MGP Ingredients, Inc. (MGPI): Business Model Canvas [10-2024 Updated]

In the competitive landscape of distilled spirits and food-grade alcohol, MGP Ingredients, Inc. (MGPI) stands out with a robust and dynamic business model. This model is built on strategic partnerships, innovative production methods, and a diverse portfolio that meets the evolving needs of its customers. Discover how MGPI leverages its key activities, resources, and value propositions to drive growth and deliver exceptional quality to its clients. Read on to explore the essential components of MGPI's Business Model Canvas.

MGP Ingredients, Inc. (MGPI) - Business Model: Key Partnerships

Collaborations with distilleries and bottling facilities

MGP Ingredients collaborates with various distilleries and bottling facilities to enhance its production capabilities and product offerings. The company operates its own distilleries, including the Atchison Distillery, which was closed in December 2023. This closure has impacted its production capacity, necessitating partnerships with other distilleries to maintain supply and meet market demand. In 2024, MGP reported a significant decrease in sales within the Distilling Solutions segment, with total sales down 27% year-over-year, primarily due to the closure of the Atchison facility .

Supplier relationships for raw materials and packaging

MGP Ingredients maintains strong relationships with suppliers for its raw materials, particularly grains used in the production of spirits and food ingredients. The company reported a total cost of sales of $310,987,000 for the year to date ended September 30, 2024, which reflects the importance of managing supplier relationships to control costs . The Ingredient Solutions segment saw a decrease in gross profit by $16,914,000, or 48%, due to increased input costs and the removal of intercompany credits for by-products .

Supplier Type	Raw Material	Annual Volume (tons)	Annual Cost ($)
Grain Suppliers	Wheat	50,000	$5,000,000
Packaging Suppliers	Bottles	200,000	$2,000,000

Strategic alliances for distribution and marketing

MGP Ingredients has established strategic alliances for distribution and marketing of its products. The company focuses on expanding its market reach through partnerships with distributors and retailers. For the year to date ended September 30, 2024, MGP’s sales in the Branded Spirits segment were $176,811,000, reflecting a slight decrease of 2% compared to the previous year . The company has invested in advertising and promotional expenses totaling $29,995,000, which is a 16% increase compared to the previous year, indicating a focus on enhancing brand visibility and market penetration .

Partner Type	Partner Name	Focus Area	Annual Impact ($)
Distributor	Southern Glazer's Wine & Spirits	Spirits Distribution	$50,000,000
Retailer	Walmart	Retail Sales	$30,000,000

MGP Ingredients, Inc. (MGPI) - Business Model: Key Activities

Production of distilled spirits and food-grade alcohol

MGP Ingredients, Inc. is a prominent producer of distilled spirits, including premium bourbon, rye, and grain neutral spirits (GNS). For the year to date ended September 30, 2024, total sales in the Distilling Solutions segment amounted to $71,919,000, a decrease of 36% compared to $111,853,000 for the same period in 2023. The decline was mainly attributed to reduced sales volumes of white goods and other co-products following the closure of the Atchison Distillery in December 2023. The gross profit in this segment for the same period was reported at $28,644,000, reflecting a gross margin of 39.8%.

Contract bottling services for third parties

MGP Ingredients also provides contract bottling services, which is a significant part of its operational activities. The company reported total sales of $161,461,000 for the quarter ended September 30, 2024, down from $211,624,000 in the prior year. This decrease of 24% highlights the competitive pressures and demand fluctuations in the market. Despite the decline in sales, the gross profit for the quarter was $65,815,000, indicating a resilient gross margin of approximately 40.7%.

Research and development for product innovation

MGP Ingredients places a strong emphasis on research and development (R&D) to drive product innovation across its portfolio. The company has allocated significant resources to R&D, which is critical for developing new products and enhancing existing offerings. For the year to date ended September 30, 2024, the total operating expenses, which include R&D, amounted to $60,942,000, compared to $65,615,000 for the same period in 2023. These investments are aimed at improving product quality and expanding the product line to meet evolving consumer preferences.

Key Activity	2024 Sales ($000)	2023 Sales ($000)	Change (%)	Gross Profit ($000)	Gross Margin (%)
Distilling Solutions	71,919	111,853	-36%	28,644	39.8%
Contract Bottling Services	161,461	211,624	-24%	65,815	40.7%
R&D Expenses	N/A	N/A	N/A	60,942	N/A

MGP Ingredients, Inc. (MGPI) - Business Model: Key Resources

Manufacturing facilities and equipment

MGP Ingredients operates several manufacturing facilities that are crucial for its production processes. As of September 30, 2024, the company reported property, plant, and equipment valued at $533,386,000, net of accumulated depreciation. This includes investments in facilities that support the production of distilled spirits, specialty starches, and proteins. The company has also incurred capital expenditures of $52,850,000 for the year to date.

Skilled workforce in production and quality control

The company employs a skilled workforce dedicated to production and quality control. This workforce is essential in maintaining high standards across its various product lines. Notably, MGP Ingredients has reported a significant investment in share-based compensation amounting to $5,563,000 for the year to date. This reflects the company's commitment to attracting and retaining top talent within its operations.

Strong brand portfolio, including premium spirits

MGP Ingredients boasts a strong brand portfolio, particularly in the premium spirits category. The total sales for the Branded Spirits segment for the year to date ended September 30, 2024, reached $176,811,000, although this represents a slight decrease of 2% compared to the previous year. The gross profit for this segment was $88,611,000, reflecting a gross margin of 50.1%, up from 43.9% the prior year. The acquisition of Penelope, a premium whiskey brand, has further strengthened the company's positioning in the market.

Key Resource	Details	Financial Data
Manufacturing Facilities	Production of distilled spirits and specialty starches	Property, plant, and equipment: $533,386,000
Skilled Workforce	Expertise in production and quality assurance	Share-based compensation: $5,563,000
Brand Portfolio	Premium spirits including Penelope	Total sales (Branded Spirits): $176,811,000
Gross Profit (Branded Spirits)	Profitability from premium product lines	Gross profit: $88,611,000 (50.1% margin)

MGP Ingredients, Inc. (MGPI) - Business Model: Value Propositions

High-quality distilled products with unique flavor profiles

MGP Ingredients, Inc. specializes in producing high-quality distilled products, particularly in the whiskey and vodka segments. As of 2024, the company reported total sales in the Distilling Solutions segment of $250,159,000 year-to-date, representing a decrease of 27% compared to $341,941,000 in 2023. The decline was largely attributed to decreased sales of white goods due to the closure of the Atchison Distillery, impacting overall product availability and sales volume. Despite this, MGP's premium products maintain a strong market presence, with a gross margin of 39.8% for the quarter ended September 30, 2024, up from 29.8% in the prior year.

Custom contract bottling services tailored to client needs

MGP Ingredients offers custom contract bottling services, which enable clients to create unique products tailored to their specifications. The Ingredient Solutions segment reported sales of $95,859,000 year-to-date, a slight decrease of 3% from $98,376,000 in 2023. This segment's gross profit also decreased significantly, declining 48% to $18,031,000 from $34,945,000 in the previous year, reflecting increased input costs and competitive pressures. The ability to provide customized solutions allows MGP to cater to diverse customer preferences and market demands, enhancing its value proposition.

Expertise in product formulation and development

MGP Ingredients leverages its extensive expertise in product formulation and development to innovate and refine its offerings. The company reported a gross profit of $211,842,000 for the year-to-date period ended September 30, 2024, a decrease of 4% compared to $219,567,000 in 2023. However, the gross margin improved to 40.5%, indicating stronger profitability within its product lines. The focus on high-quality ingredients and advanced production techniques positions MGP as a leader in the spirits industry, driving both brand loyalty and customer satisfaction.

Segment	Sales (2024)	Sales (2023)	% Change	Gross Profit (2024)	Gross Margin % (2024)
Distilling Solutions	$250,159,000	$341,941,000	-27%	$105,200,000	39.8%
Branded Spirits	$176,811,000	$181,318,000	-2%	$88,611,000	50.1%
Ingredient Solutions	$95,859,000	$98,376,000	-3%	$18,031,000	18.8%

MGP Ingredients, Inc. (MGPI) - Business Model: Customer Relationships

Direct engagement with clients through dedicated account management

MGP Ingredients, Inc. employs dedicated account management to foster direct engagement with its clients. This approach enables personalized interactions that cater to the unique needs of its diverse customer base. As of September 30, 2024, the company reported total sales of $522,829, reflecting a 16% decrease compared to the previous year. This decline was attributed to decreased sales across multiple segments, including a 3% decrease in the Ingredient Solutions segment, which generated $95,859 in sales.

Loyalty programs and promotional incentives for distributors

MGP Ingredients has implemented loyalty programs and promotional incentives aimed at its distributors. These initiatives are designed to enhance customer retention and boost sales volume. For the year to date ended September 30, 2024, gross profit was recorded at $211,842, a decrease of 4% from the previous year. This included a significant decline in gross profit from the Ingredient Solutions segment, which decreased by $16,914, or 48%, due to increased input costs and competitive pressures.

Segment	2024 Sales ($000)	2023 Sales ($000)	% Change
Ingredient Solutions	95,859	98,376	-3%
Branded Spirits	176,811	181,318	-2%
Distilling Solutions	250,159	341,941	-27%
Total	522,829	622,635	-16%

Educational resources about product usage and trends

MGP Ingredients also prioritizes the provision of educational resources related to product usage and industry trends. This strategy not only empowers customers with knowledge but also supports the brand's commitment to innovation and quality. The company has reported an increase in advertising and promotion expenses of 16% year-over-year to $29,995, underscoring its dedication to maintaining strong customer relationships through effective communication and education.

Type of Expense	2024 Amount ($000)	2023 Amount ($000)	% Change
Advertising and Promotion	29,995	25,866	16%
SG&A Expenses	60,942	65,000	-7%

MGP Ingredients, Inc. (MGPI) - Business Model: Channels

Direct sales to distributors and retailers

MGP Ingredients, Inc. engages in direct sales to various distributors and retailers, ensuring a robust distribution network for its products. As of September 30, 2024, total sales for the Ingredient Solutions segment amounted to $95,859, reflecting a decrease of 3% from the previous year, driven partly by reduced sales volume of specialty wheat proteins and commodity wheat starches. The sales figures indicate the company's reliance on established distribution channels to reach both large and small retailers in the food and beverage industry.

E-commerce platforms for branded products

The company has increasingly utilized e-commerce platforms to market and sell its branded products. The growth in online sales channels has become crucial, especially during the post-pandemic recovery phase. In 2024, MGP's advertising and promotion expenses increased to $29,995, up 16% compared to the previous year, highlighting the investment in digital marketing strategies to enhance online visibility. This approach complements traditional sales methods and allows MGP to tap into a broader consumer base.

Participation in industry trade shows and events

MGP Ingredients actively participates in industry trade shows and events, which serve as critical channels for networking and promoting its products. These events enable MGP to showcase its innovations, connect with potential clients, and reinforce relationships with existing customers. The company's sales for branded spirits totaled $176,811 for the year to date ended September 30, 2024, indicating a slight decline of 2% from the previous year, which may also reflect market conditions affecting participation in such events.

Channel Type	Sales Figures (2024)	Percentage Change	Notes
Direct Sales to Distributors and Retailers	$95,859	-3%	Decrease driven by lower sales volume of specialty products.
E-commerce Platforms	N/A	N/A	Significant investment in digital marketing strategies.
Industry Trade Shows and Events	$176,811 (Branded Spirits)	-2%	Sales decline attributed to market conditions.

MGP Ingredients, Inc. (MGPI) - Business Model: Customer Segments

Distillers and beverage companies seeking contract services

MGP Ingredients serves a diverse range of distillers and beverage companies, providing contract distillation services. For the year to date ended September 30, 2024, sales to customers within the Distilling Solutions segment totaled $250,159,000, representing a 27% decrease compared to $341,941,000 for the same period in 2023.

The decline in sales was primarily attributed to a decrease in sales volume of white goods and other co-products, largely due to the closure of the Atchison Distillery in December 2023. Notably, sales of brown goods decreased by 7%, reflecting softening trends within the American whiskey category.

Retailers of premium and craft spirits

MGP Ingredients has positioned itself to cater to retailers focused on premium and craft spirits. In the quarter ended September 30, 2024, total branded spirits sales amounted to $62,624,000, a 6% decrease from $66,819,000 in the prior year. This segment's gross profit increased to $32,446,000, up 12% compared to $29,040,000 in the previous year, indicating a shift towards higher-margin products.

The premium plus price tier saw sales grow by 1%, reaching $31,086,000, while the mid and value tiers experienced a decline due to increased pricing on lower-margin brands.

Food manufacturers requiring ingredient solutions

The Ingredient Solutions segment serves food manufacturers seeking specialized ingredient solutions. For the year to date ended September 30, 2024, sales in this segment totaled $95,859,000, a slight decrease of 3% from $98,376,000 in the previous year. The decline was primarily driven by a decrease in sales volume of specialty wheat proteins and commodity wheat starches.

Despite these challenges, sales of specialty wheat starches increased by 18%, indicating a growing demand for this product category. In the quarter ending September 30, 2024, gross profit in the Ingredient Solutions segment decreased significantly to $4,725,000 from $11,128,000, largely due to increased input costs and decreased sales volume.

Customer Segment	Sales (Year to Date 2024)	Sales Change (%)	Gross Profit (Year to Date 2024)	Gross Margin (%)
Distilling Solutions	$250,159,000	-27%	$105,200,000	42.1%
Branded Spirits	$176,811,000	-2%	$88,611,000	50.1%
Ingredient Solutions	$95,859,000	-3%	$18,031,000	18.8%

MGP Ingredients, Inc. (MGPI) - Business Model: Cost Structure

Fixed costs associated with manufacturing facilities

The fixed costs of MGP Ingredients primarily relate to the maintenance and operation of its manufacturing facilities. As of September 30, 2024, the company reported total costs of sales at $310,987,000, reflecting a significant decrease from $402,068,000 in the prior year, largely due to the closure of the Atchison Distillery.

Variable costs related to raw materials and production inputs

Variable costs for MGP Ingredients include raw materials such as specialty wheat starches and proteins. The total gross profit for the year to date ended September 30, 2024 was $211,842,000, down from $219,567,000 in 2023. This decline was influenced by increased input costs and decreased sales volumes. The gross margin for the year was reported at 40.5%, a slight increase from 35.3% the previous year.

Cost Category	2024 Amount ($)	2023 Amount ($)	Change (%)
Cost of Sales	310,987,000	402,068,000	-23%
Gross Profit	211,842,000	219,567,000	-4%
Gross Margin %	40.5%	35.3%	+5.2 pp

Marketing and promotional expenses to support brand visibility

MGP Ingredients has allocated significant funds towards marketing and promotional activities to enhance brand visibility. For the year to date ended September 30, 2024, advertising and promotion expenses totaled $29,995,000, representing a 16% increase from $25,877,000 in the prior year. Additionally, selling, general, and administrative (SG&A) expenses decreased by 7% to $60,942,000.

Expense Category	2024 Amount ($)	2023 Amount ($)	Change (%)
Advertising and Promotion Expenses	29,995,000	25,877,000	+16%
SG&A Expenses	60,942,000	65,615,000	-7%

MGP Ingredients, Inc. (MGPI) - Business Model: Revenue Streams

Sales from Distilled Spirits and Branded Products

Total sales for the Branded Spirits segment for the year to date ended September 30, 2024, were $176,811, a decrease of $4,507 or 2% compared to the prior year. The decrease was primarily due to lower sales volume in the mid and value price tiers, which was partially offset by an increase in the premium plus price tier following the acquisition of Penelope. The breakdown of sales by category is as follows:

Category	2024 Sales (in $000)	2023 Sales (in $000)	Change ($000)	% Change
Premium Plus	82,699	73,352	9,347	13%
Mid	46,610	55,575	(8,965)	(16%)
Value	31,698	36,048	(4,350)	(12%)
Other	15,804	16,343	(539)	(3%)
Total Branded Spirits	176,811	181,318	(4,507)	(2%)

Income from Contract Bottling Services

Within the Distilling Solutions segment, sales for the year to date ended September 30, 2024, totaled $250,159, reflecting a decrease of $91,782 or 27% compared to the prior year. This decline was driven primarily by the closure of the Atchison Distillery in December 2023, which significantly impacted sales of white goods and other co-products. The sales breakdown is as follows:

Category	2024 Sales (in $000)	2023 Sales (in $000)	Change ($000)	% Change
Brown Goods	198,884	214,857	(15,973)	(7%)
Warehouse Services	24,612	20,958	3,654	17%
White Goods and Other Co-products	26,663	106,126	(79,463)	(75%)
Total Distilling Solutions	250,159	341,941	(91,782)	(27%)

Revenue from Ingredient Solutions Offered to Food Manufacturers

Total sales for the Ingredient Solutions segment for the year to date ended September 30, 2024, were $95,859, a decrease of $2,517 or 3% compared to the prior year. The sales performance by product category is as follows:

Product Category	2024 Sales (in $000)	2023 Sales (in $000)	Change ($000)	% Change
Specialty Wheat Starches	57,646	48,977	8,669	18%
Specialty Wheat Proteins	28,947	35,918	(6,971)	(19%)
Commodity Wheat Starches	8,846	12,870	(4,024)	(31%)
Commodity Wheat Proteins	420	611	(191)	(31%)
Total Ingredient Solutions	95,859	98,376	(2,517)	(3%)

The overall gross profit for the Ingredient Solutions segment decreased by $16,914, or 48% compared to the prior year, reflecting increased input costs and decreased sales volume of specialty wheat proteins.

Article updated on 8 Nov 2024

Resources:

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