2026-07-30
MGP Ingredients reported weaker second-quarter results as lower demand for whiskey distillate continued to weigh on its supply business, even as its branded spirits portfolio held up better and the company kept its full-year outlook unchanged.
The Atchison, Kan.-based company said net sales for the quarter ended June 30 fell to $124.4 million from $145.5 million a year earlier, a decline of 15%. Gross profit dropped 20% to $46.5 million, while gross margin narrowed to 37.4% from 40.1%. Adjusted EBITDA fell 23% to $27.6 million. Net income was $12.0 million, down from $14.4 million in the same period last year, and adjusted earnings per share declined to $0.72 from $0.97.
Julie Francis, MGP’s president and chief executive, said the quarter came in ahead of the company’s internal expectations on adjusted EBITDA and adjusted basic earnings per share. She said momentum continued in the company’s premium-plus spirits portfolio, led by Penelope Bourbon and Yellowstone, and that some mid-priced and value brands also improved. She also pointed to sales growth in ingredient solutions and to ongoing work to reshape sales, marketing and supply chain operations while cutting costs.
The sharpest pressure came from Distilling Solutions, the unit that supplies distilled spirits and related services to other customers in the industry. Sales in that segment fell 42% to $29.2 million from $50.0 million a year earlier. Gross profit declined 40% to $11.3 million. The company said lower demand for aged and new distillate whiskey drove a 59% drop in brown goods sales. Even so, gross margin in the segment improved to 38.7% from 37.6%, helped by product mix and cost savings efforts. Warehouse services revenue rose by a high-single-digit rate, partly because of expanded service offerings.
That performance matters beyond one company’s quarterly report because MGP is a major supplier across the U.S. spirits market. A steep decline in distilling demand can signal continued caution among brands and buyers around inventory levels, contract production and aging stocks. For distillers, whiskey brands and other beverage companies that rely on outside supply, the numbers suggest that pressure on volumes has not fully eased, even if margins can improve through mix changes and tighter cost control.
Branded Spirits was more stable. Sales in that division slipped 1% to $59.6 million from $60.5 million, while gross profit also edged down 1% to $31.6 million. Gross margin improved slightly to 53.0% from 52.8%. Excluding other products, which are mainly private-label bottled items, sales rose 3%, which the company said was the strongest growth rate in the past two years.
Within that portfolio, premium-plus sales increased 5%. Penelope Bourbon rose 13%, continuing what the company described as strong growth, while Yellowstone posted significant gains tied to a limited-edition release. Combined sales of mid-priced and value-priced brands improved slightly, with mid-priced offerings up 5%. Those figures suggest consumers are still spending on selected established labels even as broader conditions remain difficult for spirits producers.
Ingredient Solutions posted modest top-line growth but much weaker profitability. Sales rose 2% to $35.5 million from $35.0 million, driven by pricing and mix in specialty wheat proteins and starches as well as higher sales of biofuel and other byproducts. But gross profit fell 53% to $3.6 million, and gross margin dropped to 10.1% from 21.7%. The company said higher waste starch stream costs hurt profitability despite better operating reliability.
At the consolidated level, MGP said operating income fell to $17.7 million from $20.3 million a year earlier. On an adjusted basis, operating income declined 30% to $20.1 million. The quarter was also affected by a higher provision for credit loss tied to a customer bankruptcy.
The company reduced spending in several areas during the quarter. Advertising and promotion expense fell 18% to $5.7 million, which MGP said reflected timing decisions aligned with its strategic priorities and focus on its most attractive growth opportunities. Selling, general and administrative expense declined 13%, while adjusted SG&A fell 19% and represented 15% of consolidated sales.
MGP reaffirmed its guidance for fiscal 2026 despite the weaker quarter. It still expects full-year sales of $480 million to $500 million and adjusted EBITDA of $90 million to $98 million. Adjusted basic earnings per share are still projected at $1.50 to $1.80 based on about 21.4 million weighted average basic shares outstanding. Capital expenditures for the full year are expected to be about $20 million.
The company also updated its tax outlook after a recent revision to Kansas tax law led to a revaluation of deferred tax liabilities. MGP now expects its full-year effective tax rate to be about 23%.
Balance sheet figures showed some added strain compared with the end of last year. Inventory rose to $408.4 million as of June 30 from $382.7 million at the end of December, while cash stood at $17.8 million, little changed from six months earlier. Long-term debt excluding current maturities increased to $166.9 million from $49.7 million at year-end, and the company reported a net debt leverage ratio of 3.5x compared with 1.8x a year earlier.
For the first half of the year, MGP reported a net loss of $122.8 million, compared with net income of $11.4 million in the same period last year. That result included a large impairment and other charges recorded earlier in the year, according to the company’s financial statements.
MGP’s board declared a quarterly dividend of $0.12 per share of common stock, payable Aug. 28 to shareholders of record as of Aug. 14.
The company operates across branded spirits, distilling solutions and specialty ingredients, with distilleries in Indiana and Kentucky, a tequila distillery in Arandas, Mexico, and bottling operations in Missouri, Ohio and Northern Ireland. Its role as both brand owner and supplier gives its quarterly results unusual weight in the beverage market because they offer a view into consumer demand at retail as well as ordering patterns deeper in the spirits supply chain.
For drinks companies watching capacity decisions, sourcing plans and inventory strategy for whiskey and other distilled products, MGP’s latest quarter points to a market that remains uneven: branded labels can still find growth pockets, especially at higher price points or through limited releases, but contract distillation demand remains under pressure as customers continue to manage stock carefully.