MGP Ingredients (NASDAQ:MGPI) closed out 2025 with results that management said came in above expectations, even as the broader spirits industry remained under pressure. On the company’s fourth-quarter earnings call, Chief Executive Officer Julie Francis acknowledged a challenging backdrop for spirits heading into 2026, which she expects will likely be “another down year” for both the industry and MGP. Still, she said the company is increasingly optimistic about its longer-term outlook, citing strategic clarity, proactive “self-help” actions, and what she described as a financial position that provides a growing competitive advantage.
Fourth-quarter and full-year results
For the fourth quarter, MGP reported consolidated sales of $138 million, down 23% from the prior year period. Adjusted EBITDA fell to $26 million and adjusted basic earnings per share was $0.63. Consolidated gross profit declined 35% to $48 million, and gross margin decreased 630 basis points to 34.9%.
Reported net income in the fourth quarter declined to a loss of $135 million. Gall said this was primarily driven by a discrete non-cash adjustment of $153 million to lower the carrying amount of goodwill and certain indefinite-lived intangible assets in the Branded Spirits segment. On an adjusted basis, fourth-quarter net income was $14 million.
Branded Spirits: Premium Plus growth offsets weakness elsewhere
In Branded Spirits, fourth-quarter sales declined 1% and full-year sales declined 3%. The company highlighted continued strength in its Premium Plus portfolio, which posted 10% sales growth in the fourth quarter—its strongest quarterly growth of the year—driven primarily by Penelope Bourbon. Mid- and value-priced brands declined 11% in the quarter, which management said was slightly better than the 13% decline for the full year.
Francis reiterated that Branded Spirits is expected to be MGP’s primary long-term growth engine, with a strategy centered on winning in the Premium Plus category with Penelope, strengthening “focus brands,” increasing penetration in national accounts, and expanding digital marketing capabilities.
Using Nielsen data for the 52-week period ending Dec. 27, management said Premium Plus growth outperformed the overall category by 900 basis points, and noted that Penelope’s reported dollar sales increased 80% over that period, making it the second-fastest-growing brand among the top 30 Premium Plus American Whiskey brands. The company attributed Penelope’s growth to innovation and distribution gains, pointing to Penelope Wheated and Penelope Ready-to-Pour Cocktails as major 2025 launches that helped drive 100% growth in points of distribution and a 12% increase in velocity.
Francis also discussed portfolio simplification efforts. MGP has implemented a cross-functional portfolio management review process to reduce complexity and rationalize SKUs and brands. As an initial step, the company is targeting rationalization of 20% of its “tail brands,” which Francis said are lower-visibility, lower-volume offerings that can divert focus and create operational complexity. In response to a question, she said the initial rationalization is reflected in 2026 guidance and is not expected to impact it. She added that some brands may be divested and that the company expects at least to recover packaging and inventory costs on some transactions, while also being “prudent” in how it draws down inventory.
On marketing and brand support, management said Branded Spirits advertising and promotion expense declined 23% for the full year as spending was realigned toward the most attractive growth opportunities. The company ended 2025 with Branded Spirits A&P spend at about 12.5% of segment sales and expects it to increase modestly to roughly 13.5% in 2026. Francis said the company plans to shift more spend to digital media and increase digital dollars by more than 200%, while streamlining its agency approach. She also cited focus brands including Penelope, El Mayor, Yellowstone, and Rebel, and referenced a NASCAR activation program tied to Kyle Busch’s No. 8 car.
Distilling Solutions: Contracting declines amid oversupply
MGP’s Distilling Solutions business continued to face headwinds in 2025 as large customers paused purchases to manage whiskey inventories and working capital. Fourth-quarter segment sales declined 47%, including a 53% decline in brown goods sales. For the full year, segment sales declined 45% and gross profit declined 52%.
Management described an industry environment where domestic whiskey production continues to decline sharply. Francis cited CTP data through October 2025 showing domestic whiskey production down 26%, 29%, and 27% for trailing 12-, six-, and three-month periods, respectively, alongside media reports of distillery closures or idling. In this context, MGP said it is working to reposition Distilling Solutions by broadening premium white goods offerings, rebuilding its aged whiskey pipeline after a pause in 2025, and providing more value-added services to attract and retain customers.
On visibility into 2026, Francis and Gall said substantially all new distillate volume is under contract, and that some aged whiskey sales tied to private label opportunities—both international and domestic—are also under contract and included in guidance. They also said MGP expects to gain more clarity on customers’ brown goods needs for 2026 and beyond toward the end of the second quarter.
Gall said 2026 is expected to be another down year for Distilling Solutions, with sales projected to be down 35% and gross profit down 40% versus 2025. He added that declines are expected to be more pronounced in the first half as the company cycles large contracts completed in 2025. Francis said management believes the segment’s sales and profitability should “approach trough levels” in 2026, while acknowledging ongoing industry oversupply.
Ingredient Solutions: Operational recovery underway, waste costs persist
Ingredient Solutions sales declined 10% in the fourth quarter and 7% for the full year, driven by a key equipment outage that impacted third-quarter results and remained a headwind into the fourth quarter, along with higher waste stream disposal costs. Francis said the equipment returned online in late November as planned, and management described early signs of improved reliability, including reduced unplanned outages and more consistent throughput. Gall also noted fourth-quarter extrusion protein sales reached a new high as the company expanded its extrusion platform beyond wheat.
For 2026, management expects Ingredient Solutions sales to recover to $140 million to $150 million, with gross margin in the mid-to-high teens, improving sequentially through the year. In response to a question on what drove 2025 profitability headwinds, Gall said Ingredient Solutions gross profit was down $5.7 million year over year in the fourth quarter, with “a little more than half” due to the equipment outage and the remainder due to effluent and disposal costs.
Francis said waste treatment and disposal has proven more complex and costly than initially expected. While the company’s biofuel plant and other waste handling initiatives are helping reduce costs, she said some costs will persist in the near to medium term and are reflected in guidance. She also noted that one waste stream cannot be digested by the biofuel plant and must be sent to a municipality that has been offline since early December, with expectations for it to return online in spring 2026.
2026 guidance and balance sheet items
For 2026, MGP guided to net sales of $480 million to $500 million, adjusted EBITDA of $90 million to $98 million, and adjusted basic EPS of $1.50 to $1.80. Gall said the first quarter is expected to be the lowest quarter, with adjusted EBITDA representing about 15% of the full-year target. The company expects a full-year tax rate of about 27%, while first-quarter tax rate is expected to be approximately 75% due to share-based award vesting impacts tied to periods of higher share prices.
Capital expenditures are expected to be about $20 million in 2026, with net whiskey put away of $13 million to $18 million. The company also highlighted two significant financing and cash items: an expected $111 million earnout payment related to the Penelope acquisition in the second quarter and a refinancing of $201 million of convertible notes in the fourth quarter. Gall said net debt leverage is expected to peak around 3.75x in the second quarter of 2026 following the earnout payment, and that the company expects to delever over time afterward. In response to a question, management said there are no limitations in the credit facility related to using it for the Penelope earnout payment.
Excluding the earnout payment, management expects 2026 operating cash flow of $40 million to $45 million and free cash flow of $20 million to $25 million. The Penelope earnout is expected to reduce 2026 operating cash flow by nearly $50 million, according to Gall.
About MGP Ingredients (NASDAQ:MGPI)
MGP Ingredients, Inc (NASDAQ: MGPI) is a leading producer of distilled spirits and specialty ingredient solutions for the food, beverage and consumer products industries. Headquartered in Atchison, Kansas, the company operates two main facilities—its historic Atchison plant, founded in 1941 as Midwest Grain Products, and a modern distillery in Lawrenceburg, Indiana. MGP Ingredients supplies an array of distillation products under its beverage and ingredient segments, serving brand owners, private-label producers and co-packers worldwide.
The beverage segment features a broad portfolio of premium spirits, including bourbon and rye whiskies, vodka, gin and neutral spirits.
