Lifeway swallows organic kefir competitor
cultured dairy beverages in a bid to increase its organic presence
and reinforce its position at the top of the sector.
The Illinois company already claims to be the number maker of kefirs, cultured dairy drinks that deliver probiotic health benefits, with Helios occupying the second spot with 2004 revenues approximately a quarter of Lifeway's. But Helios was said to be number one in organic kefirs.
Julie Smolyansky, Lifeway's CEO, said: "The major catalyst behind this acquisition is the growing demand for organic dairy products."
According to the Organic Trade Association, organic dairy foods are now the second largest category in the overall organic food market after fruit and vegetables, accounting for $2.1bn of the industry's $14.6bn 2005 consumer sales value.
Although Lifeway already had an organic range of its own, it is now ensured a steady stream of organic milk to work with since the Helios package includes an organic dairy subsidiary. In the past, Lifeway's bottom line has been impacted by high milk costs.
But the $8m acquisition, funded through a combination of cash, debt note and treasury shares, has other benefits for the two companies, too. It will deliver savings through production synergies, particularly when it comes to marketing and purchasing.
"We share the same shelf space, we buy the same raw materials, and we exhibit at the same trade shows," said Smolyansky. "This will give us better purchasing power, increase our ability to effectively market the category, and alleviate competitive pressures from Helios in the natural and organic area of our business."
In terms of geographical reach, the two companies have their strongholds of loyal retailers. While Minnesota was loyal to Helios, which hails from that state, Chicago consumers' allegiance was with Lifeway.
But in the wider world, it is hoped that the unification of the two companies will permit them to create even more of a buzz about kefirs in the healthy beverage and dairy sectors.
"With its dynamic management, a strong financial position, and this acquisition, Lifeway is poised to take the kefir category to new heights," said Helios fonder and CEO George Economy.
The Business Communication Company estimated total sales of priobiotic products to be worth $764mn, with yogurts, kefirs and cultured drinks accounting for 65.2 percent of this total.
Although this growth is expected to slow somewhat over the next five years, an annual rate of 7.1 percent would put probiotic sales at $1.1 billion in 2010.
Economy and other managers will stay on in a consultancy capacity, and Lifeway is assuring that all other Helios employees will be retained.
However there is to be an extended period of transition Helios' Minnesota headquarters to Illinois, in order to maximize efficiency and lower overall per-unit cost.
