Third-party spirits producer MGP Ingredients saw net sales grow 9% to US$395.5 million in 2020, boosted by older whiskeys.
For its 2020 full year, the firm reported a gross profit increase of 29.1% to US$98.8m. The firm’s net sales and profits were bolstered by its distillery products and ingredients solution segments.
For the fourth quarter of 2020, MGP’s sales grew 9.1% to US$100.9m, while gross profit rose 47.2% to a record US$31.7m.
David Colo, president and CEO of MGP Ingredients, said:“Each quarter this year posted a record gross profit result versus the respective prior years’ quarters, and the fourth quarter was no exception.
“Aged whiskey sales experienced another record quarter, which drove an 11.4% increase in premium beverage alcohol sales for the year. Specialty ingredients sales posted strong double-digit growth for the quarter and grew 19.2% for the year.”
The company’s distillery products segment grew sales 6.8% to US$317.5m last year, mainly due to older whiskey sales. The ingredient solutions business reported a full-year sales increase of 19.2% to US$78.1m.
Colo added: “The continued robust consumer demand for premium beverage alcohol was highlighted by the strong demand for our American whiskey products.
“Our record gross profit results confirm the long-term value of our ageing whiskey inventory, supported by our ability to cultivate solid partnerships with existing customers as well as attract new aged whiskey and new distillate customers.”
American whiskey positioning
In January this year, MGP agreed to acquire American whiskey maker Luxco in a deal valued at US$475m. The deal is expected to close during the first half of 2021.
Colo said: “This year marked an inflection point of implementing our long-term strategic plan, which has delivered substantial improvements to our financial results and built a strong foundation for future growth.
“A critical part of that foundation was positioning MGP to benefit from the robust growth of the American whiskey category. Two key components of this effort have been our inventory of ageing whiskey and accelerating our branded initiative.
“Our inventory of ageing whiskey declined US$3 million from the third quarter to US$105.4 million, at cost, at the end of 2020, reflecting strong sales of aged whiskey and reduced put-away of whiskey for ageing. We believe our library of various mash bills and vintages will continue to contribute significant levels of profit and cash flow for the company.”
During Q4, the firm released Remus Repeal Reserve Series IV Straight Bourbon Whiskey and debuted single barrel programmes for the George Remus and Rossville Union brands.
He added: “While still small, total annual sales for our brands grew, as expected, by solid double-digit growth rates in 2020. We believe our brands are well positioned for additional growth in 2021 as we integrate with Luxco’s national distribution capabilities.”
Furthermore, MGP said it was hit by a cyber attack in May 2020 that temporarily disrupted production at its Atchison site in Kansas, US. While no financial information was affected, the attack is thought to have impacted gross profit by US$1.7m in the second quarter, with US$633,000 of the sum recovered through insurance.
In addition, the Atchison facility experienced a fire during Q4, which damaged feed drying equipment and caused a temporary loss of production time. The incident impacted gross profit during the quarter by an estimated US$4.5m.
During the fourth quarter, the company recorded a US$3.8m partial settlement from its insurance firm, and is working to replace its drying system during 2021.
Colo added that the firm is unable to provide guidance for 2021 due to the pandemic.
He said: “While we remain very confident about the long-term potential of our business, we anticipate continued uncertainty related to the pandemic throughout the year.
“As a result, it continues to be difficult to predict with any level of precision the pandemic’s cumulative impact on our future financial results.
“For these reasons, we are not providing 2021 annual guidance at this time and will reassess this position based on the visibility of the macroeconomic recovery.”