Kefir Feuds And Soda Suits

0:04Welcome to the CPG Week podcast by BevNet and Nosh, your source for the latest food and beverage industry News. I'm Monica Watrous, Managing Editor of NOSH, here with my co-hosts Brad Avery and Lucas Southard. If you're enjoying the show, please subscribe on your listening platform of choice. On the podcast today, we're discussing family drama at Lifeway, Poppy Goes the Lawsuit, and General Mills in Hot Water. But first, we're headed to New York City next week for BevNet Live. What are you guys looking forward to at the event? I am looking forward to being in New York again, where I lived for many, many years.

0:43But more importantly, I'm looking forward to my panel with a bunch of non-AUK retailers, including Emily Heintz from Sachet, Chris Marshall from Sands Bar, and Nick Bodkins from Boisson. So it should be a really good discussion about kind of the non-AUK category and how to pitch to retailers there. Awesome, I'm looking forward to hearing that. Brad, what about you? I always love just getting to see everybody at the events. And I'm going to be on stage with Glenn Figenholtz, the SVP of Marketing for Lowe's Foods. He's doing a retailer profile. So I've already gotten a chance to sort of prep with him.

1:24I got a little preview of his presentation. And I'm very excited to once again take the stage at BevNet Live. And I'm excited to attend my very first BevNet Live summer event, drink all of the drinks and see everybody who is coming out for the show. So Brad, this week, you wrote about Lifeway Foods and some of the drama that has ensued at the kefir company. Can you tell us more? Yes. So this goes back a couple years, but Lifeway is the leading kefir maker in the US, and it's a family-run company despite being public. CEO Julie Smoliansky is the daughter of the founder, Michael Smolianski. And for years, her brother, Edward, was the COO and CFO, and her mother, Ludmilla, has been on the board for a long time.

2:16However, about two years ago, some dispute arose between them, and Ludmilla and Edward seem to have lost faith in Julie's ability to lead the company, tried to ouster as CEO. That failed, ultimately. They are now both gone from the brand, and Julie remains. And in that time, the brand has managed to grow and reverse course from a period of decline several years ago. People thought that this family drama, as it had been reported, might have been dying down. They reached an agreement. But this spring, it seems to have flared up again. In March, Edward announced that he was launching a competing kefir brand called Pure Culture Organics, and they debuted at Natural Products Expo West.

3:02And in April, Lifeway sued them, claiming violation of the Lanham Act by false association with Lifeway and claiming that they stole trade secrets. So this has all been going on in the background. And I set out originally to write about Lifeway's growth and thought when I went into this that the family drama was actually subsiding until I learned that actually it's been flaring up in a pretty intense way. Now, the odd part to me was last month, Lifeway issued a filing retracting its allegation of trade secret violations by saying that it turns out that pure culture organics is just a practical joke being played on them by Edward Smoliansky.

3:49Now, to get to the bottom of this, I called up Edward, and he maintains that, no, it's not a joke. I have invested$200 ,000 into this company, and I am really starting a competing brand. He did say, I'm protecting Lifeway's flank to show them the competition is around the corner at a moment's notice. Now, Lifeway itself is moving ahead with the lawsuit as far as it goes to the false association, but this is a sort of strange issue and there's a lot of very personal tension between these feuding family members. Brad, do you know if Edward and Julie have any conversation anymore? Are they in contact?

4:29I wouldn't know about recently. I do know that Edward told press a while ago that they're estranged. And certainly this is a public company. So any communications behind the scenes are going to be relevant to a publicly traded business. I don't know what their relationship is like at the moment, but it does seem to be fraught. And certainly, Edward has not given up yet trying to do what he feels is best for Lifeway. And Julie, likewise, feels that her record speaks for itself. I mean, you can look at their most recent earnings, and they are reporting a sustained period of record growth. Q1, they were up 17.8 % to$44.6 million in the quarter.

5:14They've been doing well in the market. As far as this being an expensive practical joke, yes, it would be a very expensive practical joke. And that was Edward's argument when he denied that this is a joke. And he thinks that maybe Lifeway is just trying to downplay the reason for dismissing its charge for the court, but that's his opinion. He says that they are going to be going ahead and launching product this fall. All right. We'll see if that actually happens. And of course, we'll continue reporting on any developments revolving around the Lifeway and Smolianski saga. Moving on to another dramatic event this past week.

6:00A class action lawsuit was filed against Poppy in the U.S. District Court for the Northern District of California, alleging that the two grams of prebiotic fiber in a single 12-ounce can is too low to have a meaningful impact on gut health. And by comparison, Olipop has nine grams of fiber, but both are positioned as prebiotic sodas. The plaintiff's attorneys argue that even as much as 7.5 grams of agave inulin, which is the key prebiotic fiber ingredient in poppy, taken daily for three weeks is insufficient to confer any meaningful prebiotic benefits. What have you been hearing in the industry about this case?

6:43Well, I thought Arthur Galigo on LinkedIn had a pretty interesting take. He's a veteran marketer, and his argument was that this is basically welcoming Poppy to the class action club. And if anything, what this says is, hey, you've made it. You are well known enough to attract a class action lawsuit. Congratulations. Now, obviously, a class action lawsuit is a headache for anyone to deal with and generates negative headlines. Arthur's argument on LinkedIn was that this is frivolous. That will be for a court to decide, obviously. But in the end, it's just more attention on Poppy. And it's saying, hey, this brand, it's Buzzy.

7:24And so someone's going to start scrutinizing it and file a lawsuit. Sure. And we've seen a number of lawsuits over the years directed at CPG brands. Pop-Tarts was sued because it didn't have enough strawberries and it's strawberry filling. Yeah, I think the question is, you know, Pop-Tart can take a lawsuit like that and just brush it off like whatever. You are nothing to me. I'm Pop-Tarts. Poppy is much younger and people could possibly see these headlines and walk away with a negative impression of the brand. Now, what I thought was interesting is that as this is happening, Poppy is actually trying to start moving away from the gut health positioning of the of the marketing.

8:04So we saw at the beverage forum, Allison Ellsworth was actually talking about moving away from the gut health positioning and doing a rebrand to maybe drop prebiotic from the front of the cans and start leaning into that message that it had in the Super Bowl commercial that we saw, which is it's better for you soda. It's soda that's healthy. It's soda that's good for you. You don't have to worry about the sugar. So it's kind of funny that the lawsuit for gut health is coming as poppy itself is trying to get away from gut health. Well, and I wonder how many consumers are drinking poppy for the gut health benefits.

8:41I would argue very few. I think most people are picking up poppy because it is a better for you soda. It's got great branding. It's very hip. And I think that's a lot of the reason why the brand is switching its marketing to this better for you soda messaging as opposed to a gut friendly or gut health product where, frankly, it's become pretty competitive. Everyone wants to say they're a gut friendly product these days. And I imagine there is a certain amount of consumer exhaustion from hearing gut health over all the products they're buying. Yeah, I don't know if there's consumer exhaustion or not.

9:23Maybe there is. But I do think that poppy is reaching a mainstream audience that isn't in this natural channel space that a lot of us are always following, where the natural channel consumer is certainly aware of gut health. The mainstream consumer maybe just wants something that tastes good. And that might be where poppy is going is it just tastes good. Does it? I'm actually an Olipop girl. I've never had a can of poppy. Oh, really? Interesting. Now, as a journalist, I have to be objective, but I will just say that I like them both. Such a fair diplomatic response, Brad. Folks can read more about this lawsuit at BevNet.

10:03The story is prebiotic problems. Lawsuit takes aim at Poppy's gut health claims. Moving on to another lawsuit that popped up this week. Lucas, tell us about what happens at General Mills. This lawsuit is a much different thing because it centers on a legacy of racism and discrimination in one of General Mills production plants. So filed June 2nd, eight employees of the Covington, Georgia General Mills Production Facility put forth a lawsuit alleging that the food giant tolerated a racist workplace that was centered around a leadership group that called themselves the Good Old Boys, who used Confederate and KKK-associated imagery to harass and discriminate against people of color and women at the plant.

11:02So this is a serious claim. In the 58-page class action complaint, the plaintiffs allege that this group called the Good Old Boys, led by two specific white men, held discriminatory views towards women and people of color who worked at the plant. And the claims go back literally decades. So one of the more interesting things in the lawsuit was this claim of a massive 12-foot tall, 20-foot wide mural that was outside of the East Plants facility from 2005 to 2021. The mural depicted three General Mills cereal mascots as Confederate generals. Cocoa Puffs mascot, Sonny, was Jefferson Davis. Chef Wendell from Cinnamon Toast Crunch was Robert E.

12:01Lee. And funnily enough, the Cheerios Buzz the Bee was depicted as Stonewall Jackson. It's pretty gross, to be honest. It just feels like there was a institutional racism going on in this plant that employees had to deal with, and they're finally speaking out about it. The mural itself, by using the cartoon characters, turns this into a joke and undercuts how serious the allegations are and the culture there, especially when we're talking about black workers coming to work in a building that is being run by people who are trying to belittle them with stuff like the Cinnamon Toast Crunch guy on horseback like a Confederate general.

12:49Yeah. And I think what's most interesting about this is that the racism and discrimination is is terrible enough. But the fact that this lawsuit is going after General Mills because they knew this was happening and let it continue for at some points like 20 years. One plaintiff, Keith McClinton, who started at the plant in December 2001, said that at one point there was a racial slur written on one of his power audit forms that called him the N-word and that he submitted written complaints to HR for 20 years but was told to stop doing that. Right. This isn't just about the murals or something could be played off like a joke.

13:41This is direct harassment. Yeah, and it's direct harassment that was put forth to the powers that should be putting a stop to it and doesn't seem like General Mills HR was really hearing them or doing anything about it. But even worse was allowing it to continue for 20 years, which is just bonkers. More recently, we've seen companies like General Mills, other large packaged food conglomerates embracing these DEI narratives. And so to know that that was happening while a little bit more of a performative diversity, inclusion, equity effort was being made just doesn't sit well. So there, unfortunately, are numerous examples of this culture of discrimination, racism, and intimidation that went on at the Covington, Georgia plant.

14:38The story was first reported in Law 360, and there's also a coverage of it in the Atlanta Journal-Constitution. The title of that story is General Mills Sued by Black Staff at Covington Cereal Factory. Thank you for filling us in on that, Lucas. And here are some other notable bits of news from the week. Retail strategy firm platform broadens base with eye to new channels. The sauce is simmering. Can it build for a new generation? And changing the channel. Why Fabolish is bullish on alt retail. For these stories and more, become an insider on BevNet and Nosh. That wraps up this edition of CPG Week by Bevna and Nosh.

15:21Thank you to our audio engineer, Joshua Pratt. Our director is Mike Schneider and our designer is Aaron Willett. If you enjoyed the podcast, please subscribe on your listening platform of choice and we will see you next time.