Golden Guernsey dairy plant sold to Illinois company

By Rick Barrett of the Journal Sentinel

The Golden Guernsey dairy plant in Waukesha was sold at a bankruptcy auction Tuesday to Lifeway Foods Inc. of Morton Grove, Ill., for $7.4 million.

The plant employed 112 people before it closed Jan. 5 and left dozens of school districts scrambling for another milk supplier.

Lifeway - which makes kefir, a dairy product similar to yogurt - says it would like to reopen the Waukesha plant this summer, employing as many people as possible.

The company, with plants in Illinois and Pennsylvania, had $89.8 million in sales in 2012 and is traded on the Nasdaq stock exchange. It has about 360 employees.

Lifeway topped another bidder, Superior Dairy LLC from Canton, Ohio, by $100,000 to acquire Golden Guernsey.

"It was a very active and competitive auction. Lifeway went for the goal line, and they ended up with the company, but not before Superior bid pretty high," said Charles Stanziale, a U.S. Bankruptcy Court trustee in New Jersey who handled the Golden Guernsey case and the auction.

Superior is the backup buyer should the Lifeway sale fall apart, according to Stanziale.

The sale doesn't include a labor contract with the International Brotherhood of Teamsters Local 695 that had represented the plant's employees. But Lifeway indicated it would like to hire former Golden Guernsey employees because they have the most knowledge of the dairy plant, according to Stanziale.

The sale is expected to be finalized in late June. There's no reason to think that it won't be completed, he said.

Lifeway wanted Golden Guernsey because it needs the additional manufacturing capacity and preferred buying an existing dairy plant rather than building a new one, said CEO Julie Smolyansky.

"We are looking forward to putting people back to work. It certainly won't happen overnight, but our goal, plan and hope is to retain as many of the (former) employees as we can," she said.

The company says it is the nation's top supplier of dairy products known as kefir and organic kefir - products that contain live cultures meant to boost the immune system and aid in digestion.

Distribution deal

Lifeway landed a distribution deal with Wal-Mart Stores, another reason why it needs more manufacturing capacity.

The company's products also are sold nationwide through grocery store chains including Safeway, Whole Foods and Kroger. Outside of the U.S., it has sales in the United Kingdom.

Smolyansky said she's uncertain whether the plant will resume bottling milk, but the plant will be used for dairy products.

"We are interested in keeping the operations as seamless as possible. And we know that we have a strong desire to continue bringing products to the mass market," she said.

The company was founded in 1986 by Russian immigrant Michael Smolyansky. He had grown up drinking kefir in Russia but hadn't seen it in the United States, Julie Smolyansky, his daughter, said.

"My parents thought there was a need for this cultured dairy product that was a staple in their home country and was known to have many health benefits," she said.

Michael Smolyansky ran the company until 2002 when, at age 55, he died suddenly of a heart attack.

Julie Smolyansky then became president and chief executive. Her younger brother, Edward, was named Lifeway's financial director.

For years, Lifeway dominated the kefir market in the United States, although it now has competition from the Dannon and Yoplait brands.

The company has grown fast, from about $15 million in sales in 2003 to nearly $90 million in 2012. In April it reported a 27% increase in sales for the first fiscal quarter of 2013, compared with the same period in 2012.

The sales increase came from retail distribution expansion, product additions and increased sales to existing retail customers, according to Lifeway.

Golden Guernsey has an 83-year legacy in the Milwaukee area. In 2011 the company was acquired by a Los Angeles private equity firm that shut down the operations suddenly in January and then sought Chapter 7 bankruptcy protection for the dairy operations.

In its bankruptcy petition, Golden Guernsey listed assets of $10 million to $50 million, liabilities of $10 million to $50 million, and 200 to 999 creditors.

About Rick Barrett

Rick Barrett covers manufacturing, telecom and agriculture. He has received Best in Business awards from the Society of American Business Editors and Writers and was co-recipient of a Barlett & Steele award for investigative business journalism.

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