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Dairy Queen Julie Smolyansky, head of Lifeway Foods (#38), is fermenting big things at the firm her father founded.
By Lindsey Gerdes

(FORTUNE Small Business) – Julie Smolyansky says she often gets by on just four hours of sleep a night. It's a good thing too, because she can't afford much more. The 29-year-old CEO of Lifeway Foods, maker of the Russian-style yogurt drink kefir (pronounced "KEY-fur"), has a lot on her plate. Since 2001 the company's earnings have grown 53% a year, revenues are up 17% a year, and the stock has returned a healthy 37% annually--all of which helped Lifeway debut at No. 38 in the 2004 FSB 100. Smolyansky's company, based in Morton Grove, Ill., is now selling in all 50 states, and with expansion plans in Canada and dozens of new products in development (including kids' brands and low-carb versions), the young CEO doesn't look to be slowing down anytime soon.

Lifeway's story begins more modestly. Twenty-eight years ago Mike Smolyansky, Julie's father and the company's founder, moved to the U.S. from Russia. He had less than $100 and a wife and an infant daughter, Julie, in tow. Accustomed to waiting in line for hours just to buy bread, his daughter says, he cried when he saw his first American grocery store. He began working as a mechanical engineer, and his wife opened one of the first Russian delis in Chicago in 1977. (She would eventually own five.) When the two attended a food show in 1986, they spotted kefir, a calcium- and protein-rich yogurt drink enjoyed by Russians for thousands of years and reputed to cure ailments from lactose intolerance to hangovers. The drink wasn't commercially available in the U.S., and Smolyansky thought he could market it to the growing Russian community in Chicago. He began making kefir in his basement and selling to local grocery stores.

A batch of kefir takes only 16 to 18 hours to produce, but the blend of bacterial cultures used to ferment the milk affects the product's taste and is a closely guarded secret. Mike Smolyansky got his cultures directly from Russia, an advantage that put him ahead of any upstart competitors. His business grew rapidly, and he decided to list the firm on the Nasdaq in 1988. "He didn't even know what it meant to go public," says Julie, "but he needed financing and somebody said he should. He researched it in the library."

In 1996, Julie graduated from the University of Illinois at Chicago after just three years of study, and began working for her father a year later. "I didn't really know my father growing up," she says. "He was starting a company. But when I fell in love with it myself, I got to see what he was doing when he wasn't around. It healed our relationship."

After they had worked together five years, Mike Smolyansky suffered a fatal heart attack in June 2002. Julie, then 27, immediately stepped in as CEO, one of the youngest of any firm listed on a major exchange. "I put on a face for media and interviews, but I remember feeling really fragile," says Smolyansky, who spent much of that tragic Sunday evening sealing private records and installing security. "I was paranoid people would try to destroy us at our most vulnerable time." She had reason for concern: Someone had already tried to steal the company's recipes by rummaging through its trash eight years earlier. Julie dealt with her grief by immersing herself in work. She was in the office the next day at 6 A.M.

In the company's long climb back, Julie has been aided by her brother, Eddie, 24, who serves as Lifeway's controller. Her mother, Ludmila, became chairman of the board shortly after Mike Smolyansky's death, and the family owns roughly 51% of the company. Many of Lifeway's 55 employees have been with the company from its early days; Russian and English are spoken interchangeably in the office.

Since taking over, Julie has tried to introduce kefir to younger, more health-conscious shoppers. A fitness fanatic who has run five marathons, she developed soy and organic versions of kefir and now distributes them in small health-food stores (along with big grocery chains). She has also reached out to other ethnic groups. The company's La Fruta drink--thinner and sweeter than kefir--is gaining ground in Hispanic markets. Introduced just two years ago, it now makes up roughly 20% of revenue.

The stock has been volatile--it spiked to $28 this spring after a positive news story ran on the Motley Fool website. But even after stabilizing to a recent price of about $13, shares have more than quadrupled since Smolyansky took over. In May, Lifeway reported first-quarter revenue growth of 19% and operating-income growth of 50% over the same quarter in 2003.

With numbers like that, who needs eight hours of sleep anyway?