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MGP to scale down whiskey production
After sales plunged by double digits in the third quarter (Q3), US producer MGP Ingredients is planning to scale down its whiskey production and focus on its branded spirits business next year.
Kansas-based MGP has released its financial results for the three months to 31 September 2024, which supported its earlier forecast of consolidated sales dropping by 24% compared to the previous year. CEO and president David Bratcher said that as a result, the company plans to decrease production and shift focus towards branded spirits.
“In response to the softening American whiskey category trends and elevated industry-wide barrel inventories, in 2025 we plan to further lower our net ageing whiskey put away, scale down our whiskey production, and optimise our cost structure to mitigate lower production volumes,” Bratcher said.
The branded spirits division posted a 6% decrease to US$62.6 million for Q3, led primarily by a decline in the mid- and value-priced portfolio.
Within the division, premium-plus sales were up by 1% as the company focused on American whiskey and Tequila.
The branded spirits arm includes American whiskey maker Luxco – which operates Kentucky-based distilleries Lux Row Distillers and Limestone Branch – Mexico-based Tequila producer Destiladora González Lux, and Indiana’s Ross & Squibb Distillery, which produces Penelope Bourbon.
Bratcher added that current market dynamics will have an even greater impact on the brand’s ‘Distilling Solutions’ segment, which plummeted by 36% to US$71.9m during Q3, but is hopeful about the outlook for 2025.
“We believe that these actions will strengthen the long-term competitive positioning of our brown goods business. Over the longer term, we remain confident in our Distilling Solutions business as our whiskey inventories remain an important part of the still-expanding American whiskey category.”
While MGP has long had the industrial size capacity to contract distil or sell barrels to upstart labels, in recent years, it has acquired a number of brands, most notably Luxco for US$475m in 2021. MGP also added Penelope Bourbon to its portfolio in May 2023. These acquisitions, the recent sales reports, and the corresponding changes signal what’s to come from MGP, one of the country’s largest spirits producers.
“We are pleased with our progress towards becoming a premier branded spirits company,” Bratcher said. “Though further inventory tightening is a headwind in the near term, we expect our continued investments behind our brands portfolio to deliver attractive organic growth. In addition, we expect our Ingredient Solutions segment to have a stronger 2025 despite current transitory headwinds.”
In July 2023, MGP closed its distillery in Atchison, Kansas, due to headwinds facing its grain-neutral spirits.
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