11. Segments, Products and Customers

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segments, Products and Customers

Note 11 – Segments, Products and Customers

Lifeway’s primary product is drinkable kefir, a cultured dairy product. Lifeway Kefir is a tart and tangy cultured milk smoothie that is high in protein, calcium and vitamin D. Thanks to our exclusive blend of kefir cultures, each cup of kefir contains 12 live and active cultures and 15 to 20 billion beneficial CFU (Colony Forming Units) at the time of manufacture.

We manufacture (directly or through co-packers) our products under our own brand, as well as under private labels on behalf of certain customers. Lifeway offers over 50 varieties of our kefir products including more than 20 flavors. In addition to our core drinkable kefir products, we offer 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. containers with mini-spoons. We also offer Lifeway Elixir, a line of non-dairy, sparkling organic probiotic beverages, as well as probiotic supplements for adults and children. In late 2017, we also announced that we would begin offering Skyr, a strained cupped Icelandic yogurt, and Plantiful, a plant-based probiotic beverage made from organic and non-GMO pea protein with 10 vegan kefir cultures.

Our product categories are:

• Drinkable Kefir, sold in a variety of organic and non-organic sizes, flavors, and types, including low fat, non-fat, whole milk, protein, BioKefir (a 3.5 oz. kefir with additional probiotic cultures), and Kefir with Oats.

• Cheese, which includes European-style soft cheeses, and farmer cheese in resealable cups.

• Cream and other, consists primarily of cream, a byproduct of our fluid milk manufacturing process, and non-dairy products.

• ProBugs, a line of kefir products in drinkable, frozen, and freeze dried formats, designed for children.

• Cupped Kefir and Skyr, which include Cupped Kefir and Icelandic Skyr, a line of strained kefir and yogurt products in resealable cups.

• Frozen Kefir, available in both bars and pint-size containers.

Lifeway has determined that it has one reportable segment based on how our chief operating decision maker manages the business and in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing our performance, has been identified collectively as the Chief Financial Officer, the Chief Operating Officer, the Chief Executive Officer, and Chairperson of the board of directors. Substantially all of our consolidated revenues relate to the sale of cultured dairy products that we produce using the same processes and materials and are sold to consumers through a common network of distributors and retailers in the United States.

Net sales of products by category were as follows for the nine months ended September 30:

	Nine months ended September 30,
	2018		%		2017		%
Drinkable Kefir other than ProBugs	$	61,255		76%	$	71,559		77%
Cheese		8,443		11%		8,527		9%
Cream and other		4,104		5%		5,053		5%
Cupped Kefir and Skyr		3,154		4%		2,379		3%
ProBugs Kefir		2,166		3%		3,700		4%
Frozen Kefir (a)		1,196		1%		1,418		2%
Net Sales	$	80,318		100%	$	92,636		100%

(a) Includes Lifeway Kefir Shop sales

Net sales of products by category were as follows for the three months ended September 30:

	Three months ended September 30,
	2018		%		2017		%
Drinkable Kefir other than ProBugs	$	18,877		77%	$	22,154		77%
Cheese		2,656		11%		2,829		10%
Cream and other		1,406		6%		1,615		6%
Cupped Kefir and Skyr		699		3%		889		3%
ProBugs Kefir		471		2%		843		3%
Frozen Kefir (a)		371		1%		456		1%
Net Sales	$	24,480		100%	$	28,786		100%

(a) Includes Lifeway Kefir Shop sales

Significant Customers – Sales are predominately to companies in the retail food industry, located within the United States. Two major customers accounted for approximately 22% of net sales for the nine months ended September 30, 2018 and 2017, and 20% and 21% of net sales for the three months ended September 30, 2018 and 2017, respectively.