Lifeway Foods has hit back at Ludmila and Edward Smolyansky, the US company’s largest investors, who have again called for its CEO to leave the kefir maker.
The shareholders – the mother and brother of chief executive Julie Smolyansky – claim her departure, along with that of a number of directors, is “necessary to avoid further underperformance and mismanagement of company assets”.
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In March 2022, Ludmila and Edward – who together own just short of 30% of the business – called for Julie Smolyansky to step down and for Lifeway to begin pursuing “strategic alternatives”.
The issue was said to have been resolved the following August, as Lifeway agreed to review strategic alternatives, as well as find a financial advisor and new replacements for its board.
However, the family feud has been rekindled in recent months. The latest statement from Ludmila and Edward was issued through Pure Culture Organics, a Lifeway competitor Edward set up this year.
The establishment of Pure Culture Organics sparked a legal dispute between the Smolyanskys. In April, Lifeway filed a claim against Pure Culture Organics, claiming it had stolen proprietary information to set up the business. Lifeway ended the lawsuit last month.
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By GlobalData“Edward and Ludmila Smolyansky’s conduct in recent litigation demonstrated repeatedly that they do not have Lifeway’s best interests at heart,” Lifeway said in a statement provided to Just Drinks. “Ludmila testified that Pure Culture Organics was and always has been a ‘joke’ company. Creating a fake organisation and purporting to use ‘trade secrets’ from Lifeway is yet another example of Edward’s behaviour that runs counter to Lifeway’s interests.”
Lifeway also claimed Edward Smolyansky “has sent vitriolic and threatening communications to Lifeway employees and used false names to hide his identity when posting on financial message boards disparaging Lifeway”.
It added: “Our CEO Julie Smolyansky was recently granted an order of protection against Edward based on his actions. Edward thus appears to be engaged in a personal vendetta with no regard for potential negative impacts on Lifeway’s stakeholders.”
The statement issued through Pure Culture Organics last week said Lifeway’s senior team had not honoured the agreement set out in August 2022.
“Lifeway did not make a good faith effort to honour its obligations under our settlement agreement and, by February 2023, it was apparent that it had breached the agreement,” the statement read.
“In light of the board’s failures, we believe that even significant changes are needed, and are calling for resignations of each of the board’s directors, other than Juan Carlos Dalto, who we believe is the only qualified independent director.”
According to the Pure Culture Organics statement, Lifeway has had a revenue CAGR of around 3.2% since 2016, “excluding an unauthorised and ill-advised” purchase of Glen Oaks Yogurt in 2021, plus “heavy post-Covid inflationary related price increases since 2020”.
In its statement on Friday (19 July), Lifeway responded: “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.
“Since Edward was removed from his position as Treasurer and Secretary on October 4th, 2019, the company has successfully grown revenues from $94m in FY 2019 to $160m in FY 2023. Lifeway’s closing share price on October 4th, 2019 was $2.08; Lifeway’s closing share price on July 17th, 2024 was $13.03.
“Lifeway’s leadership and board are proud of the incredible growth the brand has achieved since Edward Smolyansky’s departure and seek to continue building upon the company’s recent success.”
In response to Lifeway’s statement, Edward Smolyansky provided Just Drinks with his own: “Out of respect for my sister and the company, I’m not going to comment on Lifeway’s analysis of its own failed litigation strategy. If she truly believes her statement, then she is delusional.
“It is unfortunate that Julie she has chosen this path, weaponising the company [to] continue personal attacks on me and our mother Ludmila. This is a personal matter so, again out of respect for her, I will not comment on that.”
