Lifeway Foods Inc., Morton Grove, Ill., reported its third quarter sales increased more than three percent. The third quarter represented the company’s second highest quarter in terms of sales in its history, which led to record sales for the nine-month period, the company said. The increase was primarily attributed to increased sales and awareness of Lifeway’s Kefir cultured dairy beverage and ProBugs children’s kefir beverage, it said.

“Lifeway should see continued financial strength and revenue growth into the fourth quarter 2010 due to our recent expansion with Wal-Mart, 7-Eleven stores, as well as expanding our top four Kefir items throughout Safeway nationally, which will increase the Safeway stores our Kefir is in from about 600 to about 1,200,” said Edward Smolyansky, Lifeway Food Inc.’s chief financial officer, in a statement. “We also look forward to rolling out our new Bio Kefir line to additional nationwide retailers starting in December 2010.”

Lifeway’s total sales increased to $15.9 million from the same period in 2009. However, the company reported a 34 percent decrease in net income that it attributed largely to increases in advertising and selling expenses as well as higher cost of conventional milk, the company says. The cost of milk was approximately 50 percent higher during the third quarter 2010 than in 2009, it said. The company hopes to benefit from a recent United States Department of Agriculture rule to exempt kefir beverages from the Class 1 milk classification, which should have a positive impact on the amount the company pays for milk, Smolyansky said.

“Lifeway’s third quarter results are in-line with our expectations given the weak consumer environment, and reflect the company’s current growth strategy,” Smolyansky said. “Our gross margins have been strong and consistent year-over-year and the decrease in net income was primarily driven by higher conventional milk prices and our increased advertising and marketing initiatives. We believe our marketing program continues to build awareness for the health benefits of kefir, as well as increases the visibility of the brand with retailers.”

During the quarter, the company also announced the acquisition of the assets of New Jersey-based First Juice Inc., which manufactures organic fruit and vegetable juice beverages designed for children.