Good morning, and welcome to the MGP Ingredients Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Amit Sharma, Vice President of Investor Relations. Please go ahead.

Thank you. I'm Amit Sharma, Vice President of Investor Relations. And joining me are members of the management team, including David Bratcher, Chief Executive Officer and President; and Brandon Gall, Vice President of Finance and Chief Financial Officer. We'll begin the call with management's prepared remarks and then open the call to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements. The company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including risk factors described in the company's most recent annual report filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call, except as required by law. Additionally, this call will contain reference to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures is included in today's earnings release. If anyone does not already have a copy of the earnings release issued by MGP today, you can access it at our website at www.mgpingredients.com. At this time, I would like to turn the call over to MGP's Chief Executive Officer and President, David Bratcher. David?

Thank you, Amit. Good morning, everyone. I would like to begin with an overview of our third quarter performance and provide updates on key initiatives. I will then turn it over to Brandon to discuss our quarterly results in greater detail. Lastly, we will wrap up with discussions for our outlook for the full year as well as brief comments on 2025, before opening it up for your questions. As for the third quarter, results were in line with the preliminary results we provided 2 weeks ago and below our prior expectations. Like many in the industry, we are facing challenges in our Distilling Solutions segment in regards to the American whiskey category. Consolidated sales decreased 24% from the prior year period. On a pro forma basis, when factoring in the Atchison distillery closure, consolidated sales decreased by 14%, primarily due to the combination of our weak brown goods performance and export headwinds in our Ingredient Solutions business. Brandon will discuss our quarterly results in greater detail, but let me spend a few minutes outlining the actions we are taking to strengthen our brown goods business as the market corrects for excess whiskey inventories and increased distilling capacity. As we shared with you on our fourth quarter call at the start of the year, part of our strategic plan has been to actively reduce our exposure to aged sales by increasing our new distillate business. Although our efforts are working as aged whiskey accounted for less than 20% of our consolidated gross profit in the third quarter, down from nearly half in Q1 of 2021, the aged market appears to be weakening at a faster pace than we originally anticipated. Softening whiskey consumption and elevated industry-wide barrel whiskey inventories are having a larger and quicker-than-expected impact on not only our…

Thanks, David. For the third quarter of 2024, consolidated sales decreased 24% from the prior year period to $161.5 million. Excluding the impact for the Atchison distillery in both periods, consolidated sales decreased by 14%, reflecting lower sales in all 3 operating segments. Within the Distilling Solutions segment, reported sales declined by 36%. Excluding the impact of the Atchison distillery in both periods, segment sales declined by 18%. Grounded sales declined by 22% as compared to the prior year quarter due to lower aged handy distillate sales. Our warehouse-related sales increased by 12%. Our Branded Spirits segment sales decreased by 6%, primarily due to the planned optimization of our mid and value tiered brands. Sales for our mid and value portfolio collectively declined by double-digits, largely consistent with year-to-date trends. This decline was driven by lower sales volumes as we increased pricing on certain lower-margin mid and value brands. Our premium plus sales increased by 1% as our brands in the American whiskey and tequila categories within this price tier continue to perform well. Our premium plus growth decelerated from the second quarter as we cycled the initial launch of the Penelope brand in key large markets during the third quarter of last year. Ingredient Solutions sales declined by 18%, driven primarily by decreased sales volumes of specialty protein as well as lower commodity and specialty starch sales. Specialty protein sales were negatively impacted by the stronger U.S. dollar. We expect specialty protein sales to return to growth in the fourth quarter as we onboard new domestic customers to offset lower export sales. Our specialty starch sales, which provide FDA-approved dietary fibers under the Fibersym brand, continue to benefit from the long-term consumer-driven tailwinds across several large food categories. Third quarter consolidated gross profit decreased by 10% to $65.8 million,…

Thanks, Brandon. While I am not pleased with our 2025 outlook for the brown goods business, this reset reflects current market conditions and more importantly, our proactive actions I discussed earlier to stabilize our brown goods business. We are actively engaging our customer list, tightening our contract terms and further reducing our exposure to spot and aged sales, which I believe will rightsize and mitigate risk in our contract distilling business. Our Ingredient Solutions segment continues to be well positioned to thrive independently post the Atchison distillery closure. Though unexpected complexities from that transition have impacted recent performance, we expect this segment to return to positive growth next year. Finally, I am most enthusiastic about our progress towards becoming a premier branded spirits company. The Luxco acquisition firmly puts us on that path. I anticipate 2025 could mark the first year in which our Branded Spirits business not only becomes our biggest segment by sales, but also our primary growth engine. Most importantly, our key premium plus brands continue to have growth runway ahead, positioning us to deliver attractive growth for years to come. I would like to close by thanking the MGP team for their hard work and focus in this challenging environment. I'd also like to welcome Kathleen Molamphy to our MGP team. Kate joins us as General Counsel and will continue to add strong talent through our organization. That concludes our prepared remarks. Operator, we are ready to begin the question-and-answer portion of the call.

[Operator Instructions] First question comes from Bill Chappell with Truist Securities.

I guess I want to start with kind of this year and then a couple of questions on visibility into next year. But first, this year -- for the quarter, is it fair to say that Ingredient and Branded were actually in line with expectations and majority of the miss comes from Distilling Solutions and within that miss from aged? Or was there more to it for the quarter into the guidance?

Yes. I'll start with the numbers, Bill, and then Dave can chime in. But, yes, the miss and the reduction in our expectations for the year is brown goods Distilling Solutions driven. However, Q3 performance for Ingredients was under our initial expectations as we, as you know, are trying to repurpose sales from export markets domestically. And a couple of those large sales that we had planned on this quarter actually got pushed through the fourth quarter. So Ingredients came in under for Q3, but we expect that to rebound in Q4 for our remarks. The other change, and this isn't necessarily a Q3 change, it's more of a Q4 change, is the distributor tightening, that we're now seeing in the Branded Spirits segment, which has resulted in our Q4 outlook for brands to now be taken down a little bit in our recent numbers with sales for this segment to be down in the high single-digits.

Yes, Bill, I would add that -- I think you're spot on. The disappointing part of this is the contractor stilling brown goods business. Ingredients is, as I reflect on what Brandon and I have talked, is roughly within line of what we thought. There's a lot of transformation going on in that business today, a lot of noise in that business that we plan to wrap up very quickly here, as we alluded to in our script. And I think brands is right where we need it. Now as we mentioned, as we continue to premiumize our portfolio, even though our days on hand of physical cases are the same, the value at which we're setting at an inventory wholesaler is forcing them to look at their balance sheet, not just for us, for everybody, which is why we continue to hear this, about destocking because they have people just like Brandon sitting there looking at a balance sheet. So we monitor that closely. But we still -- I think the takeaway here is what we said in the script, this American whiskey category deteriorated faster than we expected. We've always planned at this. At some point it's a normal cycle in any category within beverage alcohol, but it did happen a little quicker than we anticipated.

Got it. And then just following up, I mean, in terms of visibility, I think the question I hear most often is, as we look at consumer takeaway in Nielsen or government data or DISCUS, what have you, we've seen a slowdown in American whiskey consumption now for 12, almost 18 months. And so I guess the surprise factor is that you're just realizing it, seeing it now. And so, do you not have that kind of visibility, especially to the newer distillate contracts? And what gives us confidence that -- I mean, why make any aged for next year if things are putting back, why not -- why only just do -- cut it back where you're just making new and age goes to 0? I mean help us understand kind of how you have any visibility or confidence, especially for next year?

Bill, it's a great question. If you think about the new distillate contract business, as we did mention in our script, we have a few smaller craft regional type customers we've had some contractual issues with. But the multinationals, not so much. I mean they are moving forward with the obligations. So therefore, we do have visibility and know that, that's stable business. I think as you look forward into this, I think everybody -- this is my view, people across the industry remain very, very, very bullish on American whiskey, and we're buying inventory and buying new distillate and buying it left and right. It's been a great, great time. But at some point, when you do see a little softening and you do see American whiskey in the branded category, still has growth, but it has definitely softened. It's going to force all of them to go back and start looking at it. And that is what we're seeing now. It's just people putting everything out, holding it back to where they can. That's why our aged and our spot business is stalled for the moment. Now, to the second part of your question, as we go into '25 -- it's a great question. The quick answer is, we're not. If you heard in my point that we are -- our put-away for next year is related just to our brands. We've spent the last 2 years building a nice inventory for future aged sales. We always think the aged sales are always going to be there. But in looking at and stabilizing the business, we've taken the actions I outlined by looking at what level should we run, how do we cut costs and how do we generate cash. One of the biggest cash outlays that we have is put-away in inventory. That put-away in inventory for future sales on this basically taken to zero for 2025.

Got it. And then just one last one. As I'm looking to '25, and I just want to clarify, it sounds like the majority of, when you're saying that distillery profit is down 50%, is aged because the other question I get is, with so much supply out there, nobody needs to buy new. And even your existing contracts are going to see massive pricing pressure and you're going to have to give concessions of what you're making it for. Can you maybe just address that?

Yes. Bill, I'll start. And -- that's exactly right. Next year -- the majority of the reduction next year is driven by age, which was actually the same story as this year as well. And as far as pricing goes, this is something that we're really -- we pay a lot of attention to, as you'd imagine. On the new distillate contract side, a lot of those agreements are put in place ahead of time. So on the existing contracts, obviously, we're not seeing any price decreases. And on the age front, the age sales we are making are still clearing at pretty good levels price-wise. It's more volume at this point. But as we look into next year, we do have some pricing factored into that for the ages that we are -- for the age sales we do have in our outlook.

Yes. I think, Bill, let me add to that a little bit. So as we look at today, we’re not seeing that price compression today. We do, though, it’s a law of supply and demand. When you have excess inventories and excess capacity over time, we do expect pricing pressure. So within the color commentary that we gave you on revenue and profitability for brown goods, we did factor in price compression.

The next question comes from Robert Moskow with TD Cowen.

I appreciate the effort to kind of pull the band aid on 2025. But I am curious to know what percent of your distillate customers have you had these conversations with? You have hundreds of them. So I imagine that they're giving you their outlook as it stands today. And have you -- do you feel like you've encompassed the full set? Is the first question. And then the second is, are the small ones going to stay in business? Like do you expect another hit possibly in 2025 from the long tail of your customers that may not be around?

Great question. So I can confidently say all of our customers, our commercial team has been fully engaged. Either they're calling us or we're calling them, because we really wanted to be able to give you good, solid color commentary. While we didn't give you fiscal guidance for '25 yet, we gave you good, solid color commentary. And part of that was making sure that we actively engaged with every customer out there. As far as speculating on some of the crafts and what happens, I don't know, Rob. It would -- it makes logical sense that over time, if they can't hold up in the retail markets that -- they disappear. But that also -- I'm going to remind you that, that is also what Brandon and I've said for a couple of quarters now, is, this is the reason why we felt like if we can contract new distillate a multiyear, it provides an annuity to business. The future of this company is in brands. That's the future of this company. And I know we've been consistent in saying we look at our contract distilling business and our ingredient business is feeding us the cash to grow the most profitable segment. So yes, we've reached out to all of our customers. I can't speculate on what happens to those customers, but the ones that we put into 2025 are bigger multinational contract customers and those that we fill even on a spot basis, that we've had the conversation with, that have the intent to do.

Okay. And maybe I'll pivot to the branded side. You said yourself that things slowed in the third quarter, but you're forecasting growth on the branded side in 2025. Given that the distributors are cutting back and are facing higher cost of carrying inventory, and also that you've lapped this major launch on Penelope, like what's the path to further growth in 2025 for that branded business? What are the tactics to get there?

It's moving to where the customers are. If you look at our premium plus portfolio, it's primarily whiskey-driven today, but we've actively been adding products to it, good quality, higher-end tequilas. But I don't think it stops there. We're not going to rest on this whiskey business. It's about moving where the customers are. Yes, overall, the industry has softened. It's back to pre-COVID levels. We said many, many times, everybody enjoyed the sales during COVID. But now the market is correcting itself, and you're seeing players across the industry to correct themselves. What will also happen and it happens every time is the consumer corrects. They're going to move to other products. They're going to -- it doesn't mean whiskey goes away or tequila goes away, but who knows what the next category is. And what we tend to research and focus is what Brandon and I've said over and over. It's diversification. What's great about the branded business is its diversification. Very rarely, I can only think of one major company that has only one item. Most of the big multinationals you're dealing with, have a portfolio of items across many price tiers. And the reason why they do is to react to customer demand. That's what we have to continue to do. We have to shore up our brand portfolio so that it's not on -- especially on the premium plus, just whiskey focus. We're adding tequilas, gins, whatever we need to do to move where the customer is. And I think that's what we have, and I've said this in previous calls, the advantage that we have, we're nimble, right? We're not pulled in by a bureaucratic system. We can respond quickly to what those customers are. And I think the question is, there's a lot of people trying to figure out where they are going. But once that's all done and we do spend a lot of time researching this, we can get there faster.

Okay. And there's an appetite among the major distributors for making a bigger commitment to your -- for you -- to you in terms of market share? Because I know they're cutting back, right?

When you say cutting back, are you referring to their inventory or the rumors about them cutting heads? Or when you say cutting back?

The rumors to cutting heads.

Yes. So what you hear on that primarily is a wine focus because wine has been quite a laggard in the business. So most of what we hear on that is in their wine portfolio. You got to remember, the two major wholesalers in the U.S. tend to firewall spirit sales from wine sales, okay? So they’ve had a bigger impact there. They’re optimizing their structure there. Once again, they’re private companies. You can only go by what you hear or gets reported. So I don’t read that as a sign. Actually, if what they’re saying or what we hear is true, I think it’s a positive thing for spirits, okay, in overall consumption because they’re going to put more energy into what drives in profit. They’re not public companies. They’re private companies, but they want that money the same way. All – both of them – the big ones are leveraged and they need to generate it. And they’re going to take their energies and put it into the business that’s still there, and that’s the spirit sector.

Our next question comes from Marc Torrente with Wells Fargo.

You are into your typical contracting season now. I think this is when you have in the past made initial comments on visibility into the next year. So I guess, how much of your plan do you think is committed at this point for '25, either through existing multiyear contracts or new contract renewals? And just on this visibility you have, how confident are you with the security of those commitments? You called out some contract nonperformance in the quarter. So just any color there would be helpful.

Yes. As it goes to '25, what we -- when -- we gave you some of the color commentary on revenue and profitability. That's through us analyzing all the business that's there, who those contract customers are, which ones we've weeded out over it. The impact of sales, as somebody asked earlier, did we contact our customers, we look at their sales history. I have strong confidence in 2025. I think the visibility we have there is strong now, but if we're dropping revenue, part of it is, is we shrank that size of the business, okay? So we've weeded through a lot of, let's say, not the good situation there to get down to the core business because what Brandon and I have discussed many times is we want to give you results that we can deliver. So it's our obligation to come back to you and go, we've done our work. And based on what we know today, that we have good confidence in '25 in our brown goods. We're not proud of the revenue number and the profit number for 2025 when it comes to brown goods, but we have confidence in it, and not only confidence for our analysts, for our investors, for our Board, for our own employees.

Okay. And then how much inventory do you think needs to be worked through out there? Previously, it sounded like you're generally comfortable with what was sort of out there in the channel from, I guess, the selling standpoint. Any more specifics on managing production versus supply? Is this going to be temporary pullbacks? Are there more fixed costs that you can address? And I guess, what are you hearing from actions of other suppliers who have also recently brought on capacity?

Yes. The question of how much inventory out there is a good question. We do spend a lot of time trying to figure out who's holding what, who are the brokers out there, who are the multinationals, inventory they have, because remember, they got substantial inventories as well. So we constantly are looking at that and trying to analyze it. Do we have perfect visibility into it? No. No. That's the honest. Do we know what we've sold and what we hear and what we see in some of the TTB reports? Yes. So there is inventory out there, and it's held. But one of the things that people -- and the reason why we have -- I think we haven't seen tremendous pricing pressure yet is because everybody is sitting and waiting. Everybody is sitting here going like, I may not -- if I'm buying spot, I may not be buying spot right now, but I want to see how this plays out. I want to see how my own inventory plays out. I also -- I think I've said this in the past, but now I'm saying it now, is if you're a major supplier in our industry, they're brands companies, okay? And one of the things that you will start seeing on the shelves, and you already see it to a certain degree, is they'll age up their offerings. For the longest time for years, and I know we've had this on prior calls, people couldn't sell anything older than the 4-year-old because we didn't keep up with it. Now they got inventory. So you're going to see the players on the brand side start to offer 7-year-old, 10-year-old, 12-year-old products. I don't speculate, and I'm just speculating that they're going to dump that on the market. Could they sell some barrels? Yes or no. What you will see hit the market is PE-backed companies that have invested in it, brokers that invested in it. But as Brandon and I've said many, many times, that's a one-off. Those are one-offs. Once they dump that, then it's back to the catch directly to the brand's growth. So look, the supply -- the excess inventory was built all around huge optimism across the industry on American whiskey. And that softened enough that people are sitting back and doing their jobs and going, well, wait a minute, let's take a breath, let's analyze where we're at. Brandon, anything you want to add to that?

Yes. As far as the cost, Markus, you’re exactly right. So firstly, in 2024, we have reduced our put-away on a net basis, north of 30%. So that work has already begun this year. And as David said, it’s going to continue next year as well. And there is – yes, there’s a number of fixed costs that will need to be absorbed, and the team has been working now for some time already on addressing that to mitigate those as much as possible.

The next question comes from Ben Klieve with Lake Street.

I've got one on the Ingredient business. You noted an expectation that, that business was going to improve here in the fourth quarter as some of the exports kind of dissipated and you brought in some new domestic customers. I'm wondering if you can kind of help parse out those two parts of the business? Can you talk about the kind of success year-to-date of the domestic business that gives you a sense of optimism in the fourth quarter? And then really, how material that export headwind has been, not only in the third quarter, but year-to-date?

Yes. Ben, I'll start. Yes. So for our specialty protein business, which is a very high-margin product line for us, a lot of those sales were in exports specifically to Japan historically. And that's been due to the strength of the U.S. dollar as it relates to the yen, that's been a tremendous headwind for us year-to-date. And while we did have some success in Q1 and Q2, the life cycle of a new sale for the Ingredients business takes time. And it can take anywhere from 2 to 3 to 4 quarters to get something spec-ed into a new product and to actually make that sale. And there were two customers we had in mind for Q3 that we are anticipating, that we've made a lot of great ground with year-to-date. And those two customers, while they're still planning to purchase, it's now gotten pushed into Q4. So the good news is we are making a lot of progress on that, and we expect it to continue in Q4 and then into next year as well.

Okay. And one clarifying question there. Were those two customers based in Japan or domestic or elsewhere?

Yes. Thanks for – let me clarify them. Yes, they are domestic. That's right.

The next question comes from Sean McGowan with ROTH Capital Markets.

First, a quick one. Would you expect -- can you hear me?

Yes. Yes, sir.

Okay. Yes. Do you expect, given the headwinds that you've described, that advertising as a percentage of revenue in '25 would be at a higher level than what we've seen in '24 so far?

Yes. We'll give more detailed guidance, Sean, in Q4. But right now, I can tell you our plan and expectation is still to continue investing for Branded Spirits between 14% and 16% of net sales in advertising and promotion. We still feel that, that's a good level knowing that a lot of that spend is going towards our premium plus portfolio, which is about -- as David said on the prepared remarks, about half of our Branded Spirits sales. So right now, there's no change in thinking there. That is still as we view it, the future of this company and where we plan to grow in the future.

Okay. And then kind of a more general question. Given not only the change in the landscape and your outlook, but also the change in the stock price, do you see a change in your capital allocation plans regarding share repurchases or acquisitions? Just general commentary there. Has there been a shift?

Yes. So yes, great question. We talked to some of this already, but -- so M&A remains -- high priority for us. We're always looking to do something that's going to strengthen our position within Branded Spirits. For CapEx, we've said on these calls before, Sean, as you know, that we view 2024 as the high watermark for capital expenditures. This year, we're now expecting $78 million. We'll share more specifically what our outlook is for 2025 on the Q4 call, but it will be reduced from this year. We're being consistent there. And another big capital allocation priority has been put away. And David has already said that we're going to -- that's going to be driven down to really the -- what we need for our own brands next year. So yes, it is shifting from the CapEx and from the put-away standpoint, both of those should be free cash flow accretive, all the things being equal. As it relates to dividend, we still -- we feel the dividend we're paying today is manageable, and it's still a good way to reward shareholders over time. And then, yes, for repurchasing, as we've discussed, the Board did approve a $100 million share buyback plan in the first quarter. There's no end date to that. So that's open ended. We bought about $10 million worth of shares to date. But when we look at the future of this company and where to add shareholder value, we like some of our other priorities ahead of the share buybacks, but it's still something we're going to continue to watch.

The next question comes from Mitch Pinheiro with Sturdivant.

So getting to the barrel distillate that you've put away, it's up like $40 million roughly year-over-year, and I know there's some inflation in those numbers. But is all that related to your own Branded Spirit brands?

Yes. Just to clarify, year-to-date we've put away on a net basis, Mitch, approximately $32 million worth of inventory. Last year, for the full year of 2023, we put away north of $51 million. So we are down more than 30% this year. And we expect that year-end put away to be $30 million to $35 million, which is up a little bit from what we've talked on previous calls, but really, that has less to do with our put-away in production and more to do with our less age sales coming in on the spot market. And yes, as we move forward, we feel really good about our inventory position. We feel like we put-away record amounts in the last, say, 2 to 3 years. So we feel like we're in a unique position where we can hit pause for some time, as we plan to do in 2025, for our Distilling Solutions speculative put-away and monetize some of the inventory we have. Historically, the majority of our put-away has been for Distilling Solutions. That relationship has become less of a proportion to brands put away in 2024. And as David said, next year, our plan is, any barrel we put-away at this point in time is going to be for our own brand spirits portfolio.

Yes. I mean that's good color. But the -- I would have to imagine, you would never disclose this, but the average age of your barrel distillate has -- I guess, that's been increasing over the years. I know you're putting a lot more away now, but you still had a fair amount before your accelerated put-away. I mean, the age only gets more valuable in -- generally speaking, and all your premium whiskeys are all higher age products, and that's what's growing in the premium plus. So is it fair to assume that your age, your barrel distillate is higher age in inventory now?

Yes. It's a little tricky because the age barrels we sell and bottle tend to be 3, 4 or more years old. So meanwhile, anything we put-away -- for example, this year is starting off at 0 years old. So it's going to keep that average age, and you're right, Mitch, we don't disclose that for competitive purposes, pretty low in terms of less than 4, 3 years. But yes, I think, as David said, the tendency right now in the market is to age up. That's a really good way to resonate your brand with consumers in this market and to differentiate yourself. And to your point, these barrels tend to grow in value with age and not the other way around, which is distinct to our industry. So we've been here before. There was a number of years ago where we slowed our put-away. That was pretty short-lived, as you all recall, because this market can be dynamic and fluid. But that's the beauty is we can plan as we are now for 2025. And if things change, then we'll change with them.

Yes. Mitch, I'd add just one piece of that. If you look at the brand side of the business that we have, we've intentionally grown our aged, okay, because of what I said earlier, we want to be able to age it up. So what Brandon is referring to is the MG put-away for future sales. And yes, I mean, we've been fortunate that we were able to sell those off, so we can refill them as fast as we can. So you've got 2 years ago, 1 year ago in there. But I do think, to your point, that, that only gets better with time. Again, this market is not going away. It's going to push down. It's going to consolidate a little, but it's there. And this is why we were able to say we remain committed to this section of our business. It's a good cash-generating piece of our business. It's just not going to be our growth engine of the future.

And just one other thing on that, and David said this, but we are -- we do view ourselves and we believe ourselves to be one of the only contract suppliers that can offer the scale of age and new distillate as we can. And so David shared that one of our strategies is selling barrels internationally. And a lot of what they're looking for is aged, and they also want that assurance that they can have more age to come in the future. So our ability to both have age to sell, but also distill today to sell them again in the future, we feel really differentiates us in the future as we go forward.

And then you expanded Luxco this year. Is that -- with a little bit of the slowdown, is that going to have some fixed cost negative leverage in 2025?

Yes, good question. Right now -- we reserve the right to maybe share a little bit more on the Q4 call, but that type of headwind is not anything that we anticipate at this point in time, is going to be material.

Okay. Then getting back to the -- it does surprise me that industry-wide everybody sort of missed the slowdown. I'm curious whether any of that has to do with any on-premise, off-premise trends that may have been missed? And then the second question is, what also may have been missed, which I've been seeing for a while is, consumer liquor cabinet destocking. Once you can -- once you're able to get your favorite brand back during the COVID error, it was hard to find it. And if you found a bottle or 2, you bought 2 or 3 or 4 bottles because you weren't sure you were ever going to see them again. And I guess at some point, consumers decided -- they felt more comfortable with starting to see their favorite brands on the shelves and starting to -- instead of buying it, just going through their own cabinet and reducing their own inventory, I guess there's no way -- Have you done any research on that part of the equation as far as the slowdown in consumption is concerned? And just also the comments on the premise versus -- on-premise versus off-premise missing the slowdown here?

Okay. And I’ll take that one. So in general, if you think about on-premise versus off-premise, the mix is roughly the same, but the problem post-COVID, there’s not as many as on-premises there was. So you’re still seeing that being relaunched over time. I’m not going to attribute that mix to the industry’s view on why it happened. I tend to take more of a macro view on this. I tend to think that we’re in the middle of an election. We’ve had all kinds of interesting things going on in the environment. Consumer spending is a little bit slower than this. I think there’s a lot of external pressures going on here that is making that consumer make different choices, all right? And so I don’t want to speculate on they’re selling more there or not selling more there. I’m attributing it to that consumer. I also bring it back to this COVID piece. Having done this for 30 years in the brands, what we’re selling back to is about what we should be in the industry. COVID was great for our industry for the period of time. And now when we all reflect back and we look at these last few years of correction, and it is inventory destocking at a wholesaler, it is inventory destocking in a pantry. You’ve got multitudes of variables coming to a head. Those 2 shall pass. Now what we all are terrible at doing, myself and everybody else in the industry is telling you exactly when that’s going to pass. You know why? Because we can’t read the consumers’ minds. We can only watch what they’re doing and react to their needs.

This concludes our question-and-answer session. I would like to turn the conference back over to David Bratcher for any closing remarks.

All right. Thank you very much, everybody, for listening. As we said, we’re not pleased with our results, but what I’d like to take a moment to remind everybody, the MGP is a transformation story. All right? We’ve clearly said what we intend to be in the future. We intend to become a premier branded spirits company. Transformation for MGP is nothing new. If you go back 10 years ago, MGP was a white goods producer. The margins were thin, very skinny. They transformed it into a contract brown good distilling. Their timing was perfect. They roll the wave up. Now, and started with the acquisition of Luxco, they were transforming it into a branded spirits company. And since the day I took the seat on January 1, we have consistently said every earnings call, everything starting with the very first release of what we believe, we will become. That is the plan for the future. Yes, our brown goods business deteriorated faster than we anticipated. I think it deteriorated to some of the questions faster than anybody across the industry anticipated. But thank goodness, we have a vision of what we want to become. And that is a premier branded spirits company. That’s what I want our analysts, our investors, our employees, our Board, everyone to know it’s a transformation story, and we’re going to accomplish that mission. So with that, thank you for your interest in our company and for joining us today for our third quarter call, and we definitely look forward to talking to you in the fourth quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.