Lifeway Foods, Inc. (LWAY): A Bear Case Theory

We came across a bearish thesis on Lifeway Foods, Inc. on Yet Another Value Blog’s Substack. In this article, we will summarize the bears’ thesis on LWAY. Lifeway Foods, Inc.’s share was trading at $21.83 as of January 29th. LWAY’s trailing P/E was 29.59, respectively according to Yahoo Finance.

Lifeway Foods, Inc. produces and markets probiotic-based products in the United States and internationally. The company’s primary product is drinkable kefir, a cultured dairy product in various organic and non-organic sizes, flavors, and types. It offers European-style soft cheeses, including farmer and white cheeses, and sweet kiss; cream and other products; drinkable yogurt, etc.

Lifeway Foods (LWAY) has become one of the most unusual and protracted stories in public markets, dominated by intense family conflict that has spanned multiple proxy battles, lawsuits, and shareholder disputes over the past three years. The company, the leading producer of Kefir in the U.S., has grown steadily, doubling revenues to over $200 million annually, yet remains a small, niche player in the consumer goods space.

The saga centers on the Smolyansky family: Ludmila, the founder and former chairwoman; Julie, the current CEO; and Edward, the former COO. Family tensions escalated in late 2021 when Edward and Ludmila filed a 13-D to nominate directors independently of Julie, highlighting a breakdown in cooperation despite controlling over 50% of shares collectively. The ensuing years have seen Julie consolidate control by ending her mother’s consulting role and firing Edward, while Ludmila and Edward have repeatedly challenged the board through 13-D filings, proxy fights, and demands for strategic alternatives.

In mid-2024, Danone, a 25% shareholder, entered with an unsolicited acquisition offer, rejected by Lifeway, triggering further legal tensions over shareholder agreements and governance. Despite these conflicts, Lifeway continues to generate strong sales and growth, though at significant legal cost, reportedly exceeding $10 million. The ongoing feud demonstrates how family-controlled businesses can suffer from value-destructive behavior, misaligned incentives, and protracted legal battles, with both sides prioritizing personal control and financial needs over shareholder value.

LWAY’s story serves as a cautionary tale of how family dynamics can overshadow operational success, leaving potential strategic opportunities unexploited while creating a volatile investment environment.

Previously, we covered a bullish thesis on Lifeway Foods Inc (LWAY) by Unemployed Value Degen and Mexican Investor in September 2024, which highlighted growth potential, Danone’s strategic toehold, and a possible acquisition creating attractive returns. LWAY’s stock price has appreciated by approximately 3.55% since our coverage. Yet Another Value Blog shares a contrarian perspective emphasizing the destructive family feud, proxy battles, and governance conflicts, warning these issues may erode shareholder value despite continued growth.

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Disclosure: None.