Functional food maker Lifeway Foods has reported a fall in income for the first quarter ended 31 March 2005, as rising costs ate into the proceeds of a jump in sales.

Lifeway reported revenues of $4.66m up from last year's first quarter revenues of $3.93m. 

Net income was $725,391 compared with a net income of $765,199 in the first quarter of 2004. Contributing to the change in net income was a rise in legal and regulatory costs, as well as insurance and utility costs.

"In the first quarter we rolled out our full line of new packaging, and the results have been great as evident in our sales growth," said CEO Julie Smolyansky. "We feel very confident of the continued market penetration of Lifeway Kefir, Lifeway La Fruta, and our other products"

"We are extremely pleased with our first quarter results" said CFO Edward Smolyansky. "The cost of milk, the largest component of our raw materials, increased approximately 25% in the first quarter 2005 from the same period a year ago.  We feel comfortable we can continue to maintain strong margins even in the environment of high raw material prices, and an overall increase in the cost of doing business."