MGP Ingredients, one of the largest suppliers of bulk whiskey, reported a sharp decline in demand for bourbon and other brown spirits during the second quarter, offering another indication that the American whiskey industry is working through a significant inventory correction.
The Atchison, Kansas-based company reported that sales of brown goods—including bourbon and rye whiskey—fell 59% during the second quarter in its Distilling Solutions segment. Overall revenue in the segment dropped 42% to $29.2 million.
MGP supplies bulk spirits, custom mash bills, new and aged distillate and barrel-aging services to whiskey brands across the industry. Its scale has made the company an important supplier behind many American whiskey brands.
The second-quarter results follow a 40% decline in Distilling Solutions sales during the first quarter and a 52% drop in whiskey sales for the full year in 2025.
MGP said the latest decline was driven primarily by lower customer demand for aged and new distillate whiskey as producers continue to manage elevated barrel inventories.
The company has already taken steps to reduce production. In May, MGP paused operations at its Kentucky whiskey distilleries, Limestone Branch Distillery and Lux Row Distillers, amid declining demand. The move affected more than 30 employees.
Kentucky’s bourbon industry is confronting historically high inventory levels. The state has roughly 17.1 million barrels of aging spirits, according to recent industry estimates, creating pressure throughout the supply chain as distillers, producers and brands work to bring inventories more in line with consumer demand.
MGP’s overall second-quarter sales fell 15% to $124.4 million, while gross profit declined 20%. Operating income fell to $17.7 million.
Branded bourbon provides a bright spot
MGP’s results were not uniformly negative.
Its Branded Spirits segment, which includes brands such as Penelope Bourbon, Yellowstone and Ezra Brooks, posted sales of $59.6 million, down just 1% from the prior year. Excluding the company’s other products business, branded spirits sales increased 3%.
The company’s premium-plus portfolio was a particular bright spot, with sales increasing 5% to $32.6 million.
Penelope Bourbon led the growth, with sales up 13% during the quarter. Yellowstone also posted significant growth, helped by limited-edition releases.
MGP acquired Penelope in 2023, and the brand has become a central part of the company’s strategy as it shifts attention toward higher-end spirits.
“We will maintain our strategic roadmap and drive our key growth initiatives, while prioritising our best opportunities for growth, taking decisive actions and executing with discipline,” MGP CEO and President Julie Francis said.
The company said its mid-priced portfolio increased 5%, while value-priced sales declined 7%.
A reset, not necessarily a collapse
MGP’s results highlight the difficult conditions facing the whiskey industry, but industry observers say the current downturn should be viewed in the context of the rapid growth that preceded it.
Whiskey producers dramatically increased production and barrel inventories during years of strong consumer demand. Higher prices, economic uncertainty, tariffs and changing consumer purchasing patterns have since contributed to a slowdown.
The result is a market in which many companies that traditionally purchased bulk bourbon now have substantial inventories of their own.
That has created particular challenges for suppliers such as MGP, whose Distilling Solutions business depends heavily on demand from other whiskey producers.
Still, the long-term outlook for whiskey remains considerably stronger than the current bulk market suggests.
Global whiskey volumes have continued to grow since 2021, increasing from approximately 469.8 million nine-liter cases to 536 million cases in 2025, according to International Wine and Spirits Research data cited by the American Whiskey Association.
The current challenge, therefore, may be less about whether consumers want whiskey and more about how much whiskey the industry produced ahead of current demand.
MGP said it is responding by rebuilding its aged whiskey pipeline, expanding its premium white spirits business and growing private-label programs. The company also is focusing its branded portfolio on its strongest performers, particularly Penelope and Yellowstone.
MGP recently added four executives to its team, including former Pernod Ricard executive Tom Neiheisel as vice president of Distilling Solutions sales.
Despite the current downturn, MGP reaffirmed its fiscal 2026 guidance, projecting full-year sales between $480 million and $500 million.
For Kentucky’s bourbon industry, the latest numbers underscore the magnitude of the current correction. The record number of barrels aging across the state represents years of investment that cannot be quickly unwound.
The question now is how long it will take for inventories and demand to come back into balance—and which distillers and brands will emerge strongest from the reset.
