LifeWay Foods, Inc. (Nasdaq: LWAY) reported financial results for the first quarter ended March 31, 2001. Lifeway reported record revenues of $2.64 million, up 17 percent from last year’s first quarter revenues of $2.27 million. Gross Profits for the quarter were $1.09 million, compared to $1.14 million last year. Net income rose 100% to $564,062 or $.08 per share versus a net income of $308,226 or $.04 in 2000.

Michael Smolyansky, President and CEO commented, “During the first quarter we took significant steps to broaden our market share utilizing advertising and promotion as our major tools. Our efforts are already showing strong results. Sales projections of our new probiotic soy beverage, SoyTreat(TM) in mainstream markets as well as health and natural markets are very high and we are also seeing strong gains in sales in our other product lines. During the first quarter we also introduced our new Lifeway Organic(TM) line of products at the Natural Products Expo West and Food Marketing Institute Shows. With these introductions we have become a kind of one-stop shopping for the kefir consumer. We offer the benefits of kefir to consumers of every taste and lifestyle.”

Smolyansky added, “As always, we enter the second quarter with the goal to further increase revenues through marketing. Our plan for this is threefold: broaden our market share, continuously innovate our product offerings and add production capacity in our new processing plant. Additionally, our strategic relationship with Groupe Danone, one of the world’s largest food processor, will help us increase distribution of our products in the US.”

Lifeway is a manufacturer of cultured, probiotic and functional food products in the health food industry, and is America’s leading supplier of the cultured dairy product known as kefir. The Company markets 12 flavors of kefir and does a successful business exporting its products to Eastern Europe and Canada. The Company continues to market a dairy based immune-supporting dietary supplement beverage called Basics Plus(TM), as well as Kefir Starter for consumers to make kefir at home or in travel. With the recent introduction of America’s first non-dairy soy kefir called SoyTreat(TM), as well as Lifeway Organic(TM) the Company is entering into the organic and soy milk market.

For more information, contact Michael Smolyansky, President, Lifeway Foods, Inc. at (847) 967-1010 or e-mail at or visit .

This press release contains “forward-looking statements” Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risk and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company’s annual reports on Form 10-K filed with the Securities and Exchange Commission.

                             Lifeway Foods, Inc.
Consolidated Statements of Income

For Three Months Ended
March 31, 2001 March 31, 2000

Sales $2,636,440 $2,272,786
Cost of Goods Sold 1,547,227 1,136,756
Gross Profits 1,089,213 1,136,030
Operating Expenses 657,219 909,618
Income from Operations 431,994 226,412
Other Income (expense) 132,068 81,854
Income before taxes 564,062 308,226
Provision for income taxes 235,349 119,400
Net Income $328,713 $ 188,866
Earnings Per Share $0.08 $0.04
Weighted Average Shares Outstanding 4,318,444 4,318,444

Lifeway Foods, Inc.
Consolidated Balance Sheet


March 31, 2001 March 31, 2000

Current Assets $8,518,023 $8,185,341
Current Liabilities 1,550,443 765,100
Long-term Debt 522,843 1,208,783
Stockholders’ Equity 11,090,875 10,582,593

CONTACT: Tracy Hollywood, 312-596-2934, or Julie Smolyansky, 847-967-1010, both of Lifeway Foods