Good morning. Welcome to Lifeway Foods' Second Quarter 2024 Conference Call. On the call with me today is Julie Smolyansky, President and Chief Executive Officer. By now, everyone should have access to the press release that went out this morning.
If you have not received the release, it is available on the Investor Relations portion of Lifeway's website at www.lifewayfoods.com. A recording of this call will be available on the company's website. Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements.
The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements.
Lifeway assumes no obligation to update any forward-looking projections that may be made in today's release or call. All of the forward-looking statements contained herein speak only as of the date of this call. And with that, I would like to turn the call over to Lifeway's Chief Executive Officer, Julie Smolyansky..
supporting growth, cost reductions and facility improvements. Our spend is very efficient, and we consistently generate strong returns when installing additional tanks as we leverage existing infrastructure to scale the business.
With our efficient capital spend, we are very prepared and have the capacity and operations in place for continued sales tailwind. We have now published 19 consecutive quarters of year-over-year net revenue growth.
And as I mentioned before, five consecutive quarters, setting a Lifeway record in quarterly net sales, both of which we are incredibly proud of and excited to pursue further. While many businesses in the broader space have called out a more cautious consumer, Lifeway has continued to excel, and we are not seeing a slowdown within our business.
It is no secret that consumers continue to face macro headwinds, including inflation and high interest rates, yet our growing customer base is proving resilient and very loyal as we continue to grow rapidly, led by volume growth, and we believe that this is because our premium better-for-you offerings come with exceptional value.
Lifeway Kefir is accessible, nutrient-dense, and research suggests that consuming it regularly improves overall health and well-being.
Lifeway products, such as Kefir and Farmer Cheese offer consumers a high-quality protein, probiotics, calcium, vitamin D, and are a great way to close the nutrition gap throughout life stages for everyone from children to more aging populations.
Studies also show that people who consume fermented dairy tend to make healthier lifestyle choices overall. Gut health and its connection to brain health and skin health is interesting even to Gen Z consumers. And the high-quality protein in dairy, like in Lifeway Kefir, is bioavailable, easy for your body to use and is naturally occurring.
Today's consumers are not willing to sacrifice their health and wellness and are focused on consuming high-quality, better-for-you products at an affordable price. This trend has led to soaring demand for bioavailable foods, like Lifeway Kefir, and should continue to be a great tailwind for us.
Our entire medium product portfolio, led by our flagship kefir, is nutritious, delicious and reasonably priced, which is why consumers keep coming back for more and eagerly await for new flavors and line extensions. The probiotics in kefir support a healthy microbiome, and approximately 80% of the immune defenses come from the gut.
Probiotic products such as kefir are the focus of intense research related to the microbiomes' role in stress, depression and anxiety.
We now know that up to 90% of the body serotonin comes from gut cells and the gut-brain access, which links the emotional and cognitive centers of the brain with our intestinal function, plays a major role in happiness and well-being.
A study published in BMC Medicine also suggests that probiotics and dairy kefir saw potential promise in improving gut health of ICU patients, and a small study protocol in the UK examined effects and potential benefits in children with ADHD who consume kefir.
It's very exciting for the microbiome research, and we applaud and support these recent efforts to uncover new and amazing ways that fermented and cultured food can positively impact our health.
Deserving of its own mention, in March, the FDA announced the first-ever qualified health claims regarding the consumption of cultured dairy and the reduced risk of type 2 diabetes. We look forward to begin incorporating this qualified health claim on our labels and within our marketing in the coming weeks and months.
As this is an excellent development, further illustrating the incredible health benefits of our products, and we believe this will further compel health-focused consumers to our brand.
To build on the already great health benefits of Lifeway Foods, we will be optimizing our product offering by reducing sugar and lactose counts in nearly all of our Lifeway products in the coming months. Market data shows consumers are looking to lower sugar consumption, and kefir is a natural option to get a delicious snack with less sugar.
While Lifeway products are already 99% lactose-free, in the coming weeks, we will be rolling out existing products with 100% lactose-free labeling. High-quality protein, low sugar and lactose-free are trends that are not going away anytime soon and likely is at the forefront of bringing these attributes to the marketplace.
As we've made clear, selling our industry-leading drinkable Lifeway Kefir is what we do best, and our focus on it is consistently paying dividends. We believe the modern health-focused consumer will continue to be a tailwind to the expanding U.S.
kefir market, and we will continue to dedicate the bulk of our time and investments into our drinkable kefir to increase brand and category exposure, drive trial and capture more and more share of today's health-focused consumers in the growing market.
As the market leader, we are also consistently evaluating trends within the probiotic and healthy food space to improve and diversify the offerings of our growing consumer base and their preferences.
Within kefir, these insights have led to numerous successful product innovations, including our Guava Lowfat Kefir, our organic whole milk products and our Organic Grassfed Kefir flavor. Each of these innovations have gained popularity and successfully attracted different types of consumers.
Our organic category has been a major hit to date and provided us strong growth. In addition to our focus in the kefir category, we are still strategically investing behind the cult favorite, Lifeway Farmer Cheese, in an effort to capitalize on the continued consumer demand for soft cheese products.
Seasonally, Farmer Cheese performed the best in fall and winter, and we are quite excited to get into its peak season. I'll now touch on some marketing and advertising updates. Just a couple of weeks ago, we had an excellent brand experience at Lollapalooza in Chicago.
Our ProBugs products were featured in Lifeway's Kidzapalooza section of the festival, and we gave out thousands of samples while interacting with a massive crowd in Chicago. Additionally, New York Bucket Listers, with the following of more than 2 million people, just named our Yoga in the Skies series as one of the best activities to do in New York.
We partnered with Up, Up & Away Yoga to deliver this unique 1-hour long yoga experience at the top of the One World Trade Center, and each participant can enhance their workout with a protein boost from our delicious Lifeway Kefir.
We always enjoy these in-person experiences as they fit into our efforts to connect with our consumers on a deeper level on their wellness journey. We remain very committed to investing behind our core products.
With that said, we have been very strategic with our marketing dollars, focusing on smart programs that effectively move units and drive velocities.
Our goal is to ensure Lifeway products are present at interrupted moments within the store, such as high-traffic end caps to increase trial and exposure to our brands to consumers who might not normally shop in our section.
A great example of this was our successful in-store promotion during the first quarter, where we partnered with many different retailers to create a temporary refrigerated spaces, showcasing Lifeway brand products at high traffic end caps within their stores.
This was a highly successful program, and we expect to initiate a similar program in the coming weeks to capitalize on back-to-school snacking season, which we are quite excited about. Outside of the store, we continue to invest behind our e-commerce sales strategy to drive velocities and exposure.
We are running targeted advertising on our retail partner sites as well as general e-commerce platforms, including Instacart, and supporting these e-commerce efforts are continued partnerships with our social media influencers, including celebrities, guests and nutrition experts with notable following.
Through our work with them, we advertise to a whole network of consumers and educate them on the kefir category, our healthy offerings and the recipes they can be used in. Our marketing strategy is nimble and is also very effective and the key reason we expect to continue delivering great sales growth. Now I'll touch on some distribution updates.
During the quarter, we gained new placement of organic kefir and Farmer Cheese at Stop & Shop, and we also increased our store count with Target.
Additionally, we were very happy with the success of our club rotation, featuring twin packs of 32-ounce kefir, a popular offering that encourages customers to increase consumption and greatly increases our visibility.
The club channel is a great place for us to meet new consumers and the lower-priced items at these club stores are also more attractive to entry-level consumers offering a great opportunity to capture incremental revenues and customers.
On a higher level, we continue to maintain our deep relationships and active dialogues with all our key retail partners and are always seeking out incremental distribution opportunities across a number of channels that make sense for our core offerings, with a key focus on our flagship Lifeway drinkable kefir.
We will continue to strategically focus on and elevate our brand name products and will deprioritize private label manufacturing to ensure Lifeway's long-term success and unparalleled category leadership. To wrap up, this was another outstanding record-breaking quarter for Lifeway. The results speak for themselves.
Our core business continues to grow rapidly as illustrated by our five consecutive quarters setting new record highs on the topline for the business. We've come a long way since our founding in 1986, and I couldn't be prouder.
With a great team in place and our dedicated investments behind our core products, we believe we are in an excellent position to continue growing strongly throughout the back half of this year and beyond, all while furthering our mission to provide best-in-class bioavailable probiotic and nutritious food to improve the health and well-being of our customers.
We look forward to updating you on our progress during the third quarter call in November. Thank you, again, for joining the call today, and I hope you all have a great rest of your summer and beginning of fall..
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