, LACTAID(R) Brand today
announced a new partnership with 3 -A-Day of Dairy, the nutrition-based
marketing and consumer education campaign managed through the National Dairy
Council (NDC).
"The National Dairy Council is proud of the partnership with LACTAID(R) to
promote better health through the 3-A-Day of Dairy program," said Grant
Prentice , Executive Vice President of Marketing + Business Development, Dairy
Management Inc.
For the first quarter, ended March 31 2005, Lifeway's sales were
approximately $4,650,000, or an 18 percent increase from $3,935,000, in the
first quarter of 2004.

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LACTAID(R) Supplements contain the lactase enzyme to make
dairy foods easier to digest and can be used anytime, anywhere.7 percent
increase in sales to $16,319,000 from $14,878,000 in 2003.

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com., the non-profit domestic and international marketing ,
planning and management organization for U.
"In addition, during the first quarter, we sampled our products in one of
the largest club chains in the U.

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"
As part of the partnership, LACTAID (R) Milk assisted in the creation of a
Web link to the WebMD diet assessment tool to help consumers determine if they
include enough dairy in their diet. LACTAID(R) Milk also currently supports
the National Medical Association's (NMA) campaign to increase dairy
consumption among African Americans .com., Lifeway Foods, Inc. A majority of this increase occurred during the middle
portion of the year and we were unable to pass along the entire cost to
consumers," Smolyansky said.

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About LACTAID(R) Brand
LACTAID(R) Brand Milk and Dietary Supplements are marketed by McNeil
Nutritionals , LLC, a Johnson + Johnson company. 3-A-Day of Dairy is supported by integrated
marketing efforts including retail promotions, public relations, online
marketing and advertising.
The balance sheet continued to strengthen with current assets growing
12 percent to $15,783,000 from $14,012 ,000 in 2003.
"We are extremely encouraged by our current sales trends and expect this
to be a record year for Lifeway Foods.26

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"(1)
LACTAID(R) Brand products can help those who experience symptoms of
lactose intolerance to more easily enjoy dairy. You can find out more about LACTAID(R) Brand Products at
http://www. The current ratio stands
at a robust 17.net .

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According to the newly released 2005 Dietary Guidelines, enjoying 3
servings of low-fat and fat-free dairy foods a day will help to meet critical
nutrient requirements, including vitamin A , vitamin D, calcium, magnesium and
potassium, without increased body weight(1).

About McNeil Nutritionals
McNeil Nutritionals, LLC is a global marketer of innovative nutritional
products . In its traditional home territory of New
England, its Hood lines of milk, cream, ice cream, cottage cheese and sour
cream regularly rank number one in the six-state area.
"We are pleased, but by no means satisfied, with our 2004 results," said
Julie Smolyansky, Chief Executive Officer of Lifeway Foods.24 $.

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S.
Lifeway, named as Chicago's 25th fastest-growing public firms by Crain's
Chicago Business and Fortune Small Business' 47th Fastest Growing Small
Business, 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.

This news release contains forward-looking statements.

Lifeway Foods, Inc .

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The company's mission is to give people the ability to actively
manage their own health. For more information about
HP Hood, please visit http://www. and have been in talks to expand the
product line with other large retail and club outlets," Smolyansky concluded.

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lactaid. Also, we are seeing positive results
from our 2004 acquisition of the assets of Ilya's Farms through increased
distribution of our existing Lifeway product lines. at (847) 967-1010 or
e-mail at http://www.

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Partnership with 3-A-Day of Dairy
A cornerstone of the LACTAID(R) sponsorship is a series of consumer
initiatives that encourage the 3-A-Day of Dairy healthful eating plan among
those who may be lactose intolerant .LACTAID. McNeil Nutritionals, LLC is headquartered
in Fort Washington, PA.hphood.

(1 ) Report of the Dietary Guidelines Advisory Committee on the Dietary
Guidelines for Americans , 2005.12 a share from $1.

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Milk, which
is our largest component ingredient, experienced a 30 to 35 percent increase
from the prior year.

danone lifeway

About 3-A-Day of Dairy
The 3-A-Day of Dairy nutrition-based marketing and consumer education
campaign was launched by the American Dairy Association /National Dairy Council
(ADA/NDC) in January 2003. Shareholders' equity
rose 13. Our weekly sales run rate has improved
to more than $400,000. In addition, we believe our new packaging has
improved our point-of-sale education, as well as heightened the products'
visibility among mainstream consumers ," continued Smolyansky. The Company also participates in the organic and soy markets with
Lifeway Organic(TM), Organic Kefir and Kefir Cheese, and America's first soy
kefir called SoyTreat(TM).

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New 2005 Dietary Guidelines Recommend 3 Daily Servings of Dairy
for Better Health

FORT WASHINGTON, Pa. LACTAID(R) Brand Milk and Dietary
Supplements can help lactose intolerant people achieve the Dietary Guidelines
recommended 3 servings of dairy a day. McNeil Nutritionals markets SPLENDA(R) No Calorie
Sweetener, SPLENDA(R) Sugar Blend for Baking , VIACTIV(R) Soft Calcium Chews,
VIACTIV(R) Multi-Vitamin Chews, LACTAID(R) Milk and Dietary Supplements , and
BENECOL(R) Spreads and Smart Chews. The ADA/NDC is managed by Dairy
Management, Inc.-produced dairy products on
behalf of America's dairy farmers.

For the year ended December 31, 2004, Lifeway Foods reported a 9.

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Lifeway Foods Reports Year End Results

"Our top-line
continued to grow as our products continued to gain broader consumer awareness
and market penetration. The company remains
relatively debt-free. We expect this operation
to have a significant impact on our growth plans on the East Coast," stated
Smolyansky.

lifeway rennet

Additionally, LACTAID(R) Milk will
participate in 3-A-Day of Dairy retail promotions, in store-sampling and Web
site communications throughout 2005 .
To find out more information on lactose intolerance and LACTAID(R) Brand
products visit http: //www.
Condensed Consolidated Statement of Income

Twelve Months Ended
December 31, December 31,
2004 2003

Sales $16,319,210 $14,877,788
Cost of Goods Sold 9,034,971 7,840,782
Gross Profit 7,284,239 7,037,006
Operating Expenses 4,333,788 3,558,362
Income From Operations 2,950,451 3,478 ,644
Total other income 491,775 97,843
Pre-tax income 3,442,226 3,576,487
Income taxes 1,390,167 1,354,548
Net income $2,052,059 $2,221,939

Per Share Earnings $.

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LACTAID(R) Announces Partnership With 3-A-Day of Dairy to Promote Consumer Nutrition and Educational Campaign

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5 percent to $17,918,000 from $15,793,000 in 2003, and book value grew
13 percent to $2.87 a share in 2003 .

dairies skimmed

LACTAID(R) Milk, perfect for
drinking, cooking and baking, is real, farm fresh milk that contains a lactase
enzyme that breaks down the difficult-to-digest lactose into easily digested
simple sugars. The 3-A-Day logo is a mark owned by Dairy
Management, Inc. -- Sales for 2004 Rose 9.

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However, our bottom line results were dramatically
impacted by the significant rise in milk prices during the year.lifeway.

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About HP Hood LLC
Founded in 1846, today HP Hood LLC is one of the largest branded dairy
operators in the United States. Hood also has national
and super-regional processing and distribution operations in extended
shelf-life products for well-known national brands."
"This increase in raw material costs lead to a 15 percent increase in our
cost of goods sold.
"We remained focused on creating shareholder value as demonstrated by our
continued balance sheet improvements.
For more information, contact Lifeway Foods Inc .

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For Americans who may experience
lactose intolerance, a condition that refers to the inability to digest the
milk sugar lactose, the Dietary Guidelines Report recommends that "the most
reliable and easiest ways to derive the health benefits associated with milk
and milk product consumption is to choose alternatives within the milk food
group, such as yogurt or lactose-free milk, or to consume the enzyme lactase
prior to the consumption of milk products. "With LACTAID(R), even those who may experience some lactose
intolerance can enjoy the many health benefits associated with 3 servings a
day of dairy. LACTAID(R) Milk,
processed and distributed by HP Hood, LLC, is perfect for drinking, cooking
and baking and is available in whole, 1%, 2%, fat-free and calcium-fortified
varieties.com or by calling 1-800-LACTAID.7 Percent

-- Company Reports Strong First Quarter Sales

-- Balance Sheet Strengthens

MORTON GROVE, Ill.

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As part of this new relationship, LACTAID(R) will become a
major sponsor of programs designed to educate Americans on the benefits of
eating a healthy diet that includes 3 servings of dairy a day. LACTAID(R) Brand products
allow people with dairy digestive problems to enjoy dairy products once more.9 to 1 a year ago. This climb in sales came as a result of increased
orders from existing customers, and not by having a large, new account
complete initial stocking.S. Investors are
cautioned that actual results may differ materially from such forward-looking
statements.

Ave. Shares 8,439,159 8,436,888

Consolidated Balance Sheet

December 31, December 31,
2004 2003

Current Assets $ 15,783,019 $ 14,011,905
Current Liabilities 882,190 1,007,210
Working Capital 14,900 ,829 13,004,695
Long-term Debt 463,541 472,509
Stockholders Equity $17,918,197 $15,792,964

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(Nasdaq: LWAY ) announced its financial results for the 2004 fiscal year as
well as strong 2005 first quarter top -line results. Net income was
$2,052,000, or 24 cents a share, compared to $2,222,000, or 26 cents a share,
for 2003. The weighted average shares outstanding for 2004 increased slightly
to 8,439 ,159 from 8,436,888 in 2003.9 to 1 compared to 13. Excluding the one-time sales to the Sav-a-Lot account ,
which accounted for $362,000 in sales for first quarter 2004, the sales would
have increased approximately 30 percent in 2005.

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LACTAID(R) Dietary Supplements, which are available in both caplets and
chewables, naturally break down the milk sugar, lactose. The Company markets 12 flavors of
kefir , and America's first and only no sugar added, low carb kefir, Slim
6(TM). 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.