Kefir manufacturer hails Q1 results despite FDA crackdown
Gross profit increased 14 percent to $7.3 million, compared to $6.4 million in 2010, with a net income of $1.9 million, up from $1.8 million on the same period of last year.
“We are extremely pleased with Kefir's expanding consumer awareness as our increased marketing initiatives enabled us to report accelerated sales growth of 20% in the first quarter of 2011,” said Julie Smolyansky, CEO of Lifeway Foods, Inc.
“As we celebrate our 25th anniversary we believe Lifeway is well positioned to see tremendous future growth opportunities."
“Going forward, we continue to expect 2011 to be a year of record sales and profitability,” added Smolyansky.
Figures
The company was helped by a drop in milk prices and USDA’s reclassification of kefir drinks as a class 2 product, which meant that the milk used to produce Kefir historically carried approximately a 10 percent lower price per pound compared to the existing Class 1 fluid milk level.
The company also added that its total income before taxes increased by $539,551, or 20 percent, to $3.2 million during the Q1 2011, up from $2.7 million in Q1 2010.
The company also increased its advertising spend, from $4.0 million during the first quarter of 2011 compared to approximately $3.1 million for the same period in 2010, and the advertising cost is expected to remain at around 10 percent of the company’s sales.
FDA scrutiny
The financial results are good news for the kefir manufacturer, and appear to negate any potential effects from a FDA warning letter on February 18 this year over immunity, allergy, anti-inflammatory and other claims made on the company website marketing its probiotic and antioxidant-containing products.
The FDA determined the claims contravened Section 201(g)(1) of the Federal Food, Drug, and Cosmetic Act (the Act) and gave Lifeway 15 days to correct the issues.
“The therapeutic claims on your web site establish that these products are drugs because they are intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease,” the FDA wrote in its letter to the Smolyansky.
Claims included the relief of the severity of celiac disease, Crohn’s disease, colitis and infantile colic; boosting the immune system; relief of allergic rhinitis; reduction in yeast infections; alleviation of irritable bowel syndrome; and anti-carcinogenic properties.
