MGP Ingredients Earnings: Branded Spirits Resilience Offsets Distilling Weakness
- Hardik Shah
- Jul 31
- 3 min read
TL;DR
• Revenue Strength:Q2 sales fell 24% YoY to $145.5M, largely from expected declines in Distilling Solutions.
• Margin Trends:Gross margin contracted 350 bps to 40.1%, driven by lower volumes and product mix shifts.
• Forward Outlook:Full-year 2025 guidance reaffirmed; expected EPS $2.45–$2.75 and EBITDA $105M–$115M.
Business Overview
MGP Ingredients, Inc. (Nasdaq: MGPI) is a branded and contract distiller with operations in branded spirits, distilling solutions, and specialty food ingredients. Its premium spirits portfolio includes Penelope, Rebel, Remus, Yellowstone, and El Mayor, sold through retail, distributor, and on-premise channels. The company operates across North America and has global sourcing and bottling facilities, including distilleries in Indiana, Kentucky, and Mexico.
“Our goal continues to be delivering sustainable growth and unlocking meaningful, long-term value for all stakeholders. We will work together with clarity, integrity, and agility to strengthen our customer-centric, brands-led approach and execute with excellence across our platforms.”— Julie Francis, CEO
MGP Ingredients Earnings Q2'25 (YoY)
Revenue: $145.5M (↓24%)
Gross Profit: $58.4M (↓30%)
Gross Margin: 40.1% (↓350 bps)
Net Income (GAAP): $14.4M (↓55%)
Adjusted EPS: $0.97 (↓43%)
Adjusted EBITDA: $35.9M (↓38%)
Drivers:
Sharp drop in brown goods (↓54%) under Distilling Solutions.
Mid/value-tier spirits declined ~15% due to tequila and liqueur softness.
Premium Plus spirits rose 1%, led by Penelope.
Ingredient Solutions rebounded 5% from Q1, aided by strong protein demand.
Cash Flow & Capex:
Operating cash flow YTD: $56.4M (↑$26.8M YoY)
Capex cut by 50% YoY to $32.5M (updated guidance)
Net debt leverage steady at ~1.8x
Forward Guidance
Management Outlook (FY2025):
Revenue: $520M–$540M
Adjusted EBITDA: $105M–$115M
Adjusted EPS: $2.45–$2.75
Capex: ~$32.5M (reduced from $36M)
Effective tax rate: ~25%
Risks & Opportunities:
Continued brown goods destocking in 2026.
Tariff impacts not yet factored into outlook.
Premium brands (Penelope, El Mayor, Rebel 100) remain strong.
Ingredient Solutions poised for H2 recovery.
Operational Performance
Segment Performance Snapshot:
Branded Spirits: $60.5M (↓5%); Gross Margin ↑ to 52.8%
Premium Plus: +1% YoY, driven by Penelope
Mid/Value Tiers: ↓~15%, facing pricing headwinds
Distilling Solutions: $50M (↓46%); Gross Profit ↓56%
Brown goods down sharply, but in line with forecast
Increased customer engagement helped stabilize volume visibility
Ingredient Solutions: $35M (↑5%)
Specialty proteins +13% on new customer wins
Fiber products flat to slightly down
“Penelope is expanding the brand's strong foundation by capitalizing on consumer demand for more approachable bourbon with softer, smoother taste profiles... it has become one of the fastest-growing Premium Plus American whiskey brands.”— Brandon Gall, CFO
Market Insights
Brown goods market remains oversupplied; U.S. whiskey production ↓28% in last 3 months (TTB data).
Distilling customers renegotiated rather than canceled contracts, giving MGPI forward visibility.
Premium RTD cocktails gaining momentum; Penelope Peach Old Fashioned among top 15 in Nielsen's Premium Plus RTD rankings.
Consumer Behavior & Sentiment
Consumers remain cautious under inflationary pressure, trading down in mid/value tiers.
Premium Plus products with authenticity, flavor, and accessible pricing (e.g., Penelope) resonating well.
Brand building efforts increasingly focused on high-ROI investments—Q2 A&P spend ↓41% YoY.
“Not only have no customers canceled their contracts, but substantially all have either confirmed or amended their purchases... giving us higher confidence in the remainder of 2025 and increasingly 2026.” — Brandon Gall, CFO
Strategic Initiatives
CEO transition: Julie Francis brings CPG and beverage expertise.
Commercial discipline in brown goods production and barrel inventory.
Innovation pipeline: Penelope expanding into new flavors and RTD formats.
Ingredient Solutions investing in operational improvements and biofuel efficiency.
Capital Allocation
Dividends: $5.2M paid YTD
Buybacks: $1M in share repurchases
Debt: $297M total, net leverage ratio ~1.8x
Liquidity: >$600M available under debt facilities
The Bottom Line
MGP Ingredients continues to navigate a tough distilling landscape by doubling down on premium brands, cost control, and commercial agility. While headwinds in brown goods persist into 2026, visibility from customer contract renewals and innovation-led growth in
Branded Spirits suggest long-term upside. Investors should watch for:
Sustained strength in Premium Plus brands and RTD momentum.
Margin preservation as volume remains soft in Distilling Solutions.
Tariff risks and macroeconomic headwinds heading into 2026.
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