Lifeway Foods’ founding family is engaged in another public dispute – this time in court – over the establishment of a new company and allegations of a stolen formula.
The US-based kefir dairy business filed a lawsuit against Edward and Ludmilla Smolyansky on 1 April claiming they stole proprietary information when they set up rival brand Pure Culture Organics.
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In its legal filing, Lifeway Foods – headed by Julie Smolyansky, the sister of Ed and daughter of Ludmilla – argued that “instead of competing fairly against their former colleagues and family member, [the] defendants decided to cheat by stealing the formula from Lifeway and trading on its long-established and credible good name”.
The suit is the latest row between the Smolyanskys. Two years ago, Edward and Ludmilla went public with their request for Julie to be removed as Lifeway’s CEO. In a matter of months, a resolution was struck with the company agreeing to review strategic alternatives for the business and a shake-up of its board.
However, Edward and Ludmilla left Lifeway Foods last year and established Pure Culture Organics. Its product range was launched at the Natural Products Expo West trade show in California last month.
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Lifeway Foods claims Edward used knowledge from his time as an executive at the company to steal proprietary formulations for kefir products that were then used to build Pure Culture Organics.
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By GlobalDataHis separation agreement with Lifeway Foods contained a confidentiality clause the company claims he broke.
Additionally, the filing points to a statement Edward Smolyansky included in a press release disseminated during Natural Products Expo West. The release stated: “My father developed the world’s best kefir formulation in the world. After he passed away, I had the privilege to be a steward of the formula for 20 years at the company he founded. In recent years, I’ve been obsessed with trying to develop the cleanest, simplest and most sustainable Kefir. Pure Culture Organics is the result of that obsession.”
Lifeway Foods said this statement by Edward “unabashedly touted claims” that he used their proprietary formulation as a starting point for the creation of Pure Culture Organics’ product.
The company is seeking damages for lost profits and damage to its intellectual property and is pursuing a halt to Pure Culture Organics’ advertising and sale of kefir products. It is demanding a jury trial.
Lawyers for Lifeway Foods looked for a corporate registration of Pure Culture Organics, Inc. but found no entity “registered by that name in multiple databases”. As such the case is Lifeway Foods v Edward Ludmilla Smolyansky.
Pure Culture Organics was contacted by Just Food for comment.
The legal filing is just another public road mark in a family dispute that has enveloped the company.
In March 2022, Edward and Ludmilla moved to remove Julie Smolyansky as the company’s CEO as they wanted the company to pursue “strategic alternatives”.
A few months later, Lifeway revealed that the family feud was over as it had agreed to review strategic alternatives and a shake-up of its board.
However, in 2023, Ludmilla resigned from the board “due to a disagreement with the board about her opinions on the business and management”, according to an 8-K filing Lifeway made with the SEC.
Following this chaos, a Lifeway Foods shareholder urged the company to sell itself after not seeing the pursuit of the previously agreed “strategic alternatives”.
Dairy giant Danone owns a 24% stake in Lifeway.
