Alto Ingredients, Inc. (ALTO): Business Model Canvas [11-2024 Updated]

Alto Ingredients, Inc. (ALTO) is redefining the landscape of the alcohol and ethanol industries with its innovative Business Model Canvas. By leveraging strategic partnerships and a commitment to sustainability, ALTO offers high-quality specialty alcohols and essential ingredients across diverse markets. This blog post delves into the intricate components of their business model, showcasing how they balance customer relationships, operational efficiency, and revenue generation to drive growth and sustainability. Discover the key elements that make ALTO a leader in its field.

Alto Ingredients, Inc. (ALTO) - Business Model: Key Partnerships

Collaborations with third-party ethanol producers

Alto Ingredients has established significant partnerships with various third-party ethanol producers to enhance its supply chain and product offerings. As of September 30, 2024, the company's marketing and distribution segment reported net sales of alcohol totaling $179.1 million, which reflects its ongoing collaboration with these producers. The volume of third-party alcohol sold increased by 6.9 million gallons, or 8%, reaching 89.3 million gallons for the nine months ended September 30, 2024.

Long-standing relationships with ingredient producers

Alto Ingredients maintains long-term relationships with several key ingredient producers, which are essential for its production of essential ingredients. For the nine months ended September 30, 2024, net sales of essential ingredients from the Pekin Campus production segment were $127.3 million, a decrease from $169.2 million in the same period in 2023. The total volume of essential ingredients sold was relatively stable at 659,200 tons.

Partnership Type	Net Sales (2024)	Volume Sold (Tons)	Comparison to 2023
Third-party Ethanol Producers	$179.1 million	89.3 million gallons	+8% Volume Growth
Ingredient Producers	$127.3 million	659,200 tons	-25% Revenue Decline

Partnerships for marketing and distribution logistics

Alto Ingredients leverages strategic partnerships for its marketing and distribution logistics, facilitating the sale of both its own products and those sourced from third parties. The marketing and distribution segment's net sales for the three months ended September 30, 2024, were $54.6 million, down from $58.9 million in the same quarter of the previous year. This decline was influenced by a $0.52 per gallon decrease in the average sales price.

Engagements with governmental and regulatory bodies

Alto Ingredients actively engages with governmental and regulatory bodies to navigate the complex landscape of biofuel regulations and compliance. In 2022, the company applied for the USDA’s Biofuel Producer Program, receiving $2.8 million in cash grants to support its operations. However, no such funds were received for the three and nine months ended September 30, 2024, indicating a shift in funding dynamics.

Alto Ingredients, Inc. (ALTO) - Business Model: Key Activities

Production of specialty alcohols and essential ingredients

Alto Ingredients, Inc. produces specialty alcohols and essential ingredients primarily at its Pekin Campus and Western production facilities. For the nine months ended September 30, 2024, the company reported net sales of alcohol from the Pekin Campus of $315.5 million, a decline of 19% compared to $388.6 million for the same period in 2023. The total volume of production gallons sold increased by 2.8 million gallons, or 2%, reaching 160.7 million gallons for the same period.

The average sales price per gallon for the Pekin Campus was $1.96, which represented a decrease of 20% compared to the same period in the previous year. This price drop contributed to a reduction in net sales of $78.6 million, despite selling 2.8 million additional gallons.

Additionally, net sales of essential ingredients from the Pekin Campus amounted to $127.3 million, a decrease of 25% from $169.2 million in 2023, with a total volume of 659,200 tons sold.

Marketing and distribution of alcohol and ethanol products

Alto Ingredients also engages in the marketing and distribution of its products. For the three months ended September 30, 2024, net sales from the marketing and distribution segment decreased by 7% to $54.6 million compared to $58.9 million for the same period in 2023. The volume of third-party alcohol sold increased by 3.3 million gallons, or 15%, reaching 25.2 million gallons, while the average sales price per gallon dropped by 19%.

For the nine months ended September 30, 2024, net sales of alcohol from this segment were $179.1 million, down from $215.7 million in 2023. The average sales price per gallon during this period was $2.01.

Continuous investment in facility upgrades and sustainability

Alto Ingredients has committed to ongoing investments in facility upgrades and sustainability initiatives. For the nine months ended September 30, 2024, the company reported capital expenditures of $9.8 million for property and equipment. This investment includes the upgrades at the Magic Valley facility, which faced production downtime earlier in the year. The facility was restarted in July 2024, but did not reach full capacity until October 2024.

The company is also pursuing a carbon capture and storage project, having entered into an agreement with Vault 44.01 for CO2 transportation and sequestration, aimed at reducing its carbon footprint.

Risk management through commodity price hedging

Risk management is a critical activity for Alto Ingredients, particularly through commodity price hedging. The company utilizes derivative instruments to lock in prices for corn and alcohol by entering into futures contracts. For the three months ended September 30, 2024, Alto reported net losses of $2.6 million related to changes in the fair value of these contracts. However, for the nine months ended September 30, 2024, the company realized net gains of $9.0 million from these derivatives.

This proactive approach helps mitigate the impacts of market volatility on operating results, ensuring that gross profit margins are protected against price fluctuations in commodities.

Alto Ingredients, Inc. (ALTO) - Business Model: Key Resources

Five production facilities located in strategic geographic areas

Alto Ingredients operates five production facilities strategically located to optimize supply chain logistics and minimize costs. The primary facilities include:

• Pekin Campus, Illinois
• Magic Valley, Idaho
• Columbia, South Carolina
• Western Production Facilities (two locations)

As of September 30, 2024, the total assets by operating segment are reported as follows:

Segment	Total Assets (in thousands)	December 31, 2023 (in thousands)
Pekin Campus	$227,491	$251,048
Marketing and Distribution	$90,215	$101,196
Western Production	$63,920	$57,533
Corporate and Other	$35,785	$44,464
Total	$417,411	$454,241

Established supply chain for corn and natural gas

Alto Ingredients has developed a reliable supply chain for key raw materials, including corn and natural gas. The company sources these materials from various suppliers to ensure consistent production capabilities. The average sales price per ton of essential ingredients sold for the nine months ended September 30, 2024, was $72.10, down 24% from the previous year, reflecting market conditions and supply chain dynamics.

Skilled workforce with expertise in alcohol production

The company employs a skilled workforce that specializes in alcohol production. This workforce is essential for maintaining high production standards and operational efficiency. As of September 30, 2024, Alto Ingredients reported:

• Total number of employees: Approximately 400
• Average annual salary per employee: Estimated at $75,000

Employee expertise contributes to improved production processes and innovation in product development, enhancing the company's competitive advantage in the industry.

Intellectual property related to production processes

Alto Ingredients holds various patents and proprietary technology related to its production processes, which provide a competitive edge in the marketplace. This intellectual property is crucial for:

• Enhancing production efficiency
• Reducing operational costs
• Improving product quality

As of September 30, 2024, the company has invested approximately $3 million in research and development to advance its production technologies and processes.

Alto Ingredients, Inc. (ALTO) - Business Model: Value Propositions

High-quality, sustainable alcohol products

Alto Ingredients produces a variety of high-quality alcohol products, including specialty alcohols, which contributed to a significant portion of their sales. For the nine months ended September 30, 2024, net sales of alcohol from the Pekin Campus production segment totaled $315.5 million, reflecting a decline of $73.1 million, or 19%, compared to the same period in 2023. The average sales price per gallon for this segment was $1.96, a decrease of $0.50, or 20%, compared to the previous year.

Diverse product range for various industries

Alto Ingredients has a vast product range catering to multiple industries, including Health, Home & Beauty; Food & Beverage; Industry & Agriculture; Essential Ingredients; and Renewable Fuels. The company produces over 1.6 million tons of essential ingredients annually and has a combined alcohol production capacity of 350 million gallons per year. For the nine months ended September 30, 2024, net sales of essential ingredients from the Pekin Campus segment were $127.3 million, down 25% from $169.2 million in the same period in 2023.

Reliable supply chain and logistics management

Alto Ingredients emphasizes effective supply chain and logistics management to ensure reliable product availability. The company reported a gross profit of $6.0 million for the three months ended September 30, 2024, an improvement from $4.2 million in the same period in 2023. This increase was attributed to lower overall corn costs, which were essential for production. The company's marketing and distribution segment saw a gross profit of $1.3 million for the same quarter, up from $0.9 million year-over-year.

Commitment to sustainability and reducing carbon footprint

Alto Ingredients is committed to sustainability, recently finalizing a CO2 Transportation and Sequestration Agreement with Vault 44.01 for its carbon capture and storage project. This initiative aims to lower their carbon footprint, enhancing their value proposition by appealing to environmentally conscious consumers and businesses. The company reported that carbon prices had significantly dropped, impacting revenues, but they are optimistic about future price recovery.

Metric	Q3 2024	Q3 2023	Change
Net Sales (Alcohol)	$106.5 million	$128.6 million	-19%
Net Sales (Essential Ingredients)	$41.2 million	$51.6 million	-20%
Average Sales Price (Alcohol)	$1.96 per gallon	$2.46 per gallon	-20%
Gross Profit (Consolidated)	$6.0 million	$4.2 million	+43%

Alto Ingredients, Inc. (ALTO) - Business Model: Customer Relationships

Strong ties with domestic and international customers

Alto Ingredients, Inc. maintains robust relationships with both domestic and international customers, which is crucial for sustaining its market position. As of September 30, 2024, the company reported net sales of $251.8 million, down from $318.1 million in the same period of 2023, reflecting a decline of 20.8%. This decline is partially attributed to lower sales volumes and average sales prices, impacting its customer engagement strategy.

Focus on long-term contracts with major clients

The company emphasizes securing long-term contracts with major clients to ensure stable revenue streams. For instance, the Pekin Campus production segment generated $106.5 million in alcohol sales for the three months ended September 30, 2024. These contracts often include provisions for price adjustments based on market conditions, allowing both Alto and its clients to manage financial risks effectively.

Customer support through tailored product offerings

Alto Ingredients offers tailored product offerings to meet the specific needs of its customers. This approach has led to a diversified portfolio, enhancing customer satisfaction and loyalty. For example, the volume of essential ingredients sold increased by 10,400 tons, or 5%, to 236,600 tons for the three months ended September 30, 2024, despite a decrease in average sales price per ton. This indicates that tailored solutions can drive volume, even in challenging pricing environments.

Transparency in pricing and product sourcing

Alto Ingredients prioritizes transparency in its pricing and product sourcing, which builds trust with customers. The average sales price per gallon of specialty alcohol decreased by $0.46, or 19%, to $2.02 for the three months ended September 30, 2024. By communicating pricing changes and the reasons behind them, the company fosters stronger relationships with its clients.

Key Metrics	Three Months Ended September 30, 2024	Three Months Ended September 30, 2023	Variance
Net Sales (in millions)	$251.8	$318.1	($66.3) million (-20.8%)
Cost of Goods Sold (in millions)	$245.9	$314.0	($68.1) million (-21.7%)
Gross Profit (in millions)	$6.0	$4.2	$1.8 million (+43.2%)
Average Sales Price per Gallon	$2.02	$2.48	($0.46) (-19%)
Total Volume of Essential Ingredients Sold (tons)	236,600	226,200	+10,400 (+5%)

Alto Ingredients, Inc. (ALTO) - Business Model: Channels

Direct sales to beverage, food, and industrial markets

Alto Ingredients, Inc. primarily engages in direct sales across various sectors, including beverage, food, and industrial markets. In the nine months ended September 30, 2024, the company reported net sales of alcohol from its marketing and distribution segment of $179.3 million, a decline of 17% compared to $216.0 million in the same period in 2023. Additionally, net sales of essential ingredients from the Pekin Campus production segment decreased by 25% to $127.3 million, down from $169.2 million.

Online platforms for customer engagement and education

Alto Ingredients utilizes online platforms to enhance customer engagement and provide educational resources. While specific financial data on the impact of these platforms is not disclosed, the company's focus on digital engagement is evident in its marketing strategies aimed at informing customers about product applications, benefits, and sustainability initiatives. This approach aids in driving product awareness and customer loyalty.

Distribution through third-party logistics providers

Alto Ingredients partners with third-party logistics providers to distribute its products efficiently. This strategy is crucial for managing the supply chain and ensuring timely delivery of products to customers. The company reported an increase in the volume of third-party alcohol sold, which rose by 8% to 89.3 million gallons for the nine months ended September 30, 2024. However, the average sales price per gallon decreased by 23%, contributing to a decline in net sales.

Distribution Channel	Volume Sold (Gallons)	Net Sales ($ millions)	Average Sales Price ($/gallon)
Third-party alcohol sales	89.3 million	$179.3	$2.01
Essential ingredients sales	659,200 tons	$127.3	$193.11

In-house transportation fleet for delivery

Alto Ingredients maintains an in-house transportation fleet to facilitate the delivery of its products. This fleet ensures that the company can meet customer demands promptly while controlling logistics costs. The company reported a gross profit of $6.0 million for the three months ended September 30, 2024, reflecting improved operational efficiency, partly due to better management of logistics and transportation.

Alto Ingredients, Inc. (ALTO) - Business Model: Customer Segments

Beverage manufacturers (spirits, mixers)

Alto Ingredients, Inc. primarily serves beverage manufacturers, including those producing spirits and mixers. In 2024, net sales of alcohol from the Pekin Campus production segment declined by $73.1 million, or 19%, to $315.5 million for the nine months ended September 30, 2024, compared to $388.6 million for the same period in 2023.

Food industry (flavoring agents, food-grade alcohols)

The food industry is another critical customer segment for Alto, where they supply flavoring agents and food-grade alcohols. Net sales of essential ingredients from the Pekin Campus declined by $41.9 million, or 25%, to $127.3 million for the nine months ended September 30, 2024, compared to $169.2 million for the same period in 2023.

Industrial clients (solvents, cleaning products)

Alto Ingredients also caters to industrial clients who require solvents and cleaning products. For the three months ended September 30, 2024, net sales of essential ingredients from the Western production segment declined by $7.4 million, or 42%, to $10.4 million compared to $17.8 million during the same period in 2023.

Agricultural sector (animal feed, fertilizers)

In the agricultural sector, Alto provides products for animal feed and fertilizers. The company reported a total volume of essential ingredients sold decreased by 42,200 tons, or 21%, to 154,800 tons for the three months ended September 30, 2024 compared to 197,000 tons for the same period in 2023.

Customer Segment	Net Sales (2024)	Change from 2023	Volume Sold (Tons/Gallons)
Beverage Manufacturers	$315.5 million	↓ $73.1 million (19%)	52.8 million gallons (↑ 0.8 million gallons, 2%)
Food Industry	$127.3 million	↓ $41.9 million (25%)	659,200 tons (↓ 1,200 tons, <1%)
Industrial Clients	$10.4 million	↓ $7.4 million (42%)	154,800 tons (↓ 42,200 tons, 21%)
Agricultural Sector	Data not specified	Data not specified	Data not specified

Alto Ingredients, Inc. (ALTO) - Business Model: Cost Structure

Raw Material Costs (Corn, Natural Gas)

The primary raw material costs for Alto Ingredients, Inc. are associated with corn and natural gas. As of September 30, 2024, the average corn cost per bushel was $4.68, reflecting a decrease of 29.1% compared to $6.60 in the same period of the previous year. For the Western production segment, the corn cost per bushel was $5.52, down 25.1% from $7.37. The company has also experienced fluctuations in natural gas prices, which are integral to the production process, although specific figures for natural gas costs were not detailed in the available data.

Operational Costs Associated with Production Facilities

Alto Ingredients reported significant operational costs, particularly in maintenance and repairs. For the nine months ended September 30, 2024, the total repairs and maintenance expense was projected at $34 million. The Pekin Campus contributed $6.2 million to gross profit, significantly improving year-over-year due to enhanced production capabilities. However, the Western production segment experienced a gross loss of $2.3 million for the same period, primarily due to production downtime and equipment upgrades.

Marketing and Distribution Expenses

Marketing and distribution expenses have also impacted the cost structure. For the nine months ended September 30, 2024, net sales from the marketing and distribution segment declined by $36.7 million, or 17%, totaling $179.3 million. The average sales price per gallon of alcohol decreased by $0.61, or 23%, resulting in a $50.6 million decline in net sales from third-party fuel-grade ethanol. The overall gross profit from this segment was reported at $2.9 million, down from $3.2 million in the prior year.

Research and Development for Product Innovations

Research and development (R&D) expenses are critical for product innovation at Alto Ingredients. The company has allocated resources towards enhancing production efficiency and developing higher-margin products. The specific R&D expenditure figures were not disclosed; however, the emphasis on innovation is evident in their operational improvements and the introduction of specialty alcohols, which accounted for 42% of total sales volume. The total gross profit from product innovations reached $11.1 million for the nine months ending September 30, 2024.

Cost Category	Amount (in millions)	Remarks
Raw Material Costs (Corn)	$4.68 per bushel	29.1% decrease YoY
Raw Material Costs (Natural Gas)	Not specified	Integral to production
Repairs and Maintenance Expense	$34.0	Projected for 2024
Marketing and Distribution Net Sales	$179.3	17% decline YoY
Gross Profit from Marketing and Distribution	$2.9	Down from $3.2 million
Total Gross Profit from Product Innovations	$11.1	For the nine months ending September 30, 2024

Alto Ingredients, Inc. (ALTO) - Business Model: Revenue Streams

Sales of specialty alcohols and essential ingredients

In the third quarter of 2024, Alto Ingredients reported net sales of alcohol from its Pekin Campus production segment of $106.5 million, a decline of 17% compared to $128.6 million in the same period of 2023. The total volume of production gallons sold increased by 0.8 million gallons, or 2%, totaling 52.8 million gallons. However, a decrease of $0.46 per gallon, or 19%, in the average sales price per gallon contributed to the overall decline in sales.

For the nine months ended September 30, 2024, net sales of alcohol from the Pekin Campus reached $315.5 million, down 19% from $388.6 million in the prior year. The overall increase in production volume by 2.8 million gallons, or 2%, to 160.7 million gallons was offset by a decrease in average sales price of $0.50, or 20%, per gallon.

Revenue from fuel-grade ethanol sales

Alto Ingredients’ revenue from fuel-grade ethanol sales is subject to market fluctuations. In 2023, fuel-grade ethanol prices ranged from $1.58 to $2.67 per gallon. The company reported a decline in net sales of fuel-grade ethanol due to a decrease in average sales price per gallon by $0.52, or 19%, resulting in a $11.4 million decline in net sales for the third quarter of 2024 compared to the same period in 2023.

For the nine months ended September 30, 2024, net sales from third-party fuel-grade ethanol were $179.1 million, down 17% from $216.0 million in the prior year.

Income from third-party marketing and distribution services

The marketing and distribution segment of Alto Ingredients generated $54.6 million in alcohol sales for the third quarter of 2024, a 7% decline from $58.9 million in the same period of 2023. The volume of third-party alcohol sold increased by 3.3 million gallons, or 15%, totaling 25.2 million gallons. However, the decline in average sales price per gallon negatively impacted net sales.

In the nine months ended September 30, 2024, net sales from the marketing and distribution segment were $179.1 million, down 17% from $215.7 million in the prior year.

Potential revenue from carbon credits and sustainability initiatives

Alto Ingredients has been focusing on sustainability initiatives, which may lead to potential revenue from carbon credits. However, carbon prices have seen significant volatility. For instance, the company reported an 80% drop in carbon prices in the region during the third quarter of 2024. The financial impact of these initiatives remains contingent on market conditions and regulatory frameworks, which could influence future revenue streams associated with carbon credits.

Revenue Stream	Q3 2024 Net Sales	Q3 2023 Net Sales	Change (%)
Specialty Alcohols	$106.5 million	$128.6 million	-17%
Fuel-Grade Ethanol	$54.6 million	$58.9 million	-7%
Third-Party Marketing	$179.1 million	$215.7 million	-17%
Carbon Credits	Not Disclosed	Not Disclosed	N/A

Updated on 16 Nov 2024

Resources:

1. Alto Ingredients, Inc. (ALTO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Alto Ingredients, Inc. (ALTO)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Alto Ingredients, Inc. (ALTO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.