The company acknowledged that full-year 2021 financial results were delayed due to the identification of an error in accounting for income taxes of a prior year acquisition, resulting in a $1.18m increase in goodwill and deferred income tax liability.
Despite the inner family and company turmoil, Lifeways Foods had positive results on all fronts with the company reporting nine consecutive quarters of growth driven by strong consumer interest in fermented dairy products, said CEO Julie Smolyansky on an earnings call last week.
The company ended 2021 with $119.1m in net sales (+16.7% vs. 2020), an increase of $17m vs. the prior year. Gross profit as a percentage of net sales was 24.1% for the year.
The company reported a $0.9m increase in marketing and advertising expenses and a slight decrease in general and administrative expenses to $11.6m (down from $11.7m in 2020).
"Lifeway branded kefir is the core of our business and the continued increases in kefir volumes demonstrate the success of our customer acquisition strategies and the strength of our core," said Smolyansky.
"Our strong results demonstrate our firm belief that customer demand for healthy products focused on gut health and protein will continue to grow and be a tailwind to Lifeway's total addressable market."
According to Smolyansky, the company increased its total customer acquisition from 9 million in 2020 to 11.1m in 2021 crediting the increase to marketing efforts throughout the year designed to engage and expose new consumers to the Lifeway brand.
Smolyansky also noted a number of key retail account wins including regaining distribution at Fresh Market stores and a rotation at Costco Midwest store after nearly a three-year hiatus.
Ongoing family leadership feud
*In late February 2022, family members and shareholders of the company, Ludmila and Edward Smolyansky, called for the removal of Julie Smolyansky as CEO in an SEC filing. In a March 2022 filing to the SEC, Edward Smolyansky expressed his intent to nominate himself, [his mother] Ludmila Smolyansky, Robert Whalen, Austin Hollis and Iana Trifonova for election to the company’s Board of Directors at the 2022 annual meeting of shareholders preparing for a potential proxy battle.
Core business performance: 'Kefir remains the backbone of our business'
Drilling down to its core business of Lifeway-branded kefir products, the company reported an 18% year-over-year net sales increase for the full-year 2021 vs. 2020. Its kids kefir product line, ProBugs, saw a 16% year-over net sales increase for the full-year.
"Kefir remains the backbone of our business and represents the majority of our sales after a very strong year in 2020. As these products continue to grow, so does our business and for the reasons stated before, we are very optimistic on this growth," said Smolyansky.
And as research builds around gut health, specifically insights into the gut microbiome, consumer interest in probiotic-based products such as kefir will intensify, predicted Smolyansky.
"Probiotic products such as kefir are the focus of intense research related to the microbiome's role in stress, depression and anxiety. We now know that up to 90% of the body's serotonin come from gut cells, and the gut brain axis - which links the emotional and cognitive centers of the brain with our intestinal function - plays a major role in happiness and well-being," she said.
"As today's consumers learn and focus more on their health, they will care even more about these facts and the probiotic cultures in their gut, which should be of great benefit to Lifeway's product portfolio."
GlenOaks Farms acquisition
Last year, Lifeway acquired California-based GlenOaks Farms for $5.8m and the transaction has been a success so far with positive performance at key retail accounts, said Smolyansky.
"To date, the integration of their business to our platform has been seamless. Glen Oaks represents an extension into probiotic drinkable yogurt and gives us additional regional strength in the Western United States, and is a very strategic complement," she said, noting how the company will be strategically incorporating the GlenOaks brand name into future marketing efforts.
Based on the strong performance Lifeway experienced in 2021, Smolyansky said she is optimistic about the future of the company (although did not comment on the internal feuding).
"Our primary target remains unchanged, delivering profitable and strategic growth, while furthering our mission to provide the best in class probiotic and nutritious foods to improve the health and wellbeing of our customers. I remain confident that we are on the path to long term growth and value creation for our investors," she said.