MGP Ingredients, Inc.

What they do

MGP produces branded and distilled spirits at its distilleries and bottling facilities and sells them to distributors or control-state governments. Its distilled spirits include premium bourbon, rye and other whiskeys (brown goods) and grain neutral spirits such as vodka and gin; it also sells bulk spirits to other branded-spirits manufacturers. Its wheat-based protein and starch ingredient products are sold directly or through distributors to consumer packaged goods manufacturers, processors and bakeries.

Revenue drivers

• Branded Spirits — Owned brands sold to distributors across premium plus (Penelope Bourbon, Yellowstone, Rebel, Remus, El Mayor Tequila), mid (Brady's, Saint Brendan's, Pearl Vodka, Lord Calvert) and value (Arrow, Canada House, Lady Bligh) tiers, plus private label and contract bottling. Second quarter 2026 sales were $59.6 million and gross margin was 53.0%.
• Distilling Solutions — Bulk distilled spirits, mainly brown goods and grain neutral spirits, sold directly or indirectly to other branded-spirits manufacturers. Second quarter 2026 sales were $29.2 million, down 42% year over year on lower brown goods volume.
• Ingredient Solutions — Predominantly wheat-based protein and starch ingredients sold to food manufacturers, processors and bakeries. Second quarter 2026 sales rose 2%, driven by biofuel and other sales, though higher waste starch stream costs pressured profitability.
• Customer concentration — In 2025, the five largest Branded Spirits customers combined accounted for approximately 25% of consolidated sales, and one Branded Spirits customer alone accounted for approximately 16% of consolidated sales.

Recent performance

Second quarter 2026 consolidated sales were $124.4 million, down 15% from $145.5 million a year earlier, primarily on expected declines in Distilling Solutions brown goods. Gross profit fell 20% to $46.5 million and gross margin contracted 270 basis points to 37.4%, as higher waste starch stream costs in Ingredient Solutions offset gross margin improvement in Branded Spirits and Distilling Solutions. Operating income was $17.7 million versus $20.3 million, including a $2.1 million credit loss provision tied to a customer bankruptcy. Net income was $12.0 million and basic EPS was $0.55; adjusted EBITDA fell 23% to $27.6 million. Branded Spirits sales were $59.6 million, down 1%, with premium plus up 5% (Penelope up 13%).

Strategy

Management's strategic roadmap prioritizes the premium plus portfolio and a channel and customer strategy, supported by regional execution and investment in people. The company is revamping sales, marketing and supply chain functions and adding capabilities for new and existing growth opportunities. An ownership cost management initiative targets waste elimination, efficiency and effectiveness; SG&A fell 13% in the second quarter and adjusted SG&A represented 15% of consolidated sales. Advertising and promotion spend is being aligned with the roadmap toward the most attractive growth opportunities.

Risks

• Consumer preference shifts — Customer and consumer shifts away from spirits, particularly brown spirits such as bourbon and rye, or toward lower-margin products could hurt results.
• Distilling Solutions volume decline — Second quarter Distilling Solutions sales fell 42% on lower brown goods volume, and industry participants have reduced production or shut down distilleries.
• Ingredient Solutions cost pressure — Higher waste starch stream costs drove a 270 basis point decline in consolidated gross margin in the second quarter of 2026.
• Customer concentration and credit — One Branded Spirits customer accounted for about 16% of 2025 consolidated sales, and the second quarter included a $2.1 million credit loss provision related to a customer bankruptcy.

Outlook

Management reaffirmed full-year 2026 guidance and declared a $0.12 quarterly dividend. It said second quarter adjusted EBITDA and adjusted basic EPS came in ahead of expectations and cited continued momentum in premium plus, led by Penelope Bourbon and Yellowstone, and sales growth in Ingredient Solutions. Management expects to maintain the strategic roadmap and key growth initiatives while navigating a challenging industry backdrop.