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| One of the existing warehouses at the MGP Distillery in Lawrenceburg, Indiana. |
“This investment is consistent with the ‘invest-for-growth’ initiative of our five-year strategic plan. Increased capacity will help us better support the rapid growth of the whiskey category, as well as support our own brand development efforts."
The brand development comment officially reverses a company pledge that it would never compete with its customers by creating its own brands. The reversal is not surprising, as house brands are simply too important for long term profitability to be dismissed that easily.
Griffin also said this:
“American whiskey is in the early stages of a long term growth trend. Thanks to our strong reputation for quality and innovation, and our production capacity, MGP is uniquely positioned to benefit from this trend. This investment allows us to expand our ability to mature product for both our customers and our own future needs.”
There has been much private discussion in recent years about the staying power of American whiskey's current boom. Many companies are speaking through their investments but few senior executives have been willing to predict a bright future this directly. As the U.S. producer most dependent on the non-distiller producer market, MGP needs this prediction to be true. Much depends on robust growth in export markets such as India and China.
MGP has been in and out of the whiskey game for decades, getting back into it with the acquisition of Lawrenceburg's old Seagrams distillery in 2011.
10 comments:
This is quiet big news. With their skills and capacity......now it's up to branding and sales....
Chuck, have you visited their facility? How are they producing so much whiskey for NDPs, etc. and soon for their own branding, and at the same time providing a product that everyone generally agrees is consitently very good?
I have toured it. (I took the picture.) It's a big distillery and it has been there all along, we just weren't paying attention when it was captive to Seagrams. But they have always been big and always been good at what they do. Before MGP bought them in 2011 they were barely making and selling enough to keep the lights on. A lot has changed in a short time.
An interesting side note to the expansion is that they have acquired most of the former Schenley Distillers facility which adjoins their property on the north side.
If they're going to launch their own brand, I wonder if they'll buy one of their NDP customers to do it.
When did they make this pledge? It's been obvious they were headed in this direction and doenst really change much. All the other sources of bulk American whiskey have their own brands.
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The brand development comment officially reverses a company pledge that it would never compete with its customers by creating its own brands. The reversal is not surprising, as house brands are simply too important for long term profitability to be dismissed that easily."
As recently as April of this year, when I visited Lawrenceburg, I was told by senior managers (not Gus Griffin) that they weren't planning to create their own brands because they didn't want to compete with their customers. I'm reporting the change, not criticizing it.
It will be interesting to see how they position their own brands in the market. So far, their contract work has enabled a lot of NDP's to stay afloat by substituting relatively high per-bottle margins for volume. Customers being able to get the same quality whiskey directly under the original producer's label will push a lot of "craft" distillers against the wall pricing-wise; just as an example, if Diageo can sell the MGP 95 rye under the Dickel label for 19.95, it's highly unlikely MGP's own price would be anywhere near Templeton's currently 37.95 for the same stuff.
Rob K's comment above makes sense to me as does Erik Fish's. The likes of Widow Jane and Templeton come to mind.
Chuck,
I can see that someone would have said that (pledged not to produce brands) to you, not all employees there seem to communicate well. However, senior management has been talking about brands for a few years and any customer who expected MGP or whoever controlled the distillery to never launch brands is quite the fool. We are all fortunate that they have been selling quality juice for the past years and can only hope that they dont shut the spigots off too soon.
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