Last year, we reported the news that MGP, one of the biggest distilleries in the country, would be scaling back its whiskey production this year. Well, it turns out that was probably a good move because this week the company reported a drop in sales at the end of Q2 by 24 percent, which is more bad news for the American whiskey industry.
For anyone that’s been following the headlines, this shouldn’t come as a major surprise. MGP is a massive distillery in Indiana that supplies a lot of whiskey (a considerable amount of rye, but also bourbon) to brands that don’t have their own distilleries (or didn’t for a long time), like Templeton, Bulleit, WhistlePig, Pinhook, and Redemption—and there are smaller, newer brands that have come onboard as well. Over the past couple of years, there have been more options for non-distilling producers, including Bardstown Bourbon Company and Southern Distilling, and more are set to come online as well (although for some of them, the future seems uncertain). Add to that the fact that younger people are drinking less and the back-and-forth threats of tariffs, and a lot of companies are feeling pretty jittery.
According to an article in The Globe and Mail, MGP has had different outcomes across its three business lines: Distilling Solutions (contract distilling), Branded Spirits (in-house spirits brands under the Ross & Squibb name), and Ingredient Solutions (food-grade wheat proteins and starches). In Branded Spirits, which includes whiskeys like George Remus and Remus Gatsby Reserve, sales were down by 5 percent, although the premium portion, driven by Penelope Bourbon which MGP acquired a few years ago, was up by 1 percent. That might be a bad sign for the company, given that the scaling back of whiskey production was meant to buttress the in-house brands made there. But Distilling Solutions saw the real downturn, with sales down nearly 50 percent—possibly a sign of a real whiskey glut or brands turning to other sources as mentioned above. Ingredient Solutions was the only sector to show positive growth, with revenue increasing by 5 percent.
Of course, not everyone is taking such a gloomy outlook on the industry. Earlier this week, Brian Rosen, the CEO of InvestBev, an investor in alcohol and funder of startup brands, had a rosier view (which makes sense given the nature of his business). While acknowledging that people are drinking less and there is too much bourbon out there, he said that alcohol sales are up and people are simply shifting to choosing cheaper options. “Bourbon is slowing down because the supply is too high,” he said, adding that producers “will work through it in the next 6 to 12 months because production levels are coming down and distilleries are shuttering… The reality is, I’m looking at this thing analytically, not emotionally. With less bourbon being produced, you’re going to have demand. Period.”
The reality is that no one knows yet if this is a course correction or a generational shift in drinking, alcohol sales, and consumption, but so far the news this year has not been great. We will continue to update you as more figures come in.
Authors
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Jonah Flicker