MGP Ups Its Game and Creates a Brand Portfolio: the Payoff is Happening

If you’re a whiskey drinker, you’ve almost certainly tried the whiskeys of MGP Ingredients, Inc., knowingly or not. This Indiana distillery has fueled the modern American whiskey boom by supplying whiskey to distillers like High West, Smooth Ambler, WhistlePig, Angel’s Envy, Bulleit, and many others. MGP’s oft-told rags-to-riches tale—a white elephant of a distillery once seen as being so worthless that it was nearly torn down in 2001—encapsulated the story of the modern whiskey renaissance as it rose to prominence over the past two decades.

But as the whiskey boom moved beyond its initial explosion years, worrisome signs began to appear on the horizon for MGP. Craft distillers were using more of their own juice as it reached maturity, and competitors like Bardstown Bourbon Co., with its custom distilling program, entered the fray. MGP no longer had the field to itself. That became particularly apparent in the company’s 2019 results, when sales slipped by 3.5% and operating income dropped nearly 6%–all while the rest of the whiskey world continued to boom. At the time, the company acknowledged that “the underlying growth rate of our target market is gradually slowing” and that “the number of potential competitors for that volume has increased.”

By then, however, MGP was already implementing a strategic rethink. In 2018 the company began casting a wider net for contract distilling customers—cutting the minimum order requirement for proprietary mashbill spirits from 1,000 barrels to 250, and allowing smaller players to pool their orders. New services were offered—including customized barrel entry proof, and use of the MGP rackhouses. The distillery began to bill itself as a “full-service partner for customers of all sizes”.

In the meantime, MGP was busy launching its own brands. Those included George Remus bourbon, Rossville Union rye, Eight & Sand blended bourbon, and Till wheat vodka, all rolled out between 2016 and 2019. Initial progress was slow as the brands were available in only a few markets, but the sales footprint has expanded. The whiskeys have scored well on the tasting front, Rossville Union’s straight rye and Barrel Proof rye earning 90 points with our tasting panel, the Remus Reserve Series whiskeys scoring 90+ points.

But the centerpiece of the MGP revamp thus far has been the $475 million acquisition of St. Louis-based distiller and marketer Luxco in 2021. The Luxco whiskey stable featured Ezra Brooks, Blood Oath, Daviess County, David Nicolson, Lux Row, and Rebel. The deal also included the state-of-art Lux Row Distillery in Bardstown, Kentucky, as well as a 50% stake in Limestone Branch Distillery in nearby Lebanon, producer of Yellowstone bourbon and American single malt and Minor Case rye. Luxco’s existing distribution partnerships also provided a strong national sales platform.

On both the contract distilling and branded sides, the MGP game plan is now starting to pay off. In its 2022 financial results announced last Thursday, the company showed a 25% sales increase to $782.4 million, while gross profit was up 27% to $253.3 million and operating income rose 18% to $149 million. The company’s Distilling Solutions segment (quietly rechristened from the former “Distillery Products” name) saw sales rise 22% to $428.5 million as both new distillate and aged whiskeys sold well. And it appears that there is still plenty of demand for contract distilled whiskey as non-distiller producers expand in a still-robust market. While the contract distilling side of MGP’s business remains the largest, the Luxco deal has catapulted the branded segment into relevance. The MGP Branded Spirits segment saw sales rise 30% to $237.9 million, with the higher-end part of the portfolio up by 56%. These branded whiskeys appear to have much more runway for growth, and that's great news for whiskey lovers as this emerging whiskey portfolio—filled with high-scoring gems—hopefully begins to reach a wider audience.