Tuesday, January 7, 2014
Future Hazy For MGP of Indiana
According to several Cincinnati news sources, there was a fire yesterday at MGP of Indiana, the former Seagrams distillery in Lawrenceburg that supplies whiskey, gin, and vodka to many non-distiller producers. Two injuries were reported. A county police dispatcher said the fire began in the dryer room. Details are still sketchy.
Also sketchy are details about the effect major corporate governance changes announced late last month will have on Lawrenceburg's future as a commodity whiskey producer. Last June, we reported that the parent company, MGP Ingredients, based in Atchison, Kansas, had postponed its 2013 Annual Meeting because of a proxy fight initiated by a voting trust that controls 75 percent of the company's voting shares. The dissident shareholders proposed a competing slate of directors. They also proposed that CEO Tim Newkirk be removed.
Early last month, the company capitulated. Newkirk was terminated and replaced temporarily by the company's CFO and VP of Engineering. The search for a new CEO is underway.
Today it was learned that Don Coffey, VP Research and Development, has left the company and his position has been eliminated. Coffey was very involved in the development and implementation of several new whiskey mash bills. He figured prominently in this November 20th post on the Whisky Advocate Blog about MGPI's future.
Although it is clear that the dissident shareholders have won (see here and here), exactly what that means for Lawrenceburg and the future of its whiskey mission is unclear. In November, MGP announced that it had completed a "review of strategic alternatives" begun last spring. It concluded that "the best approach at this time to enhance long-term shareholder value is to continue execution of the Company's strategic plan to reposition the business for profitable growth."
The subsequently-announced governance changes would seem to repudiate that conclusion, as does Coffey's departure. It seems more likely that MGP will retrench as a grain neutral spirits producer, which may jeopardize the whiskey operation.
No doubt further announcements will be forthcoming. (In fact, here they are.)
Richnimrod said;
ReplyDeleteAwwwww, Jeeeez, just when it was looking up for the Indiana branch of the Nation's distilling businesses. I certainly hope this doesn't represent a backward motion in their business plan. They seemed to be suddenly moving forward; with some vigor and innovation, even. Keeping my fingers crossed; but not holding much real hope.... Whenever management takes "a new direction", it usually means some "fat-trimming" at the expense of stuff like innovation, research, and risk-taking.
Given the explosion in the popularity of rye, mixed with the fact that MGP/LDI was producing the distillate used in several popular non-distiller produced labels, how was the whiskey portion of the distillery not profitable for MGP??
ReplyDeleteOr is MGP just so screwed up that the good is getting thrown out with the bad during the restructuring?
Chuck,
ReplyDeleteI have to think that someone would be interested in taking the distillery off MGP's hands if they ultimately decide to exit the whiskey business. Diageo could solve its Bulleit bourbon sourcing issues by purchasing the operation (at least in the long term). Bulleit rye already comes from MGP. The purchase price that the distillery would bring on the market would be pocket change for Diageo.
But they added this new guy, John Bridendall, to the board of directors. He's got a pretty extensive past in the beverage alcohol industry. He's worked for Kendall-Jackson and Brown-Forman. The investor stuff that I've seen them put out looks like they're going to focus more on drinks. They have a "mash bill innovations" video on the front page of their website too.
ReplyDeleteDid a quick search Mr. Bridendall & Ms. Strandjord (two of the Cray Group (my term) new directors for MGPI). As already pointed out, Mr. B spent a lot of time at BF and Kendall-Jackson while Ms. S has lots of CFO & personnel experience. Mr. B started as a CPA for Peat Marwick. I don't know enough about the distilling industry to advance an opinion, BUT the departure of Mr. Newkirk notwithstanding, their additions made me decide to take a closer, in-depth look at the Cray Group and MGP. And, not just to guess at the impact of these changes on what I drink. hahaha.
ReplyDeleteWe're all trying to read the tea leaves but ultimately only time will tell.
ReplyDeleteMGP will not shut down the whiskey business. The family could not afford to if they wanted. To be honest the new board members and CEO are going to come to the same conclusion as Coffey and Newkirk. It's sad they have a vendetta against "outsiders" and change to become a strong profitable company.
ReplyDeleteI could see business people getting upset with whiskey production. A bottle of some tasteless clear spirit, or a tanker full of it for a blend, seemingly is much more profitable than whiskey, which requires some quality control and years of aging (though I don't know how much aging MGP does).
ReplyDelete