What changed in this filing

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Item 1. Business

2023-02-23 compared with 2022-02-24 · 57 added, 74 removed, 136 unchanged (49% of the section changed)

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AVAILABLE INFORMATION

We make available through our website (www.mgpingredients.com) under “For Investors,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, special reports and other information, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission (“SEC”).

We make available through our website (www.mgpingredients.com) under “Investors,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, special reports and other information, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission (“SEC”).

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.

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MGP is a leading producer and supplier of premium distilled spirits, branded spirits, and food ingredients.

Distilled spirits include premium bourbon and rye whiskeys and grain neutral spirits (“GNS”), including vodka and gin.

Our distilled spirits are either packaged and sold under our own brands to distributors, sold directly or indirectly to manufacturers of other branded spirits, or direct to consumers.

MGP is also a top producer of high quality industrial alcohol for use in both food and non-food applications.

Distilled spirits include premium bourbon, rye, and other whiskeys and grain neutral spirits (“GNS”), including vodka and gin.

Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.

MGP is also a producer of high quality industrial alcohol for use in both food and non-food applications.

The Company has a portfolio of our own high quality branded spirits, which we produce through our distilleries and bottling facilities and sell to distributors.

Our branded spirits products account for a range of price points from value products through ultra premium brands, with a focus on high-end American whiskey, tequila and gin.

The Company’s protein and starch food ingredients provide a host of functional, nutritional, and sensory benefits for a wide range of food products to serve the consumer packaged goods industry.

Our industrial alcohol and ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

Our ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

Mission Statement.

Our mission is to secure our future by consistently delivering superior financial results by more fully participating in all levels of the alcohol and food ingredients segments for the betterment of our shareholders, employees, partners, consumers, and communities.

Recent Developments

Merger with Luxco, Inc.

On January 22, 2021, we entered into an Agreement and Plan of Merger to acquire Luxco, Inc.

and its affiliates (“Luxco”) and subsequently completed the merger on April 1, 2021 (“the Merger”).

Luxco is a leading branded beverage alcohol company across various categories, with a more than 60-year business heritage.

Luxco’s operations involve the producing, importing, bottling and rectifying of distilled spirits.

INFORMATION ABOUT SEGMENTS

As a result of the merger with Luxco, during 2021, we established a new reportable segment structure that separates the Branded Spirits from the Distillery Products segment.

The Ingredient Solutions segment remains unchanged.

The new segment presentation reflects how management is now operating the business and making resource allocations.

We report three operating segments;

Distillery Products, Branded Spirits and Ingredient Solutions.

Distillery Products Segment.

Distilling Solutions, Branded Spirits and Ingredient Solutions.

During 2022, we changed the name of our Distillery Products segment to Distilling Solutions.

Distilling Solutions Segment.

We process corn and other grains (including rye, barley, wheat, barley malt, and milo) 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.

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Contracts with customers may be monthly, annual, or multi-year in term with periodic reviews of pricing.

Sales to customers may also be made on the spot market with contracts in the form of purchase orders.

Sales of co-products are primarily made on the spot market.

During 2021, our five largest Distillery Products customers, combined, accounted for 14.2 percent of our consolidated sales.

During 2022, our five largest Distilling Solutions customers, combined, accounted for 16 percent of our consolidated 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, premium beverage alcohol , consists primarily of premium bourbon and rye whiskeys (“brown goods”) and GNS, including vodka and gin (“white goods”).

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 sold as aged and unaged distillate, which may be further aged by our customers or warehoused at our facilities, and are sold at various proof concentrations.

Food grade alcohol sold for beverage applications, premium beverage alcohol , consists primarily of premium bourbon, rye, and other whiskeys (“ brown goods ”) and GNS, including vodka and gin (“ white goods ”).

Our premium brown goods are created by distilling grains, including corn and rye.

Our brown goods are sold as aged and unaged distillate, which may be further aged by our customers or warehoused at our facilities, and are sold at various proof concentrations.

Our GNS is sold in bulk quantities at various proof concentrations.

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Fuel grade alcohol - 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.

Fuel grade alcohol can serve as a substitute for lead and petroleum-based octane enhancers and has been used in gasoline to meet certain environmental regulations and laws.

We produce fuel grade alcohol as a co-product of our food grade alcohol business at our Atchison facility.

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Distillers feed is principally derived from the mash from alcohol processing operations.

The mash is dried and sold primarily to processors of animal feed as a high protein additive.

The mash is sold primarily to processors of animal feed as a high protein additive primarily as dried distillers feed.

In addition, we produce corn oil as a value added co-product through a corn oil extraction process at our Atchison facility.

Warehouse Services - Customers who purchase barreled distillate may, and in most cases do, also enter into separate warehouse service agreements with us for the storage of product for aging.

Warehouse Services - Customers who purchase barreled distillate may, and in most cases do, also enter into separate warehouse service agreements with us for the storage and handling of product for aging.

Services under warehouse agreements include barrel put away, barrel storage, and barrel retrieval, as well as blending services.

Branded Spirits Segment.

Our Branded Spirits segment consists primarily of producing, importing, bottling and rectifying of distilled spirits through our distilleries and bottling facilities.

Contracts with customers are generally in the form of purchase orders.

Our Branded Spirits segment consists of a portfolio of high quality brands, which we produce through our distilleries and bottling facilities and sell to distributors pursuant to purchase orders.

MGP’s branded spirits include a wide spectrum of brands across numerous segments.

During 2022, our five largest Branded Spirits customers, combined, accounted for 17 percent of our consolidated sales.

Ultra Premium - Ultra Premium includes brands such as Yellowstone ® Select Kentucky Straight Bourbon Whiskey, George Remus ® Straight Bourbon Whiskey, Blood Oath Bourbon, Minor Case ® Straight Rye Whiskey, Rossville Union ® Straight Rye Whiskey, Green Hat ® Gin, Rebel ® 10 Year Single Barrel Kentucky Straight Bourbon Whiskey, and Old Ezra Brooks ® 7 Year Kentucky Straight Bourbon Whiskey.

Premium - Premium branded spirits includes brands such as Everclear ® , The Quiet Man Irish Whiskey, Ezra Brooks ® 99 Proof Kentucky Straight Bourbon Whiskey, and Rebel ® 100 Proof Kentucky Straight Bourbon Whiskey.

Additionally, Premium includes El Mayor Tequila and Dos Primos tm Tequila which is produced with our Joint Ventures;

Ultra Premium - Ultra premium branded spirits include brands such as Yellowstone ® Kentucky Straight Bourbon Whiskey, Remus Repeal Reserve ® Bourbon, Blood Oath ® Bourbon, Rebel ® 10 Year Single Barrel Kentucky Straight Bourbon Whiskey, and Old Ezra ® 7 Year Kentucky Straight Bourbon Whiskey.

Super Premium - Super premium branded spirits include brands such as Daviess County ® Kentucky Straight Bourbon Whiskey, Ezra Brooks ® 99 Proof Kentucky Straight Bourbon Whiskey, George Remus ® Straight Bourbon Whiskey, Minor Case ® Straight Rye Whiskey, Rossville Union ® Straight Rye Whiskey, The Quiet Man ® Irish Whiskey, and Green Hat ® Gin.

Premium - Premium branded spirits include brands such as Everclear ® grain alcohol, and Rebel ® 100 Proof Kentucky Straight Bourbon Whiskey.

Additionally, premium includes El Mayor ® Tequila, which is produced with our Joint Ventures;

DGL Destiladores, S.de R.L.

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(“Agricola”) (combined “LMX”).

Mid - Mid includes brands such as Saint Brendan’s ® Irish Cream Liqueur, Pearl ® Vodka, Ezra Brooks ® 90 Proof Kentucky Straight Bourbon Whiskey, Rebel ® 80 Proof Kentucky Straight Bourbon Whiskey and Lord Calvert ® Canadian Whiskey.

Mid - Mid branded spirits include brands such as Saint Brendan’s ® Irish Cream Liqueur, Pearl ® Vodka, Ezra Brooks ® 90 Proof Kentucky Straight Bourbon Whiskey, and Lord Calvert ® Canadian Whiskey.

Additionally, mid includes Exotico ® Tequila, which is produced by our joint venture, LMX.

Value - Value includes brands such as Arrow ® Cordials, Canada House Canadian Whiskey, and Lady Bligh ® Rum.

Additionally, Value includes Juarez Group, which is produced by our joint venture, LMX.

Other - Other includes contract bottling, private and control label products, and retail sales.

Contract bottling is a service provided to a customer to process, bottle and distribute spirits for brands not owned by the Company.

Private label products are distilled, processed, bottled, and distributed by MGP for sales under another company’s brand.

Control label sales are similar to private label, but MGP owns and controls the brand name and enters into sales agreements with certain customers to allow them to exclusively sell a branded spirit.

We operate retail locations at three of our distilleries, including Limestone Branch Distillery in Lebanon, Kentucky, Lux Row Distillers in Bardstown, Kentucky, and Green Hat Gin Distillery in Washington D.C.

Value - Value branded spirits include brands such as Arrow ® Cordials, Canada House ® Canadian Whiskey, Lady Bligh ® Rum, and Juarez ® Tequila.

Other - Other includes private and control label products sold primarily through our wholly-owned subsidiary, Niche Drinks, Co., ltd, retail sales at our distilleries, and contract bottling.

Private label products are distilled, processed, bottled, and distributed by us for sales under another company’s brand.

Control label sales are similar to private label, but we own and control the brand name and enter into sales agreements with certain customers to allow them to exclusively sell a branded spirit.

We operate retail locations at two of our distilleries, including Limestone Branch Distillery ® in Lebanon, Kentucky, and Lux Row Distillers ® in Bardstown, Kentucky.

Contract bottling is a service provided to a customer to process and bottle spirits for brands not owned by the Company.

Ingredient Solutions Segment.

Our Ingredient Solutions segment consists primarily of specialty wheat starches, specialty wheat proteins, commodity wheat starches, and commodity wheat proteins.

Contracts with Ingredient Solutions customers are generally price, volume, and term agreements, which are fixed-term contracts, with very few agreements longer than 12 months in duration.

In effort to best serve our customers and maximize returns to shareholders, we have strategically been migrating our sales towards higher price, higher margin specialty wheat products.

Our Ingredient Solutions segment consists primarily of specialty wheat starches, specialty wheat proteins, commodity wheat starches, and commodity wheat proteins products which are sold to customers pursuant to purchase orders.

In an effort to best serve our customers and maximize returns to shareholders, we have strategically been migrating our sales towards higher price, higher margin specialty wheat products.

During 2022, our five largest Ingredient Solutions customers, combined, accounted for 11 percent of our consolidated sales.

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Important physical properties contributed by specialty wheat starch include whiteness, clean flavor, viscosity, and texture.

For example, our starches improve the taste and texture of cream puffs, éclairs, puddings, frostings, pie fillings, breading, and batters, and can also improve the taste of angel food cakes.

Our other starch ingredients will improve the viscosity of soups, sauces, and gravies.

Additionally, these specialty starches will improve the freeze-thaw stability and shelf life of fruit pies and other frozen foods as well as support moisture retention in microwavable foods.

Our wheat starches, as a whole, generally compete primarily with cornstarch, which dominates the United States starch market.

Additionally, our wheat starches compete with potato and tapioca.

Our wheat starches, as a whole, generally compete primarily with cornstarch, potato, and tapioca.

However, the unique characteristics of our specialty wheat starches provide a number of advantages over other starches for certain functionality in baking and pasta end uses.

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Market place prices generally track the fluctuations in the overall starch market in this category.

However, wheat starch has

unique funtions in wheat based food formulations and provide for a cleaner more neutral flavor profile in finished goods.

However, wheat starch has unique functions in wheat based food formulations and provides for a cleaner more neutral flavor profile in finished goods.

Commodity Wheat Proteins - Commodity wheat protein, or vital wheat gluten, is a free-flowing light tan powder which contains approximately 75 percent protein.

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Our products compete against similar products of many large and small companies.

In our Distillery Products segment, competition is based primarily on product innovation, product characteristics, functionality, price, service, and quality factors, such as flavor.

In our Branded Spirits segment, competition is based primarily on product innovation, price, brand recognition, and quality factors, such as flavor.

In our Distilling Solutions segment, competition is based primarily on product innovation, product characteristics, functionality, price, service, and quality factors, such as flavor.

In our Branded Spirits segment, competition is based primarily on product innovation, price, brand recognition, product distribution, retail positioning, and quality factors, such as flavor.

In our Ingredient Solutions segment, competition is based primarily on product innovation, product characteristics, price, name, color, flavor, or other properties that affect how the ingredient is being used.

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We have filed patent applications to protect a range of inventions made in our research and development efforts, including inventions relating to applications for our products.

We have trade names on the majority of the brands we produce within our Branded Spirits segment.

We believe our trade names are critical to the success of the brands we produce and the marketing of those products.

Some of these patents or licenses cover significant product formulation and processes used to manufacture our products.

We have trademarks on the majority of the brands we produce within our Branded Spirits segment.

We believe our trademarks are critical to the success of the brands we produce and the marketing of those products.

Sales for some of our products, including brown goods and branded spirits, can fluctuate from period to period due to the inherent demands and timing of our customers and consumer needs.

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RAW MATERIALS AND PACKAGING MATERIALS

Our principal Distillery Products segment raw materials, or input costs, are corn and other grains (including rye, barley, wheat, barley malt, and milo), which are processed into food grade alcohol and distillery co-products consisting of distillers feed, fuel grade alcohol, and corn oil.

Our principal Distilling Solutions segment raw materials, or input costs, are corn and other grains (including rye, barley, wheat, barley malt, and milo), which are processed into food grade alcohol and distillery co-products consisting of distillers feed, fuel grade alcohol, and corn oil.

Our principal Branded Spirits segment raw materials, or input costs, include corn and other grains (including rye, barley, wheat, barley malt, and milo), agave, and flavoring.

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The cost of grain and wheat flour has, at times, been subject to substantial fluctuation.

Our principal packaging material for our Distillery Products segment is oak barrels.

Both new and used barrels are utilized for the aging of premium bourbon and rye whiskeys.

Our principal packaging material for our Distilling Solutions segment is oak barrels.

Both new and used barrels are utilized for the aging of premium brown goods.

We purchase oak barrels from multiple suppliers and some customers supply their own barrels.

Our packaging for our Branded Spirits segment includes oak barrels, glass bottles, labels, aluminum cans and cartons.

Our packaging for our Branded Spirits segment includes oak barrels, glass bottles, polyethylene terephthalate (“PET”) containers, caps, labels, aluminum cans and cartons.

Natural gas is an input cost used to operate boilers to make steam heat.

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A collective bargaining agreement, covering 103 employees at the Atchison facility, expires on August 31, 2024.

A collective bargaining agreement, covering 67 employees at the Lawrenceburg facility, expires on December 31, 2022.

A collective bargaining agreement, covering 71 employees at the Lawrenceburg facility, that was due to expire on December 31, 2022, was successfully renewed until October 24, 2027.

A collective bargaining agreement, covering 61 employees at the St.

Louis facility, expires on February 29, 2024.

We have not experienced any recent work stoppages, and we consider our relationship with our employees to be good.

We have not experienced any recent work stoppages, and we consider our relationship with our employees, both union and non-union, to be good.

We believe our employees are key to achieving our business objectives.

Our key human capital measures include employee safety, turnover, absenteeism and productivity.

Our key human capital measures include employee safety, employee retention, absenteeism and productivity.

We frequently benchmark our compensation practices and benefit programs against those of comparable industries and in the geographic areas where our facilities are located.

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We develop and administer company-wide policies designed to ensure the safety of each team member and compliance with Occupational Safety and Health Administration (“OSHA”) standards.

This includes a program called “Safety Up,” which promotes safety from the plant floor up and includes employee-led safety meetings, training and assessments, and weekly safety audits.

Throughout the COVID-19 pandemic we were deemed an essential employer and continued to operate with COVID-19 prevention protocols in place to minimize the risk of the spread of COVID-19 in our workplaces.

Many of our administrative staff were encouraged or required to work from home.

These protocols remain in place and will continue so long as the pandemic continues.

This includes a program which promotes safety from the plant floor up and includes employee-led safety meetings, training and assessments, and weekly safety audits.

Our Company strives for workforce retention.

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We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.

Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline.

We have robust equal employment opportunity and anti-discrimination policies and our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline.

Our policies require all reports of inappropriate behavior to be promptly investigated with appropriate action taken.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Our officers as of December 31, 2021 and their ages as of February 24, 2022:

Our executive officers as of December 31, 2022 and their ages as of February 23, 2023:

Name Age Principal Occupation and Business Experience

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from 2013 to March 2016.

Executive Vice President of Global Operations and Supply Chain for Diamond Foods, Inc.

from 2012 to 2013.

Gall 41 Vice President, Finance and Chief Financial Officer for the Company since April 2019.

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Director of Financial Planning and Analysis for the Company from January 2012 to April 2014.

Glaser 61 Vice President, Production and Engineering for the Company since October 2015.

Corporate Director of Operations for the Company from January 2014 to October 2015.

Plant Manager for the Company of the Atchison facility from May 2011 to December 2013.

Dykstra 58 Vice President, Alcohol Sales and Marketing for the Company since 2009.

Buttshaw 59 Vice President, Ingredient Sales and Marketing for the Company since December 2014.

Vice President of Sales for the ingredient group at Southeastern Mills, Inc.

from October 2010 to November 2014.

David Bratcher 55 Chief Operating Officer for the Company since July 2021 and President of Branded Spirits for the Company since the merger with Luxco on April 2021.

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from 2013 to April 2021.

Curtis Landherr 52 Chief Legal Officer, Vice President and Corporate Secretary for the Company since October 2022.

Senior Vice President and General Counsel at Cirrus Aircraft from August 2014 to October 2022.

Erika Lapish 48 Vice President Human Resources for the Company Since May 2021.

Vice President Human Resources - Central Operations at R1 RCM from February 2018 to May 2021.

Vice President Human Resources, North American Operations at Benteler Automotive from January 2015 to February 2018.

Amel Pasagic 39 Chief Information Officer and Vice President of Information Technology for the Company since July 2021.

Vice President, Information Technology for the Company from April 2021 to July 2021.

Served in a variety of IT leadership roles with increasing responsibility with Luxco, Inc.

beginning in June 2011.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business