Friday, July 14, 2023

MGPI to Close Founding Plant, Become Different Company


MGPI, Atchison, Kansas.

If you noticed in the news that MGPI will close its grain neutral spirits distillery in Atchison, Kansas, you may have thought, "Ho hum, one less industrial alcohol distillery. So what?"

The straightforward press release from MGPI soft-pedals the significance of this announcement. It contains all the information investors and other industry participants care about. The news is all there, accurately reported, with all necessary disclaimers, but there is much more to the story.

First, the business angle. MGPI is exiting the business that sustained it for most of its 82 years, the manufacturing of ethanol from corn. It's a different company now, especially since the acquisition of Luxco two-and-a-half years ago. It has other businesses but is now primarily a distilled spirits producer, leading with American whiskey.

Second, the history angle. This distillery in Atchison is where it all began for MGPI in 1941. It is the distillery Cloud Cray bought and expanded to make ethanol for the WWII war industries. He called it Midwest Grain Processors, later abbreviated to MGP. The "I" was added to represent 'ingredients.' 

The company's Ingredient Solutions business will continue to operate in Atchison. It processes corn, wheat, and other grains into fiber, protein, and starch for use in a variety of foods.

This move isn't entirely unexpected. They started on this path in 2011, when they bought the former Seagram's distillery in Lawrenceburg, Indiana, now called Ross & Squibb.

MGPI is public but still tightly controlled by its founding Cray family. Cloud Cray’s son, Bud, who succeeded him, passed away in 2020 at age 96. Bud's daughter, Karen Seaberg, chairs MGPI’s board today. 

MGPI has an image problem, in that they don't seem to know what they want their image to be. Two-and-a-half years into the Luxco acquisition, they haven't integrated well. They can't even settle on a corporate name. It is MGP in some places, MGPI in others, and MGP Ingredients, Inc. in still others. 

Their Luxco business still does business as Luxco.

Perhaps this plant closure is what they've been waiting for. Although they still make ethanol at Ross & Squibb in Indiana, it's probably not enough to support their internal need for neutral spirit for their vodka, gin, blended whiskey, and cordials products. By exiting the unprofitable grain neutral spirits and industrial alcohol business, they have a chance to stamp the company with a new identity. They need to take it.

Maybe they'll go on a history binge when the place actually closes next year.

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