MGP Ingredients Inc. reports sales decreased 4.6% to $90.7 million, decline in the Distillery Products segment, which was partially offset by sales growth in the Ingredient Solutions segment.
“While the overall American whiskey market remains robust, and our position within that market is still very strong, timing and volatility of customers’ orders continues to be a challenge this year,” said Gus Griffin, president/CEO.
“As in previous quarters this year, we saw forecasted orders delayed due to customer funding issues and their desire to delay purchasing as long as possible. These issues affected sales of both new distillate and aged whiskey inventory.
“Despite this, we did have a very strong quarter for sales of aged whiskey, selling both more whiskey and older whiskey, as customers continue to need our inventory to launch new brands, fill holes in their inventory and support brand acquisitions,” he said, adding:. ”
We believe these customer needs will be ongoing. While we are certainly behind where we would like to be at this point in the year, we are off to a strong start to the fourth quarter, and we are confident in our line of sight to the sales required to deliver against our full year guidance.”
Distillery Products Segment
In the third quarter of 2019, sales for the Distillery Products segment decreased 6.4% to $73.3 million. The year over year decrease during the quarter was primarily attributed to a decline of new distillate sales, which was partially offset by an increase in sales of aged whiskey. Gross profit declined slightly to $15.9 million or 21.7% of segment sales, compared to $16.3 million, or 20.8% of segment sales in the third quarter 2018.
“We saw a decline in our new distillate business this quarter, as some of our customers work through temporary excess inventory situations,” said Griffin. “While that was a drag on our overall whiskey sales, we continue to strengthen our position in the market and position ourselves for the long term. We are doing an outstanding job recruiting new customers for our new distillate and aged whiskey offerings, and we have added a second sales manager to support our international efforts.
“We also signed a new multi-year new distillate supply agreement with one of our largest existing customers. We continue to realize pricing in line with our expectations for our brown goods. The white goods and industrial alcohol oversupply situation continued this quarter with margins for white goods holding about even with prior year, and industrial margins compressing slightly.”
“Our long-term strategy has us well positioned in the market and aligned with strong macro consumer trends. We continue to make the necessary investments to deliver long-term growth,” stated Griffin. “Our investment in aged whiskey inventory has now reached $95.2 million, at cost, and we remain confident in the long-term value of this inventory and its ability to meet the needs of our ever growing and diverse mix of customers. We continued to expand our warehouse capacity during the quarter, bringing our total spend to-date on the project to approximately $46.4 million of the $51.8 million approved by the Board.
“With our brands initiative, we are pleased with the strong gains we are seeing in our existing markets and, as a result, are beginning to expand into additional markets, with the addition of Connecticut, Maryland and Washington D.C. this month. We are seeing strong consumer acceptance of our core portfolio, and great anticipation for our limited edition offerings that will be released next month.”