Lifeway Foods Inc., the largest U.S. supplier of the cultured dairy product kefir, announced Monday the acquisition of its biggest competitor, Helios Nutrition Ltd. The deal, an $8 million transaction, will help Lifeway keep up with the demand for its organic dairy products through Helios' organic dairy subsidiary.
"We have had issues of supply of organic milk in the past," said Lifeway Foods CEO Julie Smolyansky. "But with Pride of Main Street [Helios' organic dairy supplier], it gives us our own supply of milk.
"We now have the No. 1 share in this market, combining both the top Helios brand and our own very strong organic SKUs," Smolyansky said.
Smolyansky said the two brands already have the same customers—every Whole Foods, Wild Oats, and most other natural foods stores. She said the brands also share the same shelf space, purchase the same raw materials and display at the same trade shows.
Lifeway, which announced record revenues of $12.4 million for the first half of 2006, paid a combination of cash, a debt note and treasury shares for Helios, which reported $2.7 million in revenue for the same period.
For now, Helios will continue to manufacture its kefir in its own Sauk Centre, Minn., facility, under Lifeway's management. Helios employees will stay, though managers will be employed as consultants under Lifeway. By the end of this year, Lifeway plans to transition Helios' organic manufacturing to Lifeway's main facility in Morton Grove, Ill.
George Economy, founder and CEO of Helios, said the newly coordinating marketing strategies should help to grow the overall kefir market.
But Scott Van Winkle, managing director of Canaccord Adams, said, "If Lifeway ultimately consolidates the brands under the Lifeway banner, kefir may actually lose slots in stores where both brands are present."