Lifeway Foods controls the rapidly growing U.S. kefir market, but its founding family has been fighting even as a French dairy giant tries to acquire it. By Nate Wolf

The history of Lifeway Foods seemed straight out of the American dream before its founding family started feuding.

Now, the spat could propel the American kefir maker into the arms of one of the world's biggest food companies: Danone. The French conglomerate has owned more than a fifth of Lifeway shares since 1999, and made two offers to purchase the company last year. Lifeway rejected both.

Danone is trying to buy Lifeway once again. The new takeover bid comes with a catch: If the two companies don't reach agreement on a sale, Danone plans to team up with the CEO's brother and mother to oust the entire Lifeway board.

Family management can be a stabilizing force -- or a destabilizing force. Lifeway is in play because one group of family members is on the outs with another. The squabble may turn the top U.S. kefir maker from an independent business to another brand in Danone's portfolio.

Lifeway's founding family, who together own more than 40% of shares, has been feuding for years. The battle pits CEO Julie Smolyansky, 50, against her mother, Ludmila -- usually called Lucy -- and her younger brother Edward, whom the company fired in 2022. Edward and Lucy have mounted several proxy fights since, seeking to remove Julie and gain control of the business.

The Morton Grove, Ill.--based company today claims 95% of the U.S. kefir market that it helped create. Sales nearly doubled in the past five years to $186.8 million in 2024, as more consumers turn to protein- and probiotic-rich foods.

A Family Dissolved

Lucy and Michael Smolyansky, immigrants from the former Soviet Union, began selling kefir -- a tangy, cultured dairy drink -- in the 1980s and took Lifeway public in 1988. When Michael died in 2002, the couple's daughter, Julie, took the reins as chief executive, and she still runs it.

Signs of family friction emerged in January 2022. In a Securities and Exchange Commission filing that month, Lifeway stated that Edward, then chief operating officer, had left the company and that Lucy's $500,000-a-year consulting agreement had been terminated.

The company didn't provide more details. But in a 2025 lawsuit claiming that Edward had induced Lucy to distribute their father's shares in the company unequally, Julie claimed that Lifeway had hired a law firm to investigate "allegations of inappropriate conduct involving Edward." In the same Cook County, Ill., circuit court filing, she alleged that Edward appeared intoxicated at a 2021 board meeting, which led to a leave of absence and eventual termination.

Edward, now 45, didn't comment on the lawsuit but denied the allegations of inappropriate conduct and intoxication in an interview with Barron's, and said the investigation was neither independent nor thorough. He did confirm he had been fired.

"I was a whistle-blower," Edward explained. "I was upsetting the apple cart."

Within months of their departure from Lifeway, the mother and son began a campaign to oust the board, install themselves, and change the company's strategic direction. At the time, Lucy and Edward together owned about 38% of Lifeway shares, which were trading at less than $6 apiece, according to SEC filings.

The two sides reached a truce in the summer of 2022, with Lifeway agreeing to explore unspecified "strategic alternatives" and appoint Lucy to the board. But in February 2023, Lucy and Edward alleged that Lifeway had breached the agreement by failing to properly review strategic alternatives like selling the company.

Two-plus years of legal battles and personal barbs have followed. There have been five lawsuits between family members or the company, ranging from trade secrets disputes to tortious interference cases. A Cook County Circuit Court issued a protective order in 2024 that prohibits Edward from contacting his sister Julie or her family.

"I actually don't want her contacting me for the rest of my life, not the other way around," Edward told Barron's. He sought his own 2024 restraining order against his sister, though it was voluntarily dismissed earlier this year in a private settlement agreement between the two parties that also saw Julie's restraining order extended, records show.

Dueling Narratives

Compensation is a longtime issue at Lifeway. After just 52.5% of shareholders approved the company's pay advisory policies in 2019, Lifeway created a compensation committee to improve oversight of executive pay and reduced Lucy and Edward's compensation packages. Edward then raised concerns when the board granted Julie a $2 million retention bonus last year. The award vests quarterly, and Julie is obligated to repay unvested portions if she leaves Lifeway.

Retention bonuses aren't standard practice, said R.J. Bannister of Farient Advisors, an executive compensation consulting firm. Boards typically use them to address a particular issue, such as when there's a risk of retirement and no succession plan, he added .

In his activist campaigns, Edward also has attacked the role of Julie's husband, Jason Burdeen, who serves as her chief of staff. The board's compensation committee granted Burdeen a pay package worth $313,800 last year.

Burdeen told Barron's that he began at Lifeway a decade ago at Edward's request, first on a volunteer basis, and that his pay receives scrutiny during compensation reviews due to his relationship with Julie.

Lifeway's financial results are also a matter of contention. Net sales have climbed in each of the past five years, nearly doubling from $93.7 million in 2019 to $186.8 million in 2024. The company posted net losses in 2017 and 2018, but has been profitable since.

In 2024, it posted net income of $9 million and earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $17.2 million. Management said it was on track to deliver Ebitda of $45 million to $50 million by 2027, which would require both continued rapid revenue growth and margin expansion.

Edward contends that Lifeway can do better.

"If someone's measure of success is 10% growth, then I think that you're selling yourself short," Edward said.

Others disagree. The company's results don't seem to support Edward and Lucy's accusations of sloppy management and poor governance, said Ben Klieve, an analyst at Lake Street Capital Markets. Instead, Klieve sees "relatively stable margins and a flawless balance sheet."

For their part, Julie Smolyansky and Burdeen think Edward's crusade to remake Lifeway's leadership is about revenge and personal resentments, rather than a good-faith effort to improve shareholder value.

"He was terminated from a company that his father founded, so it's a very heavy burden for him to carry," Burdeen said of Edward Smolyansky. "It would be incredibly hard for anybody to accept."

Julie, meanwhile, told Barron's she was proud of the way the company and she as an executive have withstood the crisis within her family.

A Letter From Danone

Last September, Julie received a letter from the North American subsidiary of France's Danone.

Danone made an all-cash offer to acquire Lifeway for $25 a share. The price represented a 59% premium to the stock's three-month average price before the bid. Lifeway's board turned it down. When Danone bumped its bid to $27 a share, Lifeway again declined, saying the price undervalued the business. Shares rose to about $25 after news of the first bid became public, and the price has traded around that level since then. Edward believes that the board should have accepted the offers.

Lifeway's dominance of the kefir market and the trendiness of the product merit a premium valuation, said Klieve. He thinks the company could fetch more than $27 a share. Julie, too, said current management can take the company even further on its own.

"There is so much incredible buzz around Lifeway," the CEO said.

A 1999 shareholder agreement gave Danone a large stake in Lifeway -- currently about 23% -- plus certain antidilution and governance powers. Most notably, the French outfit has the ability to block Lifeway's board from issuing additional shares to Julie, which it had exercised in past years when the board had asked to grant more shares to her.

Danone declined to comment for this article.

In addition to rejecting Danone's acquisition bids, Lifeway's attorneys sent Danone a letter last November calling the 1999 agreement anticompetitive and void because it wasn't unanimously approved by all shareholders. The next month, the board granted Julie a backlog of 283,337 shares -- worth about $6.5 million at the time -- without the French company's permission.

"The board has seemingly greenlit a value-destroying gifting program for the CEO in blatant violation of the Shareholder Agreement," wrote Shane Grant, then Danone's deputy group CEO, in a letter to the Lifeway board after Julie's share issuance became public on Dec. 23. "Having ignored a 25-year-old contract for Ms. Smolyansky's personal benefit, further litigation to the detriment of the other shareholders is forthcoming."

Danone sued Lifeway and each of its board members in March for breach of fiduciary duty for issuing the shares to Julie. Lifeway countersued.

A Third Bid

After Lifeway rejected Danone's offers, Edward resumed his activist campaign. He and Lucy submitted a consent statement to the SEC last month asking for shareholder approval to -- among other things -- remove the board and install themselves and a slate of other candidates. The vote, which Lifeway contended was unlawful, was scheduled to end on Aug. 1.

Then, Danone swooped in.

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