MGP Ingredients (NASDAQ:MGPI) reported second-quarter 2026 results that exceeded its internal expectations, despite year-over-year declines in sales, earnings and adjusted EBITDA amid continued pressure in the distilled spirits market.
President and CEO Julie Francis said quarterly sales totaled $124.4 million, while adjusted EBITDA was $27.6 million and adjusted basic earnings per share were $0.72. Consolidated sales declined 15% from the prior-year period, primarily reflecting lower brown goods sales in the Distilling Solutions segment.
Branded Spirits Gains Share Despite Category Weakness
Branded Spirits sales were modestly below the prior year on a reported basis, largely because of lower sales in the company’s other products category, which primarily includes contract-bottled products sold in Europe. Excluding that category, Branded Spirits sales rose 3% from a year earlier, according to Francis.
The company said this compared favorably with Nielsen spirits-category trends, which declined 2% during the quarter, and NABCA trends, which fell 3%.
MGP’s premium-plus portfolio grew 5%, led by Penelope Bourbon, Yellowstone and Everclear. Penelope sales rose 13%, supported by broader distribution, media investment behind its core offerings and the launch of Penelope Kentucky Straight Bourbon and Penelope Rye. Yellowstone sales increased 54%, aided by limited-time releases, increased marketing investment and revenue-growth-management initiatives. Everclear sales increased 13%.
The company’s mid- and value-priced brands grew about 1%, with Exotico, Juárez Tequila and Ezra Brooks among the contributors. Branded Spirits gross margin expanded 20 basis points to 53%, driven by portfolio mix and early benefits from revenue-growth-management efforts.
Francis said MGP continued to build distribution in national and regional accounts. Total off-premise points of distribution increased 7% sequentially and on-premise distribution rose 4%. The premium-plus portfolio increased off-premise distribution by 14% and on-premise distribution by 10% sequentially among those customers.
The company is also reducing the breadth of its portfolio. It has rationalized 52 brands, representing about 47% of its product portfolio. Those brands represented approximately 1% of Branded Spirits sales, Francis clarified during the question-and-answer session. MGP expects the effort to improve annualized gross margin by about 25 basis points and top-line performance by an estimated 42 basis points through greater commercial focus.
Distributor Transition and RNDC Provision
MGP addressed the Chapter 11 bankruptcy filing by distributor Republic National Distributing Co., or RNDC. CFO Brandon Gall said the company recorded a $2.1 million credit-loss provision during the quarter related to the filing.
Francis said MGP had been aware of RNDC’s financial challenges since the start of the year and had developed a market-by-market transition plan. In June, the company transitioned 10 markets to Reyes Beverage Group with limited disruption, she said.
During the first month of operations with Reyes, depletions increased 7% in MGP’s premium-plus portfolio and 4% in its mid-tier portfolio. The company is still working through distributor transitions in certain open and control states, with several changes expected to take effect later in the quarter.
Distilling Solutions Remains Under Pressure
Distilling Solutions sales fell 42% year over year to $29.2 million, while gross profit declined 40% to $11.3 million. However, gross margin improved about 110 basis points to 38.7%, supported by cost-saving measures and favorable sales mix.
Brown goods sales declined approximately 59% from the prior-year quarter as customers continued to prioritize inventory reduction and working-capital management in an oversupplied whiskey market. Francis said customers remain constrained in their ability to make long-term new-distillate commitments.
MGP is pursuing alternative sources of revenue, including aged whiskey sales, premium white goods, private-label whiskey and warehouse services. Warehouse services represented roughly 30% of Distilling Solutions sales in the quarter, with both sales and gross profit rising from a year earlier.
Gall said recently updated Alcohol and Tobacco Tax and Trade Bureau data showed trailing 12-month industry production down about 28% year over year, while inventory growth had been cut roughly in half from six months earlier. He characterized the market as moving gradually through an inventory-rationalization cycle rather than entering a sharp recovery.
Ingredient Solutions Sales Rise, but Disposal Costs Weigh on Margins
Ingredient Solutions sales increased 2% to $35.5 million, driven by specialty protein and specialty starch pricing and mix, as well as improved sales of biofuel and other co-products. The segment also added four significant national customers during the quarter.
Specialty starch sales, including Fibersym, rose 2%, while the Arise specialty protein platform also grew. Francis said demand continued to benefit from interest in protein-focused, high-fiber and lower-net-carb food products.
Profitability, however, was affected by elevated waste starch disposal costs following the closure of the Atchison Distilling facility and startup of a biofuel facility. Ingredient Solutions gross profit declined to $3.6 million and gross margin was 10.1%.
MGP said engineering initiatives reduced waste volumes during the second quarter, but implementation costs were higher than expected. The company now expects full-year Ingredient Solutions gross margins in the high-single-digit to low-double-digit range.
Guidance Reaffirmed
MGP reaffirmed its 2026 outlook for 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. The company expects operating cash flow of $50 million to $55 million and free cash flow of $30 million to $35 million, excluding the Penelope earnout payment.
Capital expenditures were $6.4 million year to date, down 66% from the prior-year period, and the company maintained its full-year capital spending target of about $20 million. Net leverage was approximately 3.5 times at June 30, up from 2.1 times at the end of March, primarily due to a roughly $111 million Penelope earnout payment made during the second quarter.
Gall said the company expects leverage to peak in the third quarter. MGP continues to project net whiskey put-away of $13 million to $18 million for 2026.
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.
