Dairy-Drink Maker Rebounds Under Chief Who’s Seen A Lot

CEO Smolyansky’s strategy for Lifeway Foods includes robust product narratives and manufacturing efficiency.

Julie Smolyansky is used to ups and downs in running a business: She started life as a CEO by stepping in to run Lifeway Foods after the untimely death of her father, its founder. After she built up the maker of fermented dairy products over the next 15 years, Lifeway’s sales plunged a few years ago. Then Smolyansky pushed the company back up to a new pinnacle.

Persuading Americans to drink a yogurt-like product called “kefir,” whose origins are in the primordial cuisine of Eastern Europe, has added to the roller-coaster ride. But Smolyansky believes Lifeway has left its vacillations behind and points to robust recent results – the $102-million, Chicago-based company recently reported its seventh consecutive quarter of year-over-year growth – and bold plans for the future.

There are lessons for other CEOs in how Smolyansky is turning the corner, with streamlined manufacturing, international market expansion, a bold new-product strategy and an ambitious use of digital-marketing narratives that are bringing in new customers.

“We’ve done a lot of hard work, and it’s paying off,” Smolyansky told Chief Executive. “Now we have a lot of tailwinds and a lot of momentum and a great story to tell. Every grocery-category buyer is looking at what we’ve done and asking how they can give more space to our category.”

Smolyanksy’s father, Michael Smolyansky, a Ukrainian immigrant, introduced kefir to the U.S. market in 1986 and built Lifeway into a $12-million business, but he died in 2002. Julie Smolyansky stepped in as one of the youngest female CEOs of a publicly traded company in business history and succeeded in building Lifeway over the next 15 years.

Though yogurt-like in that it’s fermented, Smolyansky was able to carve out a strong niche for kefir in supermarkets because it’s got much greater benefits for gut health and is up to 99 percent lactose-free.

By 2017, however, Lifeway was running into headwinds. U.S. sales in the yogurt category overall were beginning to level off after a strong run bolstered by the appearance and popularizing of Greek-style yogurt. Plus, Smolyansky said, more consumers were becoming suspicious of all dairy products, as messaging behind the plant-based movement undermined dairy’s traditional nutritional appeal. Meanwhile, competition was increasing for share of the probiotics market, with more supplements and other food products pursuing Lifeway’s core customer as well.

After peaking at $124 million in 2016, Lifeway’s sales fell for three straight years. Smolyansky managed to pivot Lifeway back to prosperity beginning in 2019 with a strategy she called Lifeway 2.0.

One critical part of that plan was smoothing out production issues in a manufacturing plant in Wisconsin that Lifeway purchased in 2013 but that didn’t begin turning out kefir until 2015. Lifeway also revised packaging with more direct messages about low sugar and “more calling out details around lactose intolerance, because people have a lot of milk sensitivities,” Smolyansky said.

Smolyansky also went on the offensive in a way she enjoys: preaching the benefits of kefir and of a healthy lifestyle. She was already a cookbook author and a bit of an activist, so it came rather naturally to Smolyansky to segue into a marketing narrative about Lifeway products that presented kefir more as a nutritional savior than a mere drink. Today’s consumers, especially younger ones, have proven very receptive to such pitches.

So Lifeway has been promoting recent research findings that gut health may be important to brain health, including probiotics’ suspected role in boosting the body’s production of serotonin. It’s a neurotransmitter of which 90% is produced in the digestive tract, scientists say.

“We have a crisis of mental health that is happening – isolation, addiction,” Smolyansky said, a situation that was exacerbated by the covid shutdowns. “We’re all just a couple of bad mental-health days away from self-care. It’s our job as a brand at a time of crisis –and when people don’t have leadership — to do something about it.”

Indeed, Lifeway has positioned kefir as what Smolyansky called “a tool in your toolbox for self-care” alongside yoga, mental-health “chats” and generally “demystifying mental health” – all of which the brand has been discussing in more than 250 live digital events with its customers, online influencers and the mental-health community.

This new platform has taken Lifeway into the deep end of narrative-based social-media marketing, including sponsorship of “immersive” yoga sessions featuring projections of Starry Night and other famous paintings by Vincent van Gogh – who was infamously mentally ill.

“It’s a 20-city partnership where we offer classes in the morning before the van Gogh exhibit opens up,” Smolyansky explained. “We can have that conversation around bringing joy, a nice experience without including foods in the process.” She said the campaign produced “186 million media impressions and more than 20,000 [kefir] samples to attendees.”

Lifeway’s immersion into social media also has ranged from providing a stream of kefir recipes on its web site to placing recipes for teenagers on TikTok that involve whipped coffees and mochas using kefir.

And Lifeway, which always has tinkered with its product lineup, is getting bolder about departures from its core product. The company introduced a “plant-based” kefir alternative based on pea protein a couple of years ago but it failed rather quickly. Smolyansky blamed a bad precedent set by a similar but poor-quality product.

But because she believes “people still want an alternative to a dairy base, we have to be there to meet consumers where their need is.” So “very soon,” Smolyansky said, Lifeway will be introducing an oat-based probiotic drink.

“We’ve been offering it to some retailers, and their response has been great,” she said. “We think we have a winner. Plus, with the success of Oatly [oat-based milk alternative], we think there is a strong, anchoring base in the category that is secure.”

This year, a revived Lifeway also has been expanding its footprint via the acquisition of the GlenOaks Farms brand of drinkable yogurts in the western United States, an expansion in Tesco stores in Ireland, an incursion into France and

“This is our first presence in France,” she said. But “it’s an ideal market to replicate our U.S. success because, for generations, kefir has been a staple of the French diet.”