MGP is a leading producer and supplier of premium distilled spirits and specialty
wheat proteins and starches. Distilled spirits include premium bourbon and rye
whiskeys, and grain neutral spirits, including vodka and gin. The Company’s
proteins and starches provide a host of functional, nutritional and sensory
benefits for a wide range of food products to serve the packaged goods industry.
MGP is also a top producer of high quality industrial alcohol for use in both
food and non-food applications. Our distillery products are derived from corn
and other grains (including rye, barley, wheat, barley malt, and milo), and
our ingredient products are derived from wheat flour. The majority of our sales
are made directly or through distributors to manufacturers and processors of
finished packaged goods or to bakeries.
Distillery Products Segment - We process corn and other grains into food grade
alcohol and distillery co-products, such as distillers feed (commonly called
dried distillers grain in the industry), fuel grade alcohol, and corn oil. We
also provide warehouse services, including barrel put away, barrel storage,
and barrel retrieval services. We have certain contracts with customers to supply
distilled products (or "distillate"), as well as certain contracts
with customers to provide barreling and warehousing services. Contracts with
customers may be monthly, annual, and multi-year with periodic review of pricing.
Sales of fuel grade alcohol are made on the spot market. During 2015, our five
largest distillery products customers, combined, accounted for about 23.3 percent
of our consolidated net sales.
Food Grade Alcohol - The majority of our distillery capacities are dedicated
to the production of high quality, high purity food grade alcohol for beverage
and industrial applications.
Food grade alcohol sold for beverage applications consists primarily of premium
bourbon and rye whiskeys, and grain neutral spirits, including vodka and gin.
Our premium bourbon is created by distilling grains, primarily corn. Our whiskey
is made from fermented grain mash, including rye and corn. Our whiskeys are
primarily sold as unaged new distillate, which are then aged by our customers
from two to four years and are sold at various proof concentrations. Grain neutral
spirits are sold in bulk quantities at various proof concentrations. Our gin
is created by redistilling grain neutral spirits together with proprietary customer
formulations of botanicals or botanical oils.
Food-grade industrial alcohol is used as an ingredient in foods (e.g., vinegar
and food flavorings), personal care products (e.g., hair sprays and hand sanitizers),
cleaning solutions, pharmaceuticals, and a variety of other products. We sell
food-grade industrial alcohol in tank truck or rail car quantities direct to
a number of industrial processors.
Distillers Feed and related Co-Products - The bulk alcohol co-products sales
include distillers feed, fuel grade alcohol, and corn oil. Distillers feed is
principally derived from the mash from alcohol processing operations. The mash
is dried and sold primarily to processors of animal feeds as a high protein
additive. We produce fuel grade alcohol as a co-product of our food grade alcohol
business at our distillery in Atchison. We produce corn oil as a value-added
co-product through a corn oil extraction process.
Fuel grade alcohol is sold primarily for blending with gasoline to increase
the octane and oxygen levels of the gasoline. As an octane enhancer, fuel grade
alcohol can serve as a substitute for lead and petroleum-based octane enhancers.
As an oxygenate, fuel grade alcohol has been used in gasoline to meet certain
environmental regulations and laws relating to air quality by reducing carbon
monoxide, hydrocarbon particulates and other toxic emissions generated from
the burning of gasoline.
Warehouse revenue - Customers who purchase unaged barreled whiskey distillate
may, and in most cases do, also enter into separate warehouse service agreements
with us for the storage of product for aging that include services for barrel
put away, barrel storage and barrel retrieval. Revenue from warehousing services
is recognized upon providing the service and/or over the passage of time, as
in the case of storage fees.
Ingredient Solutions Segment - Our ingredient solutions segment consists primarily
of specialty wheat starches, specialty wheat proteins, commodity wheat starch
and commodity wheat protein. Contracts with ingredients customers are generally
price, volume, and term agreements which are fixed for three or six month periods,
with very few agreements of 12 months duration or more.
Specialty Wheat Starches - Wheat starch constitutes the carbohydrate-bearing
portion of wheat flour. We produce a premium wheat starch powder by extracting
the starch from the starch slurry, substantially free of all impurities and
fibers, and then dry the starch in spray, flash or drum dryers.
A substantial portion of our premium wheat starch is altered during processing
to produce certain unique specialty wheat starches designed for special applications.
We sell our specialty starches on a global basis, primarily to food processors
and distributors.
We market our specialty wheat starches under the trademarks Fibersym® Resistant
Starch series, FiberRite® RW Resistant Starch, Pregel® Instant Starch
series, and Midsol® Cook-up Starch series. They are used primarily for food
applications as an ingredient in a variety of food products to affect their
nutritional profile, appearance, texture, tenderness, taste, palatability, cooking
temperature, stability, viscosity, binding and freeze-thaw characteristics.
Important physical properties contributed by wheat starch include whiteness,
clean flavor, viscosity and texture. For example, our starches are used to improve
the taste and texture of cream puffs, éclairs, puddings, pie fillings,
breading and batters; to improve the size, symmetry and taste of angel food
cakes; to alter the viscosity of soups, sauces and gravies; to improve the freeze-thaw
stability and shelf life of fruit pies and other frozen foods; to improve moisture
retention in microwavable foods; and to add stability and to improve spreadability
in frostings, mixes, glazes and sugar coatings.
Our wheat starches, as a whole, generally compete primarily with corn starch,
which dominates the United States starch market. However, the unique characteristics
of our specialty wheat starches provide a number of advantages over corn and
other starches for certain baking and other end uses.
Specialty Wheat Proteins - We have developed a number of specialty wheat proteins
for food applications. Specialty wheat proteins are derived from vital wheat
gluten through a variety of proprietary processes which change its molecular
structure. Specialty wheat proteins for food applications include products in
the Arise® , Optein®, and Trutex®. Our specialty wheat proteins
generally compete with other ingredients and modified proteins having similar
characteristics, primarily soy proteins and other wheat proteins, with differentiation
being based on factors such as functionality, price and, in the case of food
applications, flavor.