November 14, 2008

Lifeway Foods Reports Record 3rd Quarter 2008 Results

MORTON GROVE, Ill., Nov. 14 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., , makers of a nutritious, probiotic dairy beverage called kefir, announced today for the third quarter ended September 30, 2008, sales increased 15% to approximately $11,240,000 from $9,817,000 during the same period a year ago. This increase in sales was driven by another strong sales increase of Lifeway's kefir and ProBugs(R).

Third quarter 2008 gross profit increased 30% to $3,537,122 from $2,720,659 during the same period a year ago. Third quarter operating income increased 153% to $1,467,239 from $581,043 during the same period a year ago. Third quarter 2008 net income increased 83% to $854,916 from $468,194 during the same period a year ago.

Edward Smolyansky, CFO commented, "We are extremely proud of our third quarter and nine months 2008 results. Our margins continued to remain strong even as oil and energy prices reached record levels in July and August. All of our oil related production supplies, utilities and transportation costs hit record levels during the third quarter, and we have only just begun to see these costs subside as the price of oil retreats. Additionally, the cost of milk in October declined to the lowest level in 16 months, and we expect them the decline even further. In a very tight credit environment, our cash flows have never been stronger and, combined with these declining costs, should only further benefit us in the fourth quarter 2008 and into 2009"

Julie Smolyansky, CEO commented, "The final months of the year should be a very exciting time for our company as we continue to expand our club store initiative during this difficult economic time for consumers. In the coming weeks, we expect to begin shipments of our 8 oz Kefir variety pack to stores in the northeast region, and a new Probugs(TM) club variety pack to stores in the northern California region. In difficult economic times, when consumers are looking for value at warehouse and club type outlets, it is part of our growing initiative to provide value to these consumers."

About Lifeway Foods

Lifeway, recently named Fortune Small Business' 49th Fastest Growing Small Business, is America's leading supplier of the cultured dairy product known as kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these "friendly" cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs (TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding! Live conference calls will now be on an annual basis to discuss fiscal full year results. For more information, contact Lifeway Foods, Inc. at (847) 967-1010 or e-mail at [email protected] and visit

This news release contains forward-looking statements. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission.

                                                        (Unaudited)                                                    Three Months Ended                                                       September 30,                                                     2008          2007    Sales                                        $11,240,282     $9,817,478    Cost of goods sold                             7,505,794      6,901,471   Depreciation expense                             197,366        195,348    Total cost of goods sold                       7,703,160      7,096,819    Gross profit                                   3,537,122      2,720,659    Selling Expenses                                 957,978      1,174,140   General and Administrative                     1,032,043        916,893   Amortization expense                              79,862         48,583    Total Operating Expenses                       2,069,883      2,139,616    Income from operations                         1,467,239        581,043    Other income (expense):     Interest and dividend income                    95,042         84,918     Rental Income                                   13,647          9,731     Interest expense                               (71,928)      (102,197)     Impairment of marketable securities           (270,908)     Gain (loss) on sale of marketable securities,      net                                          (110,259)       209,207     Total other income (Expense)                  (344,406)       201,659    Income before provision for income taxes       1,122,833        782,702    Provision for income taxes                       267,917        314,508    Net income                                      $854,916       $468,194    Basic and diluted earnings per common share         0.05           0.03    Weighted average number of shares outstanding 16,730,650     16,824,911                                          (Unaudited)                                    Nine Months Ended                                       September 30,            December 31,                                   2008              2007           2007   Cash flows from operating    activities:   Net income                   $2,655,240      $2,999,551     $3,152,660   Adjustments to reconcile net    income to net cash flows    from operating activities,    net of acquisition:     Depreciation and      amortization                 821,505         789,215      1,049,913     (Gain)Loss on sale of      marketable securities, net   146,404        (663,538)      (539,739)     Impairment of marketable      securities                   270,908     Deferred income taxes       (125,221)          12,419       (223,717)     Treasury stock issued      for compensation              65,809          27,720         48,509     Increase (decrease) in      allowance for doubtful      accounts                      (4,449)        (40,540)       (40,540)     (Increase) decrease in      operating assets:       Accounts receivable        (947,303)       (862,699)      (226,405)       Other receivables            14,193          25,240         27,939       Inventories                (700,540)     (1,538,993)      (984,358)       Refundable income taxes     240,880         142,008         26,891       Prepaid expenses and other        current assets                 665          (1,068)        (9,270)     Increase (decrease) in      operating liabilities:       Accounts payable            766,988         402,027        131,316       Accrued expenses            118,650         (39,033)       (66,062)       Accrued income taxes        308,260             ---            ---   Net cash provided by    operating activities         3,631,989       1,252,309      2,347,137    Cash flows from investing    activities:     Investment in cost      method securities                ---        (500,000)      (500,000)     Purchases of marketable      securities                (4,864,873)     (4,408,170)    (5,744,697)     Sale of marketable      securities                 4,659,350       6,652,670      7,168,246     Increase in margin            428,951             ---            ---     Purchases of property      and equipment             (1,892,472)     (1,142,709)    (1,824,879)     Purchases of      organizational costs             ---          (5,858)           ---   Net cash used in investing    activities                 (1,669,044)         595,933      (901,330)    Cash flows from financing    activities:     Proceeds of note payable          ---         300,000        300,000     Purchases of treasury      stock, net                (1,139,987)       (752,603)      (752,603)     Repayment of notes      payable                     (887,977)     (1,318,885)    (1,945,131)   Net cash used in financing    activities                  (2,027,964)     (1,771,488)    (2,397,734)    Net decrease in cash and    cash equivalents               (65,019)         76,754       (951,927)    Cash and cash equivalents    at the beginning of the    period                         595,885       1,547,812      1,547,812    Cash and cash equivalents    at the end of the period      $530,866      $1,624,566       $595,885  

Lifeway Foods, Inc.

CONTACT: Lifeway Foods, Inc., +1-847-967-1010, [email protected]

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