Cover Story: Culture Craze
Lifeway's packaging defines the product as: "Kefir is the cousin of yogurt and its roots can trace back more than 2,000 years. Originating in the Caucasus Mountains of Europe where people live well past 100 years, the word kefir is thought to have been derived from the Turkish word 'keif' for 'good feeling.'"
Since it was founded in 1986, the family-run company has worked to introduce kefir to the American market. Michael Smolyansky founded Lifeway Foods 10 years after emigrating from Russia. Following Michael’s sudden death in 2002, his daughter Julie took the helm as chief executive officer and son Edward assumed the role of chief financial and chief operating officer. Under the siblings' leadership, Lifeway has expanded the brand, its reach and posted impressive company gains with the hopes of being in "every single refrigerator that there is," Edward Smolyansky says.
For the full-year 2009, publicly traded Lifeway Foods reported nearly $60 million in sales, which also includes several varieties of cheese products. Kefir continues to be the leader in the company’s portfolio, and in recent years, Lifeway has expanded its product family and has grown the company through acquisitions and innovative product introductions.
"We're trying to be creative," Smolyansky says. "We're not just trying to come in here and do our 9 to 5 job; we're trying to have fun with it at the same time."
Lifeway's creativity reaches beyond new kefir flavors and distribution agreements and into its latest ventures - probiotic wellness bars and Starfruit Cafes, which it calls "kefir boutiques." The three Starfruit Cafe locations in Chicago serve made-to-order kefir parfaits, smoothies made with kefir and frozen kefirs. Starfruit visitors also can take home Lifeway's bottled kefir products from the cafes.
Kefir effectThrough the years, Lifeway's product lineup has lengthened from its original plain whole milk Kefir to include options as varied as Nonfat Blueberry Kefir to ProBugs Sublime Slime Lime organic whole milk kefir for children. The company places an emphasis on new products to attract new consumers as well as to please loyal fans. "We try to make a product for everybody," Smolyansky says.
The company is at an advantage when it comes to product development because its production facility is located blocks away from its office and distribution center in Niles, Smolyansky says. For more information on Lifeway Foods' Morton Grove, Ill, production plant, read February's Plant Focus article.
"Since we are the producer as well, we can develop new products very quickly," he says. "We have the ability to make a huge and wide variety of products and different sizes. We can make small batches and large batches. We can make nonfat, low fat and full fat. We try to at least produce every type of product that we are asked for."
This year, the company is planning to launch kefir made from goat milk, which comes in response to consumer requests, Smolyansky says. The line will include three flavors and will be a premium product made for a niche market.
In the natural sector, Lifeway's organic kefirs are outpacing the traditional line posting strong growth numbers, Smolyansky says. Its organic whole milk kefir for kids line, ProBugs, also has been performing well and has progressed based on consumer feedback. The idea for a berry flavor was inspired by ProBugs' audience, Smolyansky explains.
For the ProBug line, the company approaches product development a little differently than for traditional kefirs. The first step in ProBug development is to create a character and then come up with its corresponding flavor, Smolyansky says. For the most recent berry flavor known as Goo Berry Pie, the character Princess Penelope was created. The princess joins Polly and Peter ProBugs as brand ambassadors for ProBugs products.
"When we do events we get a lot of feedback from the kids as to what flavors they would like," he says. "For example, our first two flavors, that came out simultaneously when the product was launched were Orange Creamy Crawler and Sublime Slime Lime. We noticed a lot of kids were asking for a berry type of a flavor so we created Goo Berry Pie with Princess Penelope. We get a lot of feedback from these shows and actually now Goo Berry Pie is our top selling ProBug flavor."
Packaged in a curvy flexible pouch with a patented no-spill spout, the ProBugs line has grown at almost triple digit rates since its introduction in 2006. While the numbers are impressive, Smolyansky says, ProBugs still is considered a niche product. The product line has a higher price tag due to its base of organic whole milk as well as the custom packaging. However, the packaging is integral to the line, Smolyansky says.
"The whole thing for us was the unique package," he says. "We could have created a generic character and put it on our 8-ounce bottle with a label and called it Kefir for Kids, but it wouldn’t have stood out. ProBugs gives us an edge in that category."
When it comes to traditional new product development, Lifeway often finds its inspiration out of the category, he explains. The company frequently examines trends in the marketplace, trends in other food categories and global trends.
"We came out with a Pomegranate Acai-flavored Organic Kefir so it’s rich in the antioxidant superfruits, which have become very popular," Smolyansky says. "Pomegranate-flavored Kefir, which we introduced about four years ago, has quickly become our top flavor."
In addition to pomegranate, Low-Fat Plain Kefir continues to be a top performer. The company also has seen success with its Greek Style Kefir, which capitalizes on the popularity of Greek style yogurt, a creamier variety of yogurt.
Other globally inspired lines include two Indian-style Lassi varieties, which are marketed as "spiritual, wellness, karma, yoga, faith kind of thing," Smolyansky says. Lassi is packaged in 8-ounce grab-and-go bottles in Mango and Strawberry flavors.
Lifeway also produces a line of Hispanic-targeted flavored yogurt drinks under the La Fruta brand. Available in popular Hispanic flavors such as in Mango, Horchata and Tres Leches, La Fruta is a lower priced line made with a standard yogurt culture mix instead of Lifeway's probiotic culture mix, Smolyansky says.
"The increased awareness of probiotics has helped us tremendously," Smolyansky says. "We were actually the first company to label our products 'probiotic.' Before that the industry shied away from putting 'probiotic' on the product because they thought consumers would be afraid of the stuff in there and not know what it is."
To help educate consumers, Lifeway's packaging names the individual strains that make-up the company's exclusive blend of ten probiotic cultures.
"The Live & Active 10 is what we call it, and it's our exclusive blend that was developed by European scientists exclusively for us," Smolyansky says. "With a mix of traditional kefir cultures as well as new probiotic strains, the thought process is that we have these ten and they run the gamut of health benefits so some of them have more focus on immunity, some of the strains help guide the digestive system, some are thought to help lower cholesterol and different properties, so we tried to pick a mix that would run a spectrum of health benefits."
For the company, Live & Active 10 cultures are its focus because more cultures do not necessarily mean more benefits, Smolyansky says.
"You can have a million strains in your product, but at some point you're not going to get any extra benefits," he says. "We feel that our ten is the most well-rounded mix."
In addition to the quality of the cultures, Lifeway's kefirs show high activity levels of the probiotics throughout the product's 70-day shelf life, the company says. Probiotic activity levels are measured as colony forming units (CFUs). High numbers of CFUs translate to probiotics that are alive and healthy while on the shelf and activate when consumed. The company’s data show its kefirs have 7 to 10 billion CFUs of activity at the time of the expiration date in each cup, Smolyansky says.
Although increased awareness of probiotics has helped Lifeway, Smolyansky says consumption still lags behind other areas of the world, particularly Europe and Latin America.
"(It) is a challenge trying to educate the U.S. consumer that cultured dairy is something that’s good for you and it's not something to shy away from," he says.
Lifeway continues to work to grow its consumer base, which is traditionally popular with health-conscious women in their mid-20s to late-40s. This has helped fuel its ProBugs line as well, as many mothers embrace probiotics themselves and want to provide those health benefits to their children. Most recently, the company has found its products attracting males between the ages of 25 and 50 who are looking to include the cultures in their diet.
A growing presence
"We are sold in every supermarket and grocery store in Chicago," he says. "Very few places can you go in Chicago and not find our product. Now we're in 7-Eleven, we're increasing our presence in a new channel - convenience stores."
In December, Lifeway announced a distribution agreement with 7-Eleven. The agreement began at 275 7-Eleven stores in the Chicago area, which stock six flavors of 8-ounce Kefir bottles, all three varieties of ProBugs and three varieties of the company's probiotic wellness bars. The bars contain Lifeway’s probiotic cultures through a kefir coating. Lifeway also launched a complementary marketing campaign and hopes to expand distribution nationwide this year.
For several years, the company also has been working with club store CostCo on various partnerships across the country. Most recently Lifeway Foods rolled out a 12-pack of 8-ounce bottles of Low-Fat Strawberry and Blueberry Kefirs to stores in the Midwest.
On-premise locations represent the next frontier for Lifeway's distribution, Smolyansky says. The company hopes to expand the availability of its products to restaurants, coffee shops, hotels and beyond. Last year, the company also formed a distribution agreement with Chicago's Lincoln Park Zoo. Lifeway's Kefirs and all three varieties of ProBugs are available at the zoo’s cafes and concession stands, and the company also had a presence at special events held at the family attraction.
Giant versions of the company's ProBugs characters also are on display at the Smithsonian National Zoological Park in Washington, D.C., Smolyansky says. The company broke into the East Coast market last year through its acquisition of Fresh Made Dairy in Philadelphia.
"The Fresh Made acquisition was very good because they were the third-largest brand at the time and they have a very nice production facility in the East Coast," he says "It gives us a lot of good leverage for transportation and getting out to the East Coast, which is a densely populated area of people. It’s very important market, obviously, but also a difficult market to penetrate if you’re not there locally."
The company will maintain the Fresh Made brand as it did following its 2006 acquisition of Minnesota's Helios Nutrition Inc., which is the No. 2 brand in the kefir category. As Fresh Made provided entrance to the East Coast, Helios grew the company's potential in the organic kefir category, which is one that is seeing strong growth, Smolyansky says.
In addition to acquisitions, Lifeway has embraced the Internet and social media as an integral part of getting the word out about its products.
"We're finding right now that the Internet is one of the only, and really the best way, to get really good critical customer service," Smolyansky says.
In July, Lifeway launched a new Web site featuring interactive pages for consumers. In addition to ProBugs games for children, the Web site features a virtual kefir bar where consumers simulate their own custom kefir creations. The page helps consumers who might be new to the category, Smolyansky says.
"The virtual kefir bar came out of wondering, what is a way for people who buy the product but don't know what to do with it or how to consume it," he says. "We're noticing a lot of traffic to our virtual kefir bar where people can get creative and they can print their recipes. People can click on all the different ingredients that are there, they can print their recipe, they can share their recipe with somebody else and they can e-mail it to somebody else."
The company also has allocated resources to expanding Lifeway's presence on social media sites, including links to the brand's Facebook, Twitter and YouTube pages. The Web site also features Lifeway's blog, which includes health news, articles and trends - and how the announcements relate to kefir.
"It's still very early on to say if it's translating into actual sales and top line revenue, but you can definitely put your finger on the pulse as to how many more people each month are either on our Web site, being drawn to our Web site or from our Web site going out into the social media hemisphere and talking about it or blogging about it," Smolyansky says.
In 2010, the family intends to continue pushing the boundaries of the emerging kefir category. In addition to the new goat milk kefir line, the company expects to launch a new ProBug variety this year.
The Smolyansky siblings also want to continue introducing new consumers to the product their father helped usher into the U.S. market. The company continues to be family run, and runs like a family, Smolyansky says.
"We have a very family, close-knit atmosphere in terms of our employee structure," he explains. "One of my father's best friends is still the vice president of the company. Several family members and close friends work with our company and have for a long time."
The family atmosphere is one that Smolyansky hopes will continue to appeal to consumers.
"It's important because it's our passion," he says. "It's our goal. It's what we know, and it's what we love. We drink the product, we consume the cheeses and all the other products, so it's important for many customers to know that it's not just a large conglomerate-run food company, we have the family interest aligned with our own."
For more information on Lifeway Foods' Morton Grove, Ill, production plant, read February's Plant Focus article.