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Responding to several questions from HG posters, I prepared the following summary of a recent email conversation with CEO Julie Smolyansky. Reposted for your enjoyment here:


Roberto, Howard, and Ivan,

I passed your questions on to Julie at Lifeway. Paraphrased, here's what she had to say in response:

1)Can anyone give some insight on the relationship between LWAY and Dannon? Is Dannon looking to acquire?

Lifeway thinks of Danone as their "big brother." Danone approached Lifeway with the offer of needed capital and assistance in expanding its market, and Lifeway accepted. In exchange, Danone keeps its "foot in the door" of the kefir market, while simultaneously preventing Lifeway from working with a competitor (e.g., Lifeway is forbidden from manufacturing private label kefir for a Danone competitor).

On the acquisition question, Lifeway understandably declines to comment on Danone's intentions.

2)Why have a non-compete agreement? Better yet, why would Dannon sign one?

See above. Also, note that the non-compete forbids Danone from manufacturing kefir, and forbids Lifeway from manufacturing yogurt.

3)SMOLYANSKY LUDMILA (mother of CEO) is selling shares Non-open market. Where are the shares going? Is there a way to find out?

Julie confirms that the shares are being sold through a broker, so the "non-open market" designation may be a misnomer. [Rich: My guess is these may be private sales.]

The sales are definitely not to Danone, and are timed for when the stock price is particularly strong and moving upwards, so as to minimize any downward pricing pressure that might hurt outside shareholders.

4)How popular is kefir or probiotic drinks? Is this a niche product?

I'll quote Julie at length here: "Kefir has been a niche product but my goal has always been to take it from niche to mainstream. We can see it's working because our sales continue to go up, mainstream locations continue to bring in the product, and the mainstream press is very interested... In general, the probiotic category is booming... There is still major growth... Target, Wal-Mart, and Costco are all testing the kefir and so far, in upscale locations, it sells well. So, we continue to grow, educate consumers, and build a brand that means something. I LOVE it! I'm blessed and proud of our company."

Hope y'all find this useful. I'll post a copy on the Lifeway board, which gets less traffic than this one, to make this post easier to find if you need to locate it in the future.

Foolish best,


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