkable cultured dairy beverages."

In addition to drinkable cultured dairy products, Lifeway Foods manufactures a variety of spreadable cheeses and dairy desserts.

Growth through acquisition

As you can tell, innovation is important for Lifeway Foods. But while innovating, why not acquire? The development of Greek Style Kefir was sort of a sign of other big news within the company: the July 2006 acquisition of Minnesota-based Helios Nutrition Ltd. (The name Helios refers to the young Greek god of the sun.)

Helios has been Lifeway Foods' primary kefir competitor with its namesake brand in the number-two position on a national basis. However, Helios was number-one in organic kefir, as Helios was the first organic kefir in the marketplace and all of its products are certified organic.

"The acquisition strengthens Lifeway's presence in the rapidly growing market for organic dairy products, providing a steady supply of organic milk through Helios' organic dairy subsidiary," says Smolyansky. "The synergies between the two companies provide many benefits. For example, we have the same customers including every Whole Foods, Wild Oats and most other natural foods stores; we share the same shelf space; we buy the same raw materials; and we exhibit at the same trade shows. This will give us better purchasing power; increase our ability to effectively market the category; and alleviate competitive pressures from Helios in the natural and organic area of our business.

"It also opens up Minnesota, an important geographic market that was previously very difficult for Lifeway because local retailers were fiercely loyal to the local Helios brand, just as we have a very strong advantage in our hometown of Chicago," she adds. "This is a major step for Lifeway as we continue to drive the kefir phenomenon with great-tasting, healthy product lines. It raises our competitive positioning in the marketplace and creates a tremendous footprint in the growing organic and cultured dairy market."

The Helios brand will become a sub-brand under the Lifeway umbrella of products, and it now has inroads into retail venues where Lifeway Foods recently gained distribution. For example, in 2005, Lifeway kefir started showing up in Costco and Target stores.

In addition to drinkable cultured dairy products, Lifeway Foods manufactures a variety of spreadable cheeses and dairy desserts.

Other new products

Lifeway wants to have a kefir for every consumer, which is why the company responded to the low-carb craze with Slim6. With only 6g net carbohydrates per serving, the low-carb kefir continues to appeal to a select, and steady, consumer base. "Slim6 was introduced in response to a growing number of requests for a no-sugar-added flavored kefir," Smolyansky says. "It meets the needs of consumers who follow a low-carb regimen or are diabetic."

For U.S. Hispanics, Lifeway produces a line of products called La Fruta Drinkable Yogurts. Varieties include traditional ethnic flavors such as Horchata, Mango and Tres Leche.

Lifeway also offers more than drinkable cultured dairy products. Another innovation for the company is all-natural, organic pudding under the name "It's Pudding!". Flavors include Banana, Chocolate, Rice, Tapioca and Vanilla.

And, though this one has been around for a few years, its uniqueness deserves mentioning, particularly since it was Michael Smolyansky's final contribution to his American dream. Sweet Kiss cheese spreads are based on the company's Farmer's cheese. Available in varieties such as Apple, Peach, Raisin and Vanilla, this low-fat alternative to cream cheese also contains probiotic cultures, giving it a unique positioning in the health food community.

Congratulatory hugs and kisses to Lifeway Foods for being Dairy Foods' New Products Company of the Year. Here's to the next 20 years!