I love kefir -- and the company that makes it.
The dime tour of both concepts, though, might go something like this: Kefir, a yogurt-ish drink with reputed metabolism-bolstering properties, is considered a staple in much of Eastern Europe. In the U.S., Lifeway popularized the drink over the last couple of decades. Beginning in the Chicago basement of a Ukrainian immigrant named Michael Smolyansky 21 years ago, the company has grown into a $25 million-per-year business, retailing its product first at specialty grocers like Whole Foods (Nasdaq: WFMI ) , and in more recent years moving into the most mass of mass marketers, including mega-retailersTarget (NYSE: TGT ) , Costco (Nasdaq: COST ) , and Wal-Mart (NYSE: WMT ) .
When I first wrote about the company three years ago, I described a business valued at just $50 million, growing its sales at 14% per year compounded over the previous five years, and its profits at 19%. Since then, growth has accelerated to 19% and 23%, respectively.
Back in 2004, a good portion of Lifeway's market cap was made up of cash. And while it pains my heart to watch that cash pile dwindle, I cannot fault the way management has spent it.
Deploying its cash hoard in a series of smart acquisitions in the dairy sphere -- deals as small as the purchase of a tiny Pennsylvanian cream cheese maker, and as large as the acquisition of Lifeway's erstwhile archrival, Helios -- Lifeway has tripled its enterprise value in just three years. In the process, the firm has come to dominate the U.S. market for kefir, keeping larger potential rivals like Kraft (NYSE: KFT ) and Danone (NYSE: DA ) at bay.
Eyes wide open
Mind you, my love for Lifeway is not blind. Like all paramours, Lifeway has its warts. I'm as worried as anyone about the vulnerability of Lifeway's profits to the vagaries of the raw milk market. I consider the company's occasional stock splits -- and its ad hoc repurchases of minimal lots of stock -- to be at best irrelevant. At worst, I suspect they divert management time that could be better spent on building the business.
But on balance, I'm as taken with the company today as I was back then. Familiarity, you see, does not always breed contempt. Sometimes, it does just the opposite -- and on this day most of all.
Fall in love with Lifeway all over again:
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