What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-25 compared with 2020-04-14 · 56 added, 69 removed, 261 unchanged (32% of the section changed)

16 unchanged sentences

at the time of manufacture.

manufacture (directly or through co-packers) our products under our own brand, as well as under private labels on behalf of certain

As of December 31, 2019, Lifeway offered approximately 20 varieties of our kefir products including more than 60 flavors .

In addition to our core drinkable kefir products, we offer several lines of products developed through our innovation and development

These include Kefir Cups, a strained, cupped version of our kefir;

and Organic Farmer Cheese Cups, a cupped version of

our soft cheeses, both served in resealable 5 oz.

We also offer Skyr, a strained cupped Icelandic yogurt;

a plant-based probiotic beverage made from organic and non-GMO pea protein with 10 vegan kefir cultures;

a line of probiotic supplements

for adults and children;

and a soft serve kefir mix.

We manufacture (directly or through co-packers)

and market products under the Lifeway and Fresh Made brand names, as well as under private labels on behalf of certain customers.

Our product categories are:

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kefir with additional probiotic cultures).

European-style soft cheeses, including farmer cheese in resealable cups.

European-style soft cheeses, including farmer cheese, white cheese, and Sweet Kiss.

Cream and other, which consists primarily of cream, a byproduct of making our kefir.

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Product innovation and new product

is committed to maintaining its positions as the leading producer of kefir and a recognized leader in the market for probiotic

We routinely evaluate opportunities for new product flavors and formulations, improved package design, new product configurations

and other innovation opportunities.

Beyond our core drinkable kefir products, we have an ongoing effort to extend the strength

of the Lifeway brand and leverage the capabilities of the Lifeway organization into categories both inside and outside of the

dairy aisle, including into non-food categories and into additional channels, such as gyms and fitness studios.

In 2019, we maintained

the level of focus on product innovations, packaging innovations, and growth opportunities.

As noted above, these product innovation

and development efforts have led to additional revenue opportunities from Plantiful and Kefir minis.

New items introduced or expanded

through our innovation efforts were offset by lower volumes of our core drinkable kefir products in 2019.

Lifeway is committed to maintaining its

positions as the leading producer of kefir and a recognized leader in the market for probiotic products.

We routinely evaluate

opportunities for new product flavors and formulations, improved package design, new product configurations and other innovation

opportunities.

Beyond our core drinkable kefir products, we have an ongoing effort to extend the strength of the Lifeway brand

and leverage the capabilities of the Lifeway organization into categories both inside and outside of the dairy aisle, including

into non-food categories and into additional channels, such as gyms and fitness studios.

In 2020, we maintained the level of focus

on product innovations, packaging innovations, and growth opportunities.

These product innovation and development efforts have

led to additional revenue opportunities from Plantiful and Kefir minis.

Lifeway considers research and development

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staff and facilities or relying solely on third parties.

In 2020, in light of the Covid-19 outbreak, and our focus on expanding

sales of our current products, we don’t expect to focus on new product development.

In 2020, in light of the Covid-19 outbreak, and our focus was on expanding

sales of our current products, and less on new product development.

Manufacturing

During 2020 and 2019, approximately 99%

and 98%, respectively of our revenue was derived from products manufactured at our own facilities.

We currently operate the following

manufacturing and distribution facilities:

of our revenue was derived from products manufactured at our own facilities.

We currently operate the following manufacturing and

distribution facilities:

Morton Grove, Illinois, which produces drinkable kefir, drinkable ProBugs kefir, Kefir Cups, and cheese products;

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We have co-packer

agreements to manufacture drinkable kefir in European markets our frozen kefir products, and our probiotic supplements.

and 2018, approximately 1% of our revenue was derived from products manufactured by co-packers.

Our co-packers are audited regularly

by our staff and are required to follow our specifications and Good Manufacturing Practices (GMPs).

Additionally, the co-packers

are required to ensure our products are manufactured in accordance with our quality and safety specifications and that they are

compliant with all applicable laws and regulations.

agreements to manufacture drinkable and frozen kefir in Ireland and the United Kingdom, respectively, to serve our European markets.

During 2020 and 2019, approximately 1% of our revenue was derived from products manufactured by co-packers.

Our co-packers

are audited regularly by our staff and are required to follow our specifications and Good Manufacturing Practices (GMPs).

Additionally,

the co-packers are required to ensure our products are manufactured in accordance with our quality and safety specifications and

that they are compliant with all applicable laws and regulations.

SALES AND DISTRIBUTION

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Retail sales.

the retail-direct channel, we sell our products to the retailer that either the retailer’s carrier picks up or Lifeway ships

through third party carriers for delivery to those retailers’

Under the retail-direct channel, we sell

our products to the retailer that either the retailer’s carrier picks up or Lifeway ships through third party carriers for

delivery to those retailers’

distribution centers.

In turn, our retailers then deliver

the products to their respective stores.

In turn, our retailers then deliver the products to their respective stores.

Customers in this route-to-market grouping include Kroger, Walmart and Trader Joe’s.

Under the retail direct model, optimal product merchandising, assortments and product presentation are attended to by the retailer

with limited support from Lifeway’s broker network.

Sales to our retail-direct customers represent approximately 43% of

our total net sales for the year ended 2019.

Under the retail direct model, optimal

product merchandising, assortments and product presentation are attended to by the retailer with limited support from Lifeway’s

broker network.

Sales to our retail-direct customers represent approximately 45% of our total net sales for the year ended 2020.

Under the distributor channel, we sell

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Under the direct store delivery (DSD) route

to market, we distribute our products directly to the retailer using a fleet of Company-owned vehicles and a team of Lifeway merchandisers

to market, we distribute our products directly to the retailer using Company-owned vehicles and a team of Lifeway merchandisers

who engage face-to-face with store management to ensure optimal product assortments and presentations.

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In the Chicago, Illinois metropolitan area,

Lifeway operates three retail stores and a food truck under its Lifeway Kefir Shop subsidiary.

The Lifeway Kefir Shop sells its

frozen and drinkable kefir products, as well as certain Lifeway products, through these retail outlets.

Sales through these retail

outlets represent approximately 1% of net sales for the year ended 2019.

Lifeway operates two retail stores and a food truck under its Lifeway Kefir Shop subsidiary.

The Lifeway Kefir Shop sells its frozen

and drinkable kefir products, as well as certain Lifeway products, through these retail outlets.

Sales through these retail outlets

represented less than 1% of net sales for the year ended 2020.

Distribution outside of the U.S .

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During the year ended December 31, 2020,

two customers, United Natural Foods, Inc.

(UNFI) and one other customer, collectively accounted for approximately 22% of our total

These customers collectively accounted for approximately 17% of net accounts

receivable as of December 31, 2019.

two customers collectively accounted for approximately 21% of our total net sales.

These customers collectively accounted for approximately 22% of net accounts receivable

as of December 31, 2020.

Lifeway has determined that it has one

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and organic raw milk.

Raw milk primarily contains raw skim milk, in addition to a small percentage of butterfat and other components.

The federal government establishes minimum prices for raw milk purchased in federally regulated areas.

Some states have established

their own rules for determining minimum prices.

The federal government announces prices for raw milk each month.

While we are subject

to federal government regulations that establish minimum prices for milk, the prices we pay producers of organic raw milk are generally

well above such minimum prices, as organic milk production is generally costlier, and organic milk therefore commands a price premium.

In addition to the prices for raw milk, we also pay producer (“over-order”) premiums, federal order administration

costs, and other related charges that vary by milk product, location, and supplier.

states have established their own rules for determining minimum prices.

The federal government announces prices for raw milk each

While we are subject to federal government regulations that establish minimum prices for milk, the prices we pay producers

of organic raw milk are generally well above such minimum prices, as organic milk production is generally costlier, and organic

milk therefore commands a price premium.

In addition to the prices for raw milk, we also pay producer (“over-order”)

premiums, federal order administration costs, and other related charges that vary by milk product, location, and supplier.

Lifeway takes appropriate precautions to

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We maintain various types of insurance,

including product liability coverage, which we believe to be sufficient to cover potential product liabilities.

including product liability and product recall coverages, which we believe to be sufficient to cover potential product liabilities.

We have also implemented the Safe Quality

Food (“SQF”) program at all of our facilities.

Food (“SQF”) program at most of our facilities.

SQF is a fully integrated food safety and quality management protocol

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quality simultaneously.

Safe Quality Food or SQF certification provides an independent and external validation that a product,

process or service complies with international, regulatory and other specified standards.

Our Waukesha and Morton Grove facilities

are SQF certified at the highest level of such certification.

SQF certification provides an independent and external validation that a product, process or service complies

with international, regulatory and other specified standards.

Our Waukesha, Morton Grove, and Niles facilities are SQF certified.

Lifeway’s business is not seasonal.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business