MGP Ingredients, Inc. (Nasdaq: MGPI), a leading provider of branded and distilled spirits and food ingredient solutions, reported it will scale back whiskey production in 2025.

Amid declining Distilling Solution segment sales for Q03, CEO and President David Bratcher announced the planned scale-back in a statement last week.

“In response to the softening American whiskey category trends and elevated industry-wide barrel inventories, in 2025 we plan to further lower our net aging whiskey put away, scale down our whiskey production, and optimize our cost structure to mitigate lower production volumes,” Bratcher said. 

The third quarter report included the following financial statistics:

• Consolidated sales decreased 24% to $161.5 million. Excluding the impact of the Atchison distillery, consolidated sales decreased by 14%.
• Net income increased 82% to $23.9 million. Adjusted net income decreased 5% to $28.8 million. Net income margin increased 860 basis points to 14.8%. Adjusted net income margin increased by 350 basis points to 17.8%.
• Basic earnings per common share (“EPS”) increased to $1.07 per share from $0.59 per share. Adjusted basic EPS decreased 5% to $1.29 per share from $1.36 per share.
• Consolidated gross profit decreased 10% to $65.8 million. Gross margin increased by 610 basis points to 40.8%. Excluding the impact of the Atchison distillery, adjusted gross margin increased 30 basis points to 40.8% largely due to higher Branded Spirits margins.
• Adjusted EBITDA decreased 9% to $45.7 million. Adjusted EBITDA margin increased by 460 basis points to 28.3%.
• Capital expenditures were $44 million year-to-date.
• Net debt leverage ratio stands at approximately 1.3x as of September 30, 2024.

“While current market dynamics will likely have an even greater impact on our Distilling Solutions segment sales and profitability in 2025,” Bratcher said, “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.” 

Distilling Solutions and Branded Spirits

For the third quarter 2024, Distilling Solutions segment sales decreased 36% to $71.9 million, according to the report. Excluding the impact of the Atchison distillery, segment sales decreased 18% to $71.9 million mainly due to the 22% decline in brown goods sales, including lower aged and new distillate sales. Segment gross profit, as reported, decreased to $28.6 million, or 39.8% of sales, compared to $33.3 million, or 29.8% of segment sales, in the third quarter 2023.

The Branded Spirits segment third quarter 2024 sales decreased 6% to $62.6 million, driven primarily by the decline in mid and value priced portfolio sales, the report said. Premium plus sales grew 1%. Branded Spirits gross profit increased by 12% to $32.4 million, or 51.8% of segment sales, compared to $29.0 million, or 43.5% of segment sales, in the prior year period.

Bratcher added, “We are pleased with our progress towards becoming a premier branded spirits company. 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.”

Read more: MGP Ingredients Hires New VP of Investor Relations