MGP Ingredients, Inc. (MGPI) Earnings Call Transcript & Summary

Good morning, and welcome, everyone, to the 2021 MGP Ingredients Investor and Analyst Day. I'm Mike Houston with Lambert & Company, MGP's Investor Relations firm. And joining me today are members of their management team. Before we begin today's event, it is my responsibility to inform you that this event may involve certain forward-looking statements such as projections of sales, operating income, gross margin and effective tax rate as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to a number of, factors including the risk factors described in the company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call today. With that, I'd like to turn the webcast over to MGP's President and Chief Executive Officer, David Colo. Dave?

Thanks, Mike. Hopefully, that's not the most entertaining thing you're going to hear today. So thanks, everybody, for coming. My name is Dave Colo, CEO of MGP. We'd like to welcome everybody here to this beautiful facility, the Lux Row Distillery. It's a gorgeous place. You're going to get a chance to take a tour after we get through the session here today, and I think you're really going to be impressed. Let's get into this. So today, we got our management team here. They're all sitting in the back left here. I'm going to kick the presentation off today. We have Brandon Gall that will take us through some of the financial metrics. He's our Chief Financial Officer. David Bratcher is going to give a little bit of the history of Luxco and the progression of the company over the last several years. And Donn Lux is also going to join David and be part of that presentation. So thanks, Donn. Dave is the Chief Operating Officer of MGP. He was the President and Chief Operating Officer of Luxco for 7 years but has been with Luxco 20-plus years and a seasoned veteran in the spirits industry. And I think you'll see that come through today as David speaks. He also has responsibility for all of the commercial activities and operational activities now in that role for the broader MGP. And this is a good example of what we're trying to do as we've integrated these 2 companies together. This leadership team is a good example of how our philosophy of when we make a major acquisition like this, a typical mistake that's made is the acquiring company eliminates all the senior leadership of the company, that they just acquired. The reasons for that typically are that's where a lot of cost is, right? And they need those cost savings for synergies. We've taken the exact opposite approach here. Luxco is a phenomenal Branded Spirits company. They've got an extraordinarily talented senior leadership team, and that entire leadership team is still intact. And they -- a number of them now have broader company-wide responsibilities. So we have a blended senior leadership team as a result of this acquisition, and it's really strengthened our management team as a result. Mike Buttshaw heads up our Ingredients business. So Mike's going to take you through the ingredient solutions business and all the exciting things that are going on there. Then David Dykstra will take you through our Distillery Products segment. I'm sure you're all interested to hear about how the American Whiskey business is doing, and it's doing quite well. And then Ryan Earey and Fletcher Buchman are going to take us through the Branded Spirits segment. Ryan heads up all of sales for Branded Spirits. Again, he's been in the industry a long time. Knows the distributors extremely well and manages a quite large Branded Spirits organization for us. And then Fletcher is another example of someone that he had responsibility for marketing for the Branded Spirits, but he now has responsibility for marketing for all of MGP. So he also supports the marketing needs of the Distillery Products and the Ingredient Solutions segment. So you're going to hear from this team today. We also have with us our VP of HR, Eri Lapish, our General Counsel, TJ Lynn, and our Head of Operations, Steve Glaser. Oh, I'm sorry, and our Chief Information Officer, Amel Pasagic who is also an example. Amel was the head of IT basically for Luxco. He is a super talented guy, and he is now the Chief Information Officer for the entire company. But a shameless plug for Amel, he's the best IT leader I've worked with and what sets him apart is his business acumen. So he's not just an IT guy, he understands the business from the beginning of the process to the end of the process. And then he also knows how to take all the information that you collect and turn it into actionable intelligence for people to make better decisions to run the company. So thanks for being here, Amel. We also -- I want to introduce Donn and Michele Lux. They're back here. Thanks for being here, Donn and Michele. None of this would be possible, what we're going to -- a lot of what we're going to take you through today without Donn and Michele agreeing to this merger of these 2 companies. So we're excited to share a lot of that with you today. So the agenda, you can see I'll open it up and talk a little bit about what's changed since we did our last Investor Day, which was in 2018. Then I'm going to turn it over to the business unit leads that I just mentioned. They'll each take you through kind of their strategies for the next few years and how we're going to grow these businesses. Then like I said with David Bratcher and Donn, they're going to give you a little -- I ask them, can you guys just talk a little bit about the history of Luxco, how the organization has evolved and then ultimately what led to where we're at today with the 2 companies coming together? I'll cover ES&G. I don't think you can have a meeting today without talking about ES&G or DEI and getting questions about it. So I'll take you through kind of the journey where we're at as a company in that process. Brandon will talk about some of the financials, and then I'll close it with some concluding remarks. We'll then do a Q&A. We'll have all the presenters up here on stage sitting here. And we've got an hour allocated, if needed. So you'll have the chance to ask questions to everybody on the team. We're going to have a box of lunch during the Q&A. So we'll have lunch during that session. Then we'll go on a tour. The tour is going to be really cool because what you're going to get to see, we're going to showcase products from all 3 of our Whiskey Distilleries. So make sure as you go through, you'll do tasting of products from all 3 distilleries as well as obviously get a good understanding of how Lux Row Distillery works. So that's kind of the flow for the day. All right. Since we did this last Investor Day in 2018, we've had a good run. 2019, I think if you've been following the company for a while, it was a little bit of a step back but we've come back very strong in 2020 and 2021. 2020 was a record year for MGP. It's the most profitable year of the company has ever had, and it was driven by growth in both our Spirits Distillery Products segment as well as our Ingredient Solutions business. And the LTM as of the end of Q3 for 2021 of this year, as you all know, we're on a record-setting pace again for this year. So hopefully, as we finish this year, we'll have 2 consecutive years of record results. And again, those results are being driven now by all 3 of our business segments. So you can see revenue and growth on an LTM basis is up about 50% from 2018. Our gross profits have more than doubled. Our gross margin has increased by 950 basis points. Our operating -- or adjusted operating income has doubled as well, and it's up about 630 basis points on a margin percentage basis. And adjusted EBITDA has also more than doubled, and it's up around 630 basis points as well. So very strong performance. The good news here is it's not one part of the business that's driving these results. It's all 3 of our business segments delivering to these results. Obviously, one of the significant changes since we were all together the last time in 2018 is the acquisition of Luxco and really increasing our scale and presence in branded spirits. As we talked, the strategy here was MGP had been in the brands business for the last 5 or 6 years, trying to really build brands organically and by making a couple of small acquisitions. So we bought George Remus, a small bourbon brand. We bought Green Hat Gin, a small gin brand. And we've been managing that and trying to grow those brands out state-by-state. And what we found is it takes a long time to grow brands that way. And we had to kind of build the organization capabilities at the same time we're rolling these brands out. And people used to ask me, "Hey, was that -- how profitable is your brands business? And I would always say, well, we're in investment mode," which is code for we're losing money. So what we decided to do is switch gears and say, let's go more to a buy versus build model. And ideally, what we wanted to try to find from an acquisition point of view was, could we really find a company that was already established in the industry, had a great portfolio of brands and can also be an enabling transaction for future M&A, right? And we looked around, we studied several deals and ultimately had a conversation with Donn and were able to come to an agreement to bring these companies together. And that's just been a huge win for the company. And like I said, I think it sets us up for the next 20, 30 years to really grow in our Branded Spirits segment. Luxco has a lot of capabilities. This is a full-scale company with a broad portfolio. We literally have brands in every segment within Spirits. We have a national sales platform with tremendous relationships with distributors. And that is key in this industry in the 3-tier system. If you don't have good relationships with distributors, it's really hard to have a good route to retail into the broader market. Donn and David and his team and Ryan have phenomenal relationships with distributors, and that was one of the key things we look for as well. Operationally, a lot of capabilities here. You can see there's 3 distilleries. We're in the show place here, which is absolutely gorgeous. We have one down the street in Lebanon Kentucky, you'll get to taste some of the products there. Yellowstones, the flagship brand coming out of there. We have a joint venture tequila distillery in Mexico with a long-standing partner relationship perspective that Donn and his family have had. It's a gorgeous facility. I was down there a couple of months ago with David. First-class operation with first-class people. You couldn't ask for a better partner in the tequila world than our partner down there. And then, of course, we've got 3 bottling facilities, Cleveland, Ohio; St. Louis, Missouri, and believe it or not, we actually have 1 in Northern Ireland as well. So a lot of capabilities. And then again, you'll get to learn a little bit more about the brand portfolio today. In Distillery Products, this business has been on a roll. When COVID hit, nobody really knew what was going to happen in the industry. On-premise got shut down. We lost about 20% of the revenue in spirits typically goes through on-premise. But our business has done extraordinarily well. We changed our go-to-market approach on this business in Q2 of 2020. We went from the old 3x and 40y pricing algorithm that we communicated quite broadly. And we said, you know what, that's created -- it served its purpose. It's now creating a few issues for us. So let's change the strategy and focus on growing gross profit by increasing market share at market-based pricing. And David Dykstra and his team have done a phenomenal job there. And we haven't really lost any pricing power but man, have we gained a lot of business. And what this chart shows, if you look at the left side, that's the number of customers that we've sold to by quarter. And it goes all the way back to Q1 of 2018. And look at what happened starting in Q3 of 2020. So that's the combination of our brown goods customers, which includes new distillate and aged. And then if you look on the right side, you can see the impact that it's had on brown goods sales and then the overall segment of Distillery Products gross margin. And it's a direct correlation, right? This is being driven -- a lot of these sales are being driven by craft customers. So the craft customers business is doing extremely strong business right now. But we've also seen some of the bigger American Whiskey players knock on our door as they're starting to have supply issues with their liquid. So Ingredient Solutions, this is Mike's business. Again, excellent results here. These are being driven by consumer trends. People want more plant-based nutrition in their diet. They want plant-based proteins, plant-based fibers. And our Ingredients business is 100% plant-based product portfolio. In this business, the gross profit doubled from 2019 to 2020 primarily driven by Mike and his team focusing on optimizing the product mix to higher-margin products, optimizing the customer mix and optimizing the channel mix. And then Steve and his team really focusing on operational improvement in our Atchison, ingredients facility to free up capacity to support these levels of sales. So phenomenal work on this. And then you can see the impact on the right side here that it's had on our gross profit percentage and obviously, the overall gross profit dollars. Okay. So where are we at now? This is the evolution of this company over the last 10 years or so. And you can see we've laid out here a couple of key milestones. The first one was in 2011, we bought Lawrenceburg and got back into the whiskey business because MGP had been in the whiskey business prior to this. So we got back into the bulk whiskey business. And you can see how we've leveraged that over the years. And the team has done a fantastic job with that. In 2015, we were laying down whiskey and selling new distillate prior to that, but we really started ramping it up. And that's what's kind of really driven the growth -- the majority of the growth in this company for the last, let's call it, 5 years. In 2020, we had a record year. Both businesses were firing. So our Distillery Products segment as well as the Ingredient Solutions business. So we finished that year extremely strong. We carried that momentum into '21. We were on the acquisition hunt during 2020 into '21. Obviously, we did the deal with Donn on Luxco. And we're on record pace this year to set another record earnings for this company. And you can see the phenomenal growth in revenue as a result. A lot of that revenue growth, obviously, is when you bolt on a company the size of Luxco, but the revenue growth in ingredients and distillery products are also at record levels. So it's contributing from all 3 of our business segments. So where are we going in the future? M&A and organic growth are going to be the story. So we're going to continue to grow all 3 of these platforms organically. We're going to continue to margin up the product mix, the portfolio, the type of innovation we bring to market. And we're also going to look at M&A opportunities. We're focusing on Branded Spirits M&A, but we're also looking at Ingredients M&A as well. So with that, I'm going to turn it over to Mike Buttshaw. He's going to talk about Ingredient Solutions.

Thanks, Dave. It's great to be with you all here this morning and have the opportunity to talk a little bit about our Ingredient business. Also enjoyed meeting a few of you during our coffee session. So thanks for those questions already. I'm going to take a few minutes and talk to you a little bit about where we've been, how we've kind of maneuvered the last 5 years. But more importantly, I'm going to spend more time talking about where we're going and give you some ideas about our strategy. But first, I want to talk to you a little bit about our mission statement. Everyone on our team knows that the customer is extremely important. Our point of difference going to market is we come alongside our customers, more personal way. We collaborate with them. We try to give them solutions to help them get to market faster. And so this is really our focus. We want to be a strategic business partner by collaborating through kind of innovation and also best-in-class customer service. And my entire team, whether it would be in sales or whether it be in R&D or even our marketeers, we all do the same thing. It's what we focus on, and it actually sets us apart from some pretty large competitors. So here's this look back. I've been with MGP since 2014. As you can kind of see, it's been a very progressive build upon, build upon, build year. When you look at where we were in 2017 and then you look at where we are today, we're approaching a $100 million business unit. What's the most encouraging thing is the margin accretion, the improvement of our margin. We've added over 900 basis points in margin. And what's really cool about this is we're still on a very long runway, and we have opportunities to continue to enhance our portfolio and even improve margins further in the years ahead. We go to market with some key brands, which I'll talk about in just a few minutes. Fibersym is a part of our specialty starches and actually offers a premium dietary fiber. We're aligned with some of the largest industrial bakers and pasta makers in the world because we're so heavily leveraged there with the right brands, growth continues to just go year after year. Our specialty wheat proteins are under Arise and ProTerra. The ProTerra brand, we just actually launched a year ago and is showing great success thus far with a huge opportunity for another growth engine. ProTerra is that brand that gets into plant-based proteins, and it offers consumers a chance to consume more proteins from the earth rather than wheat. And finally, the Arise brand is a wheat protein isolate that actually MGP pioneered years ago. And this particular product goes into many, many bakery items and also soft tortillas. You might say, what does it do? It actually adds a great deal of functionality. It actually adds mouth feel, texture, freshness, longer. And what's really cool is when you combine the specialty wheat starch fiber with our Arise, it actually lowers net carbs. Our consumer trend, which I'll talk about briefly in a few minutes. And so as we go to market, we're really excited about the future. It's great to look back, but I really want to spend more time talking to you about the future because that is what gets really exciting. When I talk about being strongly positioned in the markets, we sure are. We're actually not only positioned on consumer trends, but these markets are growing. Growing markets around eating more plant proteins, growing markets around consuming more protein from the earth, growing markets around dietary fiber. All of these markets continue to have tailwinds to our business. And we're very well positioned to capitalize on these tailwinds. And what's really cool about our team and our group of marketers, we're bringing solutions to our customers in a very dynamic way. Letting them understand these kinds of tailwinds and how we can help them capitalize on those and actually grow their business faster in some very significant multinational brands. And so really, how are we going to do that going forward? I'm going to quickly go through 5 planks. But as Dave mentioned, we will have a chance for a Q&A period later on. But the 5 strategies are actually very secure. It's amazing. We did this last year, and they were so appropriate. We didn't really have to change any of these going into this year. We're looking at expanding Fibersym and Arise. These 2 platforms drive a lot of profit and also enhance margins. We're going to go into expanded texture proteins under the new ProTerra brand. We may even have an opportunity to get into a new channel, which I'll talk to you about in just a few minutes. We also have clean label. Clean label starches, as you know, are one of the consumer trends as well. Consumers love a simple label, clean, efficient. And that's what's happening out there, too. And we can actually capitalize on that with a rebranding of what we've done on that starch. We also, as Dave mentioned, we're optimizing our channels. We're optimizing our customers. We're optimizing our distributor network. And we're going into actually new markets. Many of you may not realize but we are a global ingredient provider where we're routinely shipping product to Southeast Asia, South America, of course, Canada, Mexico and even now the EU. So we're not just leveraged here in the United States. We're looking globally as we continue to grow. And that's part of number four, optimizing channel, optimizing customers, getting our product efficiently into market. And finally, it's really cool to let you know -- all know that we do have an aggressive M&A approach. We're actually as a team looking at opportunities to how we can add to our business, margins that will be accretive, actually looking at new channels. We're not just going to look at B2B or Ingredients. It might be a food service opportunity. It could be a retail product, maybe an emerging brand. We have a team in place that can evaluate these kinds of opportunities. And so that's really a cool thing to have that added to our strategic approach for growth in the next 5 years. So let's look at Fibersym. Fibersym, I actually spoke to a couple of you, what is it? Well, certainly it's a dietary fiber. It's fully approved by the FDA. It's a cross-linked wheat starch. All that means is we know how to modify that a bit and turn it into a dietary fiber. What's really nice is, it actually competes -- it's a premium fiber. And it doesn't actually -- it digests very easily in our system. So like some of our other fibers out there, they could give you a little bit of digestive complication, if you will. Our fiber doesn't do that. And so it's considered a very premium fiber. And what's really cool about this platform is we can bundle our wheat protein along with fiber. And when we do that, we come to our customers and we can offer low net carb keto-friendly products. One of our biggest movers this year is actually helping one of our biggest customers come out with a new keto-friendly bread. It's in the grocery hour right now. And man, has that been a nice bump, right? And what's nice about our customers, they're investing in these brands. So when you get with the right customer, you get a double bump. You bring them a solution, they're putting money against their brands, our products grow. And so I see this as a real driver for profit in the next 5 years. We are still on a long runway and margins will continue to improve. Next, when you look at expanding our texture plant protein, this is really going to be a future growth driver for us. We actually have very technical know-how on taking plant proteins and texturizing them. What does that actually mean? It turns a product into a plant protein that actually has mouth feel like meat. We also hired a chef about a year ago, and now we're flavoring these plant proteins as the texture. And this is going to give us opportunities to get into that new channel I talked about potentially food service next year. We're going to continue to focus on getting the best combinations of proteins available. We're not going to stick with just wheat. Maybe we can now go with pea -- we can go with soy. We can go with pulses. We actually are innovating combinations, which give more functionality in the marketplace. And finally, we're actually bringing on new specialty distributors around the world, Asia, South America, the EU. And we also have a distributor out of Chicago that specializes in this market. So we're very bullish on this platform. We fully expect it to be a profit driver and a growth engine in the years ahead. I talked about clean label starches. One of the big drivers, you can see 50% clean label means minimally processed. Well, when you see on your label wheat starch, that's a clean ingredient. Customers are more and more liking the fact that they can pronounce the words on the ingredient deck, right? They know what they are. And we are actually rebranding this platform. It used to be considered a commodity starch. We don't look at it that way any longer. It's an opportunity for our customers to have a clean label and a very functional ingredient. We're actually getting into the pet treat segment now with some key customers, a brand new market entry, really holding out great promise for the future. As I mentioned, we're optimizing customer, market and channel. This is something that I don't think ever changes, right? We're always trying to cultivate new business, bring on new customers, help drive more profit. But what's really cool about this is we're actually looking at new channels. And this is -- you see the picture of the campus dining. Keep your eyes and ears open because we're going to be launching a product very soon. And we feel it's going to get into the food service channel, and it's going to be very successful. It's all part of trying to do the premium idea of how we make more money for our shareholders, how we expand margins further, where do we go with our products to actually even position ourselves for a bolt-on M&A. So this is the last. The M&A, this is new for us to have a really cool way to grow our business. And as we expand into new channels, as I mentioned earlier, we're going to have opportunities to look at all kinds of different M&As. So I'm very thankful for this opportunity with MGP. And now I'd like to introduce my friend and colleague, Dave Dykstra, who handles our Distillery Products.

Hello, everyone. Thanks for coming. I'll talk a little bit about our Distillery Products here and our good message. And I'll start with our mission statement. And what I really like about our mission statement is that it focuses on our -- on the strengths of our group, creating lasting partnerships. We do that well. We have many partnerships in the beverage alcohol industry. We create -- we have a great sales platform, a great operating platform from which to create products and a great product development team that helps our customers create their either craft brands or major market brands across the globe. If you look at the last 5 years, we've also had great growth in both our sales and our gross margin. And that is done on the strength truly of our new distillate and aged goods. As we've grown that business, our gross profit has grown. And we expect over the next several years, we will be able to continue to grow that through as the category continues to grow over -- due to the strength of the whiskey market. I think most people know, our brown goods that we have 10 to 15 major mash bills we produce and age to sell into the market. But what's important about our white goods is we're a very big gin producer, which is not talked about a lot in the industry. We're one of the largest certainly in the United States and probably in the globe. And so that's very important for our growth as well. Our industrial alcohol, we are phasing it out slowly. As our beverage alcohol grows, it's one of -- it's not a stable business right now, as we'll talk about here in a little bit. So our 5 major strategies are more -- are based around us becoming a more focused beverage alcohol company. We're again eliminating our -- solely eliminating our industrial alcohol sales, continue building our multinational base as well as our customer base, enhancing our offerings to become a solutions provider and then attracting control labels as we move forward, which is a whole new market for us and, most importantly, developing an export market strategy to become a more global company. As you can see, we've been fairly successful in reducing our industrial alcohol over the last 3 years. We're doing this for 2 principal reasons: First, the industrial pricing is not as stable as the beverage alcohol market. And secondly, with the rise in COVID, many nontraditional producers expanded rapidly. And now -- we now have about 500 million gallons of overcapacity in that industry, more focused towards the industrial market than the beverage market. So we want to withdraw back to the customer base of which we're the strongest in, which is the beverage alcohol sector. As Dave mentioned, we've had great success growing our beverage alcohol customer base, especially in the aged and new distillate business. And that is on the strength of the Spirits industry, which has grown tremendously over the last 10 years. And that's been led by super premium whiskey, super premium gins and rye whiskey, all categories of which we're very strong in and which we could take out to our customer base. Also, the growth of the American whiskey business last year at 6.9%. We think it will be at least that, if not a little bit higher this year. And we'll have a long runway for growth mainly based on we're still not at the peak of 1970 of the American Whiskey category, and we have twice as many legalized drinkers today as we did in 1970. We want to enhance our ability to become a solutions provider. The addition of Luxco has helped us do that tremendously. We now can do packaged design, concept innovation and bottling as -- for those select customers of which we want to partner with on a much deeper basis. Also, our export program, we really only began looking at growing outside the United States in 2019. And we spent a whole year just educating our -- educating those select customers we targeted on just -- about MGP. Most of them only knew us as a brand neutral spirits provider, didn't even know we produced whiskey. And so it took us a year just to introduce ourselves. And then last year, we had some success selling abroad. This year, more. And we believe with the tariff being removed, if it does finally get removed at the first of the year, we'll see a lot of reinvestment in brands overseas, and we'll be able to capitalize on that. And really for the foreseeable future, that should be a good growth market for us. And lastly, we want to boost and get into a market we historically have not even been able to entertain, which are the control labels. They want packaged goods. We obviously didn't offer bottling. We also were not good at package design, concept innovation. And with the addition of Luxco, and we work with them, we'll be working -- or are working with them going forward to get into this market segment, which we just traditionally have not been able to attract. Now introduce you to David Bratcher to lead into the branded segment.

So we did a audible here. I asked Donn to join me here this morning. I thought for me to be able to kind of give you a brief history on what we're doing. Here's the guy between -- our investment firm was Lux and Bratcher. He had the money. I spent all the money. So a really good gig we had going. So I do want to give you just a brief glimpse of where we are, where we've been and where we are today. And then we're going to turn it over to the people who really run the business today, today, which is Ryan Earey your VP of Sales; and Fletcher Buchman, our VP of Marketing. Here's a time line. It's in your presentation. You can read it. It's just a time line. But to me, it means more than a time line. This signals to me the evolution of our company. If you look, we were started in the early 1958. It was started by Donn's father and his father-in-law, David Sherman. And in those early years, it was built as a private label distributor for the friendly wholesale operation that they had in Missouri. As we progress through, in the '80s and '90s, Donnie joined the organization in the mid-1980s. I joined in the mid -- or the late 1990s. We went off and did our thing. We really focused on growing the business 2 ways. It aligns perfectly with like Dave Colo said, acquisitions, organic growth. So you see here all this beautiful acquisition chart Donn and I have looked at. This is just a sampling of deals, but I bet together, if you went in my office and look, we have a trophy wall. There's probably 50 things that Donn and I've done close together and I probably looked at 500 deals it feels like over the years. But this is a small sampling of it. As we continue to do that in the last little bit here to present, we said, let's start invest in the assets that we own. How do we build the brands? How do we continue to change the face of the company forward? So let's back up as we look at this time line again. It really represents 3 phases for this company, the first team, the value proposition. We got into the business as a private label manufacturer. That second stage is continuing to build that brand portfolio through mid-tier acquisitions. Once we did that, that led us into this third stage, premiumization of the portfolio. So we do that in a couple of different ways. We would focus on organic growth, focus on repositioning brands we acquired, making it fit the consumer demand and the price points that we're driving at that time. And more importantly, you're standing in one of the biggest marketing opportunities that we had here. This is premiumization of the brands, especially in the whiskey and the tequila categories. This is where the market's at. People -- the consumers today are extremely educated and want to see the real thing behind it. Anybody can build a whiskey distillery. Very few people can actually do this and have a real brand behind it. So we've evolved from a value proposition to a premium proposition. And in my -- well, as he reminds me every then and now, we put our money where our mouth is. I put my mouth where his money was at, okay? It's the way it really worked. So it's been great. I would say, as -- working on 25 years with the family. Donn and his father, especially Donn was a mentor to me throughout this. You come out of grad school and you get an opportunity. You could go to work for someone and just focus on a single area, or you can go to business boot camp. That's what Donn set me through was business boot camp. So we covered every single area of the company. Even today, we look at each other and we go, "Wow. Think about the last few years." We also ask ourselves, why did we make this change? If things are so great, why did we make this change? That's why I wanted him up here. I want you to hear it from him why this was a good deal for us. Yes, you're going to follow that. Go for it.

Thanks, David. This is on? So yes, so what you see here is really a vision that started back in 2013 when you said to me, our whiskey business is growing, and we're going to need to really find our own facility and build our own facility and so on. And it just goes to show with collaboration and letting the people who run your business really run it and tell you what the right thing to do is. That's what this is. That's a very short story. I have a very long process of driving around the state, trying to find locations. So why are we here? So one thing I like to talk about is my 3-legged stool. And basically, what's right for Luxco? What is the best strategy to try to maximize the platform that we have which is the network of distributors, not only in the U.S. but around the world? The great branded products we have, all of our facilities and so on. And about 3 or 4 acquisitions in a row, kind of mid-2015, 2016, 2017, we were always the bridesmaid. And really, the light one off for both of us. I said we have got to find somebody that we can join forces with so that we can have scale. We had many family offices contact us when we were looking at deals, whether it be from Diageo or from Jim Beam or other suppliers. We had private equity people interested in us, but none of it felt right. And it just didn't -- because I believe in the platform, and I just thought if we just waited that sometime we would find the right organization that kind of looked at the business the way we looked at it. So that was about 75% of my 3-legged stool. The other 25% was combined of what's best for my family longer term. So I have 3 siblings, and they were all in the room when my late father said, leave your brother alone. Let him run the business. The business is there to grow, and it will all work out for you. So I kind of sort of think it's all worked out for them and they did let me run the business, which was great. And they were -- and just to roll back in 2004, my dad and I bought out all my mom's relatives basically because we wanted to build a new bottling line and they wanted to buy a house in Florida and buy a Ferrari, okay? That just doesn't work in a closely held family business. So the smartest thing we could do was to buy them out, which we did. So -- but I was -- but the next generation, where I was going with this, is the next generation, I have 7 nieces and nephews. Actually, Michele and I have 2 boys and I have 5 nieces and nephews. And they weren't in the room. And I just got this feeling -- and that's a much longer conversation that they just kind of weren't looking at it the same way that others were looking at it. And that kind of scared me. And I really didn't want to put whoever was running the business, whether it was nonfamily management or even our son Andrew or our son Phillip, I just didn't want to put them in that situation. And so it just didn't feel right to me. And then the third thing for me is that I was -- quite frankly, didn't really enjoy being kind of the man anymore. The pressure was always on me, on us. The new expansion here that we're doing, the capital requirements of now being -- operating Lux Row among other things. And it just didn't feel right to me anymore. So when I first met with MGP, I didn't know a lot about them other than they were one of our suppliers. And so they called, I think, in early 2020. Then Dave and I met sometime in the middle of 2020. And the more I learned about MGP and I brought my brother along to help me so that I had another kind of voice in the room to help me manage through it. The more I saw, the more I liked. Dave and I talked about shared strategy. We talked about a shared vision. I learned about the Ingredient business, which is super exciting. I learned about the supply agreements. And I went back to Lawrenceburg, which I hadn't been to in years and just walked around there and said, "Wow, this really could be something special." And so over time, we were able to agree kind of on a vision, on a shared vision. And it's gone -- as I say, my great-grandkids will either be saying, "God, that great grandpa, that little bald guy was really smart. He was a complete idiot. I have no idea what he was thinking about." I think the former not the latter. So I know I'm out of time. So that's kind of why we're here, if that makes sense. The biggest thing for me and this is going to sound crazy, but it really wasn't about the money. It was about what's the best thing long term for Luxco. And through a long process of talking to the Board members, meeting with Dave, Karen and I talked for a while about things. It just felt like the right deal at the right time for our business. So I'll be around all day if you have any other questions. I don't think I'm on the panel, which is great because I don't want to be on the panel. But thank you all for coming. I'm an investor, too, by the way. So I get to be here on Investor Day.

That's okay. so thanks, Donn. So one of the other things I'll add to that because Donn is right. We looked at lots of different options because we did need to be able to have access to capital to do the deals out there. There's a ton of deals that flip through this industry. And you guys are all our bankers. You see the multiples they roll out, okay? So we knew that to be able to capitalize on that, we need a partner, all right? And as we did, I think Donn and I saw every private equity company from coast to coast. We saw every family office in coast-to-coast. And we never really got comfortable with it. And one of the reasons we never got comfortable with it because we're a family company. The employees meant something to us. It wasn't, as Donn said, always about the money. It was about making sure that: a, yes, we have a responsibility to deliver money. But we have also a great management team that we wanted to make sure had a bright future in whatever we did. So I know it sounds sappy, but a lot of our decision to do this was completely based on going like, hey, bring your management team along. This would be great. And he has lived up to his word, 100% lived up to his word, which as Donn and I look back -- we're going like, that feels pretty good. We can -- I can walk in my office and say, looks today and look at everybody and go, we told you. And so it's been a great arrangement. So with that, these 2, come on up here. These 2 are the guys that actually run the Branded Spirits piece on a day-to-day basis. Ryan, VP of Sales, been with us for a long time and give you a little history, and Fletcher the same way. These are the people that actually deal with us and drive the numbers for us.

Well, that is a really tough act to follow up. So we will do our best. Again, my name is Ryan Earey. I'm the VP of the Branded Sales. I've been with Luxco now for 15 years, going on 16. I've been in the spirits industry just under 19 years. So a lot of experience there. And I've got Fletch. He and I are going to tag team the presentation, and I'll kind of let you introduce yourself a little bit.

Yes. Hi, everybody. Fletcher Buchman, good to see you all. Thanks for being here. I've been with Luxco for a little over 7 years. I started in brand management, as a whiskey brand manager and have been very fortunate to have some additional opportunity in being in this position today. Before that, I was with Anheuser-Busch actually for 11 years. That's how I got to St. Louis. So then almost 20 years in alcohol marketing. So thank you again for being here.

So I'll start off -- and David did a great job of explaining kind of the history of Luxco and the evolution of what's been happening. Fletch and I have been living that evolution over the last 7 years. And a lot of it is us transitioning to a more premium portfolio, okay? And that is and will be our mission as we move forward as we want to continue that. And as you see our presentation today, you're going to see a lot of strategies and insights that we put in to why we want to be a more premium business, why we want to drive more premium brands. Again, it's the margin sets that they bring. But again, we want to align with categories and price tiers. This is the direction of Luxco. This is the direction of the industry and one that we want to capitalize on. And you would think that coming out 7 years ago and saying, "Hey, we're going to transition to a premium company," that's not an easy thing to do. And when you look around the country, we have great relationships with our distributor partners. And the only reason why we could get this done is getting them to buy in to what we were trying to get accomplished. Across the country, these distributors want to do business with us. They want to see our brands succeed. They like the way Luxco goes to market. They like our business strategies. And again, we couldn't do that without the success of them with our brands, okay? Looking at the future, those are going to continue to be how we manage and how we build our portfolio through them as they are the ambassadors out to the retailers in the market, okay? So again, our whole goal as we move forward mission wise is premiumization and aligning with the spirit categories and price tiers that are growing.

Okay. So we're going to sound like a broken record up here because we're going to be talking about premiumization and American whiskey and tequila. And this slide really here, that's what it shows. So what we've seen over the past few years and this trend continues, really cost -- any consumer product right now, but is that shift to the higher end, right? So you see on this slide here, we've broken it up by price tiers. Across spirits, value is declining and all the aggressive growth is in the premium and ultra premium. So like Ryan was saying, a lot of hard work over the past few years, but it's been a lot of fun, too, building out this portfolio, introducing new brands that are at that higher price point that consumers are looking for. Kind of taking a look down on it on the chart, kind of breaks out each spirit category. And what we're trying to show here is where we have products that fall within these price tiers. So what you'll see is on American Whiskey and tequila, we're covered. We've got a brand that covers every single price segment on there. We're much, much more balanced. The white space in some of these spirit categories, that gives us opportunity in the future as we continue to grow, where we can come out with additional innovation. New products that are aligned within those growing price tiers. If you look to the right of the chart, this is where you start to see some of our brands that fall within those price tiers, ultra premium, great brands like Yellowstone Select, George Remus Bourbon. These 2 brands right here, that's just an example of a ton of our growth opportunity that we have moving forward as we continue to support these brands and grow them, Premium, Everclear, Ezra Brooks 99, Rebel Yell 100 -- Rebel 100. Those 2 brands right there, there was a recent innovation that we've continued to kind of steer -- step up within those brand families, amidst some great flagship brands like Saint Brendan's Irish Cream, Ezra Brooks 90 Proof. And then our value too, which is an important part, especially as on-premise has returned this year. We've seen some nice on-premise growth with some of these well brands like Arrow Cordials and Morris tequila. So it's very important to have that balanced portfolio, and this is something that we continue to build out and shift, make sure that we've got the right products will continue to grow with where the spirits is growing, and that's in the high end.

Yes. And just to add on to that, looking at the premium and ultra premium growth. That's where all of our innovation is. That's where -- we're organically growing and you're going to see that throughout the whole presentation. And again, looking at the tequila and whiskey, how we are aligned with every price category, that's a precursor to the direction that you're going to see Luxco going in the future. Now what I want to show you with this slide is that Luxco has a wide breadth of brands. We have well over 100 brands. But when we talk throughout this presentation, we talk about premium brands. This is a set of brands that I really want you to take note of, okay? When you look at this set of brands, you can see a couple of things here. The price point progression. We've got a nice price point offering $24.99, all the way up to well over $100, okay? That is where we're seeing the margins come in. The other thing is the packaging. All of these brands, we have worked really hard to put in a premium feel to every one of the brands. And that's something that we want to continue as we innovate. Even we innovate within brands. As you can see, Ezra 99 is a brand that we've taken out and we've built up to be a little more premium to add to the value of what Ezra Brooks can be, okay? And then the other thing I want to touch on, as we talked about the precursor to whiskeys and tequilas. If you look on this slide here, we have 11 whiskey brands, okay? We've got 3 major tequila brands. That's the direction of Luxco. That's the direction that we want to go. And as we look at our strategies moving forward, that's going to be the target for us. As we kind of go through our strategies, we go through the next few slides here. Really for us, what it all comes down to is we showed on that previous slide there. We want to make sure that we've got the right brands in the right categories, right? We're focusing on the right brands within each of those growing spirit categories. We're at the right price point, the price point that the consumers are looking for right now, in the right size at 750, right? That's the margin opportunity that we have. And then in the right marketing support. So as we grow these brands and make sure that we continue to overinvest in them build these brands, right, set them up for continued future growth. And these strategies are exactly what we're sharing with our distributor partners, okay? This is the road map to sales success. This is where we are looking from the selling story. This is exactly what makes it easier for them to tell that story and deliver the sales that we need in the premium sector. So one of the things that I've got here with our strategy #1 is looking at focusing on the right category, okay? We want to really fish where the fish are, okay? And when we talk about whiskey and tequila, this is a Nielsen graph on the top right there. And all of it is incremental dollar growth over the last 52 weeks. Whiskey and tequila account for 61% of the total dollar growth within Nielsen categories right now. What's driving that is on the bottom there, and you can see that, that is the price tiers that are driving -- these are the top 6 price tiers that are driving the growth within the spirits world. And they're all whiskey and tequila, premium plus, okay? And if you look to the right there, you see a number of green columns. That is where our brands, Luxco brand sits. And we are in every one of these categories. And in the most cases, we are showing higher growth than what the category trends are for those price tiers. So we are -- have the right brands in the right place, which leads us on to focusing on the right brands. So we talked a lot earlier about those brands that we have that we consider our premium plus focus brands. This is a simple time line of giving you an idea of the progression of volume percentage. So on top is the percent of cases that we do in the premium plus. So you can see in 2017, it was 22% of our cases, we're done in that sector. As you move down to the bottom graph there, that is the relationship to margin. So in 2017, 22% of our cases came from premium plus, but 45% of our margin came from those brands. That was a big driving factor as to why we want to put more emphasis, more investment, more dollars, building places like this was to build out that piece of the business. And you can see the growth over the last 5 years to through 2021, where it's now 30% of our overall case volume, and it's 62% of our overall margin. We've really built out that brand or those price points to deliver more premium products. So what that has been through is innovation, organic growth of brands like Yellowstone, but this is the direction that we are heading and we have the brands that play in it.

Yes. Like Ryan is saying, the expansion of these brands, the shift that we've seen, the growth in our high ends and what we want to show in this slide right here is we've got an incredible portfolio of brands, right, with some great stories with these brands. You guys walked through that door today. You saw what said on -- as soon as you came through real products, real family, real roots. I think I got that mixed up. But the real roots, real family, real products. And it's huge. It's what's so important with all these brands. Each of these brands have incredible stories, incredible homes. We love talking about these brands. And what's great about that is it's a great family of brands. It really kind of fits any consumer need that's out there that we're looking for. Lux Row, that first one that you see right here, like Ryan's saying, what David was talking about then, you walked through this place. It's incredible, right? The feel of this place, the Lux family, the history behind it. Being here embarks down the bourbon capital of the world, our master distiller, [ John Rampe ] that you'll meet with today and go through a tasting. It has really brought these brands together and created this incredible home for these brands and telling the story. Rebel, that dates back to 1849 with its original recipe. Great brands, great stories. Limestone Branch Distillery, Steve Beam, you're going to meet him master distiller, the founder of Limestone Branch Distillery, 30 minutes south of here in Lebanon, Kentucky. Yellowstone, that brand dates back to 1872 when the National Park was formed, right? Steve Beam comes from his ancestors, the Beams and the [ Dance ], 2 most renowned families in bourbon history. I mean incredible story behind these brands. He's seventh generation distiller. DGL, Destiladora González Lux. Donn's dad formed a partnership in tequila with Rodolfo Gonzales, the master distiller down there. His dad, over -- almost 60 years ago. So this is an incredible history with this brand. Rodolfo Gonzales, his family. His son Paul, that's a master distiller there. He's a fourth-generation distiller. They have over 150 years of distilling experience in Mexico. So again, great brands [indiscernible] that we have a niche drinks in Ireland, another partnership that Donn formed back in the '80s. Ross & Squibb Distillery, that distillery in Lawrenceburg, Indiana, that is Whiskey City U.S.A. That distillery dates back to 1847. George Ross starting that. The Squibb Distillery and George Remus taken over that Squibb Distillery in prohibition. Fantastic stories with these brands. Green Hat Distillery in Washington, D.C. first distillery built and opened in Washington, D.C. since prohibition. I mean, just incredible stories with these brands. We love talking about these brands. Come find us at any point. We'll talk about these brands all day. But consumers are looking for a story, an incredible story to latch on to, right, that authenticity. And we've got that with this great incredible portfolio of brands. And that's an incredible point is that the consumer insights are that people want to know where their whiskey or where their brands are coming from. They want to have a home place. They want to see that story. And it's incredibly important for us to have that. A lot of our innovation wouldn't have been possible without home places like Lux Row. You start looking at barrel programs. You start looking at finishes you start looking at all the things that can be produced at Ross & Squibb. There is a ton of potential that is out there for this portfolio and having home places like V6 is impressive. And it's not something that's seen in many, many other supplier groups. So this will certainly be a big part of the selling story. Our next strategy really is focusing on the right price. And what you have in front of you on the left side here is 4 categories. okay? It's American whiskey, tequila, gin and Irish whiskey. And the big takeaway from this is looking at where the consumer's buying habits are. They are buying more premium. You can see at the top, all of them are ultra-premium, premium. Those are the ones that are driving the consistent growth within the categories. And that's where we emphasize where our innovation is going to come from, where we want to build our brands. We want to grow organically. It's within these categories and these price points. Looking at Ezra 99, Dos Primos that launched this year, both in premium and ultra-premium within their respective categories. Last year, Daviess County in Bowling & Burch, both in the ultra-premium within their categories. These are the brands that are going to be the future of Luxco and how we're going to build out our current margin sets are going to be based on driving these brands just like this.

The one thing I'd just add to that real quick, Ryan, too, is we've seen through research that consumers, what they're looking for, what they consider an everyday brand or brands that fall within that $25 to $40 range. For example, is right here, those brands fall within that price point, right? You have to be at the right price. You have to have the right product, the right proof that they're looking for, the right packaging. Be in the right spot on the shelf, and that's exactly what we've been working with over the past few years, and we'll continue to work on is making sure we've got those products that fall within that -- what consumers are looking for, their everyday brands.

So on this slide right here, what we're showing here is our brands, we've been very fortunate. We've won some fantastic awards over the past few years with some of the high-end innovation launch that we have. But what's also great when we see this is it provides a halo effect for our whole entire brand families, right? It has consumers looking out and says [ Rebel 10 year ] that brand has won whiskey of the year, top 12 whiskey through whiskey advocate. I might not be able to find them on the shelf, but I'll try Rebel 100. That's the 4-year bourbon, and brings consumers back into our overall brand families. It really helps us build out the entire brand family, which is huge. And we continue to work together as a team to make sure that we maximize on that opportunity.

Two great examples on this particular slide are the Ezra 7. We have probably one of the best launches of one of our brands with Ezra 99 this past year. And a lot of it is due to that halo effect that Ezra 7 brought to it. The packaging and the whiskey that goes into that, people were looking for that in the Ezra 99, again, making it overly successful. As we go throughout this year, looking at what the Remus Repeal has done for the overall Remus brand from a legacy MGP standpoint, this brand is at the infancy stages of what it could be. So we're really excited about having a halo effect of anybody recommending that. At this point, we're seeing a lot of bloggers talk about it. And again, it's the halo effect of seeing the success or drive itself to the base SKU.

Yes, that's a great point, Ryan, because I mean, Fred Minnick, who is one of the most renowned bourbon bloggers that's out there, just had a post this past week on Remus Repeal Reserve, talking about how great of a brand this is. You can see the consumer comments on that for, hey, I'm going to go out. I'm going to start looking for George Remus more and more. Being able to take Ryan and his team to take that from 16 markets to over 43 that we have this year, right? So we've got consumers that are now able to find that product to really capitalize on that exposure and that awareness of what we're creating.

Our fourth strategy really is coming down to focusing on the right size mix, okay? And really, that comes down to focusing on the items or the size of that produces the most margin. For Luxco, it's the 750. And if you look within Nielsen, the 750 size is by far the largest portion that's creating incremental dollar growth within the spirits categories. So this is where we want to focus our attention. Yes, there are a lot of other sizes that are important and play a big role in our company. But from an innovation and an emphasis and a sales perspective with our current customers, 750 is where we want to drive the customers to and our distributors and their share of mind to the 750. This is a great example of the innovation that we've come out with that takes into account everything that we've just previously discussed, being in the right category, being at the right price, having the right brands with the right images with the premium feel. These are great success stories that we've had over the last 6 years with Yellowstone, which is really coming into its own in the last 2 years. Remus Repeal, again, elevating that brand. Ezra 7, another elevation and a big premium set that drives a great margin. And the Daviess County, Bowling & Burch, Ezra 99 and Dos Primos that we've launched this past 2 years, have seen great success. But again, it's all about us looking at the consumer insights, driving our brands into the right categories, the right price points and the right size mix. And this actually leads great into our next piece, which is going to be the marketing side. And we can't have great brands without awareness.

Yes. So to Ryan's point there, we've been working really start to expand and have a full funnel market strategy. And really, what I love about the slide we're seeing in this funnel here is that the awareness, right? You've got to cast a big net out there. You've got to start to pull in your target consumers that you're looking for within each brand. Get that message out to them. Continue to get that message out to them. Pull them into that funnel, right, that consideration, starting to engage them with the brand. Get them aware, educate them, start to learn, start to have that conversation back and forth with them over and over again, which is leading to that consideration or to that conversion and that sale, that point of purchase, whether that's at retail. It's in on-premise. We're now with e-commerce, different opportunities to create that conversion with our consumers. And all these different tactics, each step of that funnel, how you're doing that through traditional media, through focused market support, what we're doing to leverage e-commerce opportunities. You've got to have all those pieces of that -- to continue to engage and get -- and bring in new consumers in as we build these brands.

And that's incredibly important as we talk with distributors and retailers. They want to know what awareness is being built, okay? Little tidbits like Fred Minnick recognizing a brand. That goes tremendously a long way with our customers, our distributors in the way they sell our products. So as we get more of this involved in the expanded opportunities within awareness, it is something that we'll continue to grow our brands, especially on the premium side.

And I think too Ryan saying about Fred Minnick, when those opportunities happen, how do we pull that into social media, right? How do we get more PR leverage out of that? How do we provide the selling materials to the sales team so that they can talk to their distributor partners and key accounts? All those pieces in our puzzle that continue to pull that into our full market [indiscernible]. And we look to grow overall increase the selling story. Here, I just kind of wanted to show. This is an example of some of the marketing support we're doing. So we launched a brand 3 months -- this year. It's a partnership that we have with Thomas Rhett, country musician and his cousin, Jeff Warren. And Thomas Rhett has a huge following. I mean he's just hitting -- over the past couple of years with popularity and what he's been doing. He and his cousin always wanted to launch a tequila. They came to Donn and David we formed -- launched his brand in February. And right out of the gates, all those pieces of that puzzle, how are we launching this brand? How are we building that? How are we investing in this brand to make sure that we have successful launch year 1, year 2, year 3 we continue to build that out? The social and digital media, what are we doing to set this brand up, how do we talk about that? How do we also have leverage Thomas Rhett, in his social media? And what we can do to kind of connect those with the brand, traditional media or PR, what we're doing with TV spot? How are we running that? TV has become a lot more fragmented. You can run traditional TV. You can run digital TV. You can run that video through social media, all those different ways that we can utilize those media assets. Our retailer, e-commerce, how do we bring this brand to life at retail? That message that we're saying the way we've positioned that brand? - How are we connecting that to top of -- 2000 -- how are we pulling that support into -- through e-commerce, right, whether it's digital rebates or whether you can purchase that directly online? There's tons of opportunity out there. Instacart. What we can do, right, as people have -- consumers have shifted to purchasing more and having those delivered. Experiential tour support, he finally went back on tour this summer and this fall -- radio in the market's leading up to his concert. How can we sample with consumers at his concerts? How can we share those brand videos at the concert? He's on stage talking about it. All these pieces of the puzzle that come in together with these marketing plans. This is what we're doing on our key brands, our key whiskey, our key tequila brands. As we build those, we overinvest. Dave Colo was talking to me last night about it. We took a much -- market strategy in Nashville, Tennessee, where Thomas Rhett is -- [indiscernible] market Broadstreet, those accounts, Broadway, those accounts that are there in the on-premise, points different [indiscernible] is an example of how we're overinvesting in these brand launches to make sure they're successful. And we continue to have these brands grow. These key brands for us that fit into this portfolio.

And as we talked about earlier, the evolution of Luxco becoming more premium, this is the type of investment that it needed to be made. This is how we get the distributor buy in. This is how we get the retailer buying on our brands and our investments in these overall premium brands. This shows that we are putting out the tools necessary to build the awareness to help with the pull of the shelf. This is exactly what we needed. And when we talked about changing the evolution of what Luxco is, this is exactly the direction that we needed to go and has certainly been successful so far.

And talking about TV. This last year, we started TV advertising for the first time with Yellowstone so. This brand has been on a tear. And we looked at, okay, what's the next piece of the puzzle here? And that was -- something new for us. So if you've heard of it, the show Yellowstone, pretty popular show. Its new season launched. Actually, I think it was the most successful season premiere since 2017, like Walking Dead. So a fantastic show. But last year, we started advertising in the show. And you can see on here the 52 weeks before we started advertising, the brand was growing very, very strong, over 126% compared to that previous year. But what we saw in the 13 weeks after we started advertising was at more than doubled, almost to 300%. And what was incredible about it was the full team working together. Ryan and his team, sharing that story with the distributors and our key retail partners showing them, "Hey, we're on TV. We're overinvesting in these brands. We're serious about this." We want this to become our next big, huge brand in the company. And that momentum has continued. We've increased that media support for this year. We have Yellowstone Select media running through, they flighted out the full year. We've added other brands into advertising on TV, Ezra Brooks 99, that launched in February. Daviess County, Bourbon, Dos Primos and [indiscernible] tequilas. Again, sounds like a broken record, but the fastest-growing spirits are whiskey and tequila. And that's where we're over investing in to support and to grow these brands. And we will continue to do that as we move. Pretty much over the past few years, the increase in support that we've had for marketing and A&P, we've continued to put that back into media in ways that we can build awareness, continue to build these brands.

And what's amazing about a lot of the TV support that we have here is a lot of it is digital. And we're able to target, specific customers targeted consumers who are buying premium tequila, premium whiskey. So we can go directly to them and showcase our brands to have them look at that as a consideration set.

And before we start this, I think on here, I just kind of want to set this up. So we're going to show the TV -- the current TV spot for Yellowstone so that gives you an example of some of our creative right now. Pay attention to is just how this product is the hero front and center throughout the entire commercial right here, how we bring this brand to life, right? How we show the beauty of this brand. Not only that but how we set it up with the lifestyle for our target consumer, who we're going after, whether they join us brand with their friends on their back patio or meeting a friend at the bar or taking it on their favorite hike to their favorite national part. Hopefully, it runs. Here we go. [Presentation]

It gets me every time. Well, so that's the end of our presentation. But one of the things I want to make sure that you guys are taking away is that we have evolved as a company. We have become more premium. What we started 6, 7 years ago, we've made great strides into doing that. And the investments that we're making into our brands have certainly helped deliver the results that you're seeing today and ones that as we move forward, those are going to be the kind of things that we're going to put and activate to ensure that we have success with all of our premium brands and continue to drive that portfolio and overall margin mix. All right.

Yes. Thank you all. Look forward to talking to everybody later.

Yes. Dave Colo is next.

How about a round of applause for Fletch and Ryan? That's their first Investor Day. Very well done, guys. Thank you. Let's talk a little bit about ES&G. The bottom line here, this is a pretty complex area, and you can really get lost in the weeds in ES&G. There's a lot of buzz words going around about it. It's become more and more important, right, for publicly traded companies. But to me, I'm a simple guy, so I need to boil it down to key things. To me, it's really about -- it's this simple. Take care of your people, right, take care of the planet and take care of the communities in which we operate. That's ES&G and that's how we think about it at MGP. There's a lot of new kind of reporting requirements that come along with this. There's -- we get scored by a company called ISS that gives us a quote ESG score. So there's a lot of visibility around this. So what we as a company have to do now -- and we're a small, relatively small publicly traded company. We're getting larger, of course. But we're really on a journey here. So it's not a situation where we haven't been concerned about the environment historically or our employees or the communities we operate in. But we now need to take what we've historically been doing, put it into a more structured framework and start disclosing what we're doing more publicly. And that's what public companies like ourselves are being asked to do. So that's going to be our journey. You can see the commitments here we've outlined. Being in the spirits industry, we obviously have to be a positive role model for responsible alcohol consumption. So I think Luxco has done a really good job of that over the years. We are members of DISCUS, the President's Forum, a couple of other organizations that really focus in this area, and we're a key part of that. And we'll continue to educate not only our consumers but also our employees in this area. Diversity, equity, inclusion initiatives. Again, this is pretty simple. Treat your employees fairly, try to have as diverse of a makeup in your organization as you can. Different cultures bring different benefits to a company. And that's been a little bit of a challenge for us based on our locations. But again, with bringing Luxco into the fold and a broader organization, an international footprint, that's going to definitely help us over time. Obviously, from an environmental standpoint, we need to protect the precious resources we have. I think we've done a pretty good of job of that over the years, but we've got some pretty good ideas on how we can improve in that area. And then on the community front, our companies have always been very good in giving back to the communities in which we operate, and that's definitely going to continue. To that point, when Donn and I were talking, we were getting close to agreeing on the final terms of this deal. I got an e-mail from Donn one night, and he goes, "Hey, these are the things that really matter to me." They had nothing to do with the valuation of the company for once, Donn. Thank you. But one of the things on the top of his list was, hey, you guys need to keep contributing, making charitable donations to the communities in which we operate. And I said, of course, we will. So both companies, I think, have a strong legacy in that area, and we'll certainly continue that. From an environmental focus point of view, environmental compliance is a big deal. The technical regulations around air, water, et cetera, are extremely complex and they change very frequently. So we're committed to being 100% in compliance with all those regulations and also our reporting requirements. From an environmental sustainability point of view, you can see where we're focusing, right? You could look at this probably in any company, and they're going to call out these same areas. One of the things that we put in place to really help us here is about 1.5 years ago, we started a true continuous improvement journey in this company. We call it our house of zero loss. And the whole idea there is try to eliminate all forms of loss, right? And if you use your imagination, you can see how that could apply here, right? Don't waste water. Don't waste electricity. Don't waste natural gas. Try to run your facilities with its high first pass quality and yield as you can that is responsible management for the environment, right? So Steve and his team have really done a good job in focusing on how do we get all forms of waste out of the organization. And that's really going to help us improve in this particular area. The standards that we are going to apply or hold ourselves accountable to are called GRI 300 in this area. GRI is the Global Reporting Initiative. And it's a structured framework that companies can adopt and follow. And then it gives you kind of a road map on how to improve over time and what disclosures you need to make to candidly improve your score in this area. So we've adopted that, and you'll see us publicly disclosing over the next several years, our progress in those areas. From a social responsibility focus, again, I talked about these earlier. This is pretty common sense, right? There's a lot of buzzwords around it, but we've done a pretty good job in this area. We know we need to up our game on the diversity front, in particular. But I will tell you, we've always been a very inclusive organization. We treat people fairly and that's certainly going to continue. Again, in this area, basically, what we're going to do is we've laid out a road map for both our environmental and social responsibility areas. We're using the balance of this year and next year to really get ourselves set, lay the framework and then we're going to start doing -- reporting disclosures on a quarterly basis in these key areas over the next -- basically from now until the end of time. So that's kind of the journey that we're on. You'll see it a little bit more transparently. We'll be posting these disclosures on our website in the proxy, et cetera. So in a nutshell, that's kind of the game plan we're taking. It's going to be, what I would call, pragmatic approach. We're not going to go spend $25 million trying to hire an entire organization to manage this. It's going to be the responsibility of every employee in the company. So with that, I'm going to turn it over to Brandon, and he's going to take you through some key financial information.

Thanks, Dave. Good morning, everybody. I'm Brandon Gall, Vice President of Finance and CFO at MGP Ingredients. And I couldn't be more happy to share our financial story with all of you today. So let's dig in. As Dave mentioned in his opening remarks, financial performance since 2018 has been remarkable. 2020 was a record year for our company with both Distillery Products and Ingredient Solutions setting records in both sales and gross profit. Just 2 weeks ago, we released our Q3 earnings results. As part of that, we gave full year guidance for the company that, again, is going to result in record highs. Sales are projected to be in the range of $570 million to $615 million. Adjusted EBITDA is projected to be in the range of $125 million to $135 million. And adjusted earnings per share are projected to be in the $3.75 to $4.05 range. These record results have resulted in a very strong balance sheet as well as tremendous access to capital. From a balance sheet perspective, we have both the assets and inventory required to sustain long-term growth. Our leverage ratio on a net basis was a manageable 1.8x at the end of Q3. And just last week, we successfully raised upwards of $200 million in convertible notes that help lock in a more permanent capital structure for the company, doing so at a fixed and attractive rate while also paying down our credit facility, which gives us more direct and less encumbered access to capital. Same with access to capital, earlier this year after we closed the Luxco transaction, we amended our credit facility, which now allows for upwards of $400 million in total capacity, plus an additional $100 million according in future. Recently, in addition to the $40 million outstanding private placement notes we have with Prudential, we've also recently gotten approved for an additional $120 million if needed. We feel very good about the strength of our balance sheet and our ability to finance future growth. What adds to that confidence is the strong cash flow profile of our business. For the last 3 years, we have seen growth in free cash flow and a significant uptick in 2021 as a result of monetizing our aged inventory as well as the integration of Luxco. Our free cash flow conversion remains at a healthy level this year despite the increase in CapEx. So what do we plan to do with all this money? And what are our capital allocation priorities? M&A will continue to be an important lever for the company in terms of accelerating growth. We believe strongly that our whiskey put away currently is in balance in where it needs to be. But we're going to continue to put away and prioritize put away to match the future growth demand that we're seeing in both our Distillery Products and our Branded Spirits segments. In addition to maintenance capital, we are going to continue to pursue CapEx opportunities that contribute to growth and also position our company from a competitive standpoint. We've achieved a consistent quarterly dividend payable to approximately 22 million shareholders. Dividends are something we're going to continue to assess quarterly with our Board. And how are we going to fund all this? Well, with the capital available. And when we're not investing, we're going to be delevering just as we've done since the acquisition of Luxco. We're going to pay down as much debt as we can in order to put as much dry powder as possible to finance this type of growth. Let's talk more about M&A. Let's do so at the segment level. Mike Buttshaw did a nice job walking you through the opportunities and the criteria that we see in Ingredient Solutions. Similarly, in the story products, we're going to seek similar opportunities that are accretive to gross margins but also enhance our overall offering and capabilities. Since the acquisition of Luxco earlier this year, we see tremendous opportunity for M&A and branded spirits. Let's dive into that a little bit more. Similar to the other 2 segments, we're too, going to seek opportunities that are gross margin accretive in Branded Spirits. But additionally, we're going to look at large improving brands at attractive multiples that fill holes in our portfolio. We're also going to look at small and emerging brands that may be kind of at a higher multiple but are going to be in the right categories and the right price points to focus on in the future. Additionally, we're going to look at incremental opportunities to expand our distribution, our product into our platform as we go forward. So we've talked a lot about our organic growth profile of this company already today. We see tremendous upside without M&A. But given our financial positioning, where we are in the industries we compete, we see a lot of opportunity here as well as we go forward. So with that, I'll turn things back over to Dave for some concluding remarks.

All right. So we're well ahead of schedule. So I've been asked to speak for 2 hours. Is that okay? Now what I want to close out on before we go into the Q&A session and then when that gets completed, we're going to do the tour and Michele is going to talk to us all about that. But obviously, if you look at 2018 through our forecast for 2021, you can see our net sales have increased $215 million. Gross margins increased 900 basis points. Adjusted EBITDA has more than doubled. And our free cash flow on a cumulative basis is about $200 million. So pretty strong, obviously, performance. Our long-term goals, all right, this isn't guidance. This is just giving you some kind of qualitative things to think about. But our long-term goals from a net sales basis, and this is all organic, by the way, this is without acquisitions or M&A. We see this combined portfolio, we should be able to grow low to mid-single-digit growth organically. A lot of the things that the business unit leads talked about today should give you the rationale as to why we feel that way. Gross margin, we think we can continue to expand it. There's a little asterisk by that. We're going to see a step back in gross margin in our industrial and white goods business from this year to next. We've been talking about that for 6 quarters now. What we projected was going to happen has happened. So the margin in that part of the business is going to go back to historical levels. The balance of the business, though, we should see good continued expansion in gross margins. From an adjusted EBITDA point of view, notice we're talking adjusted here. That's because we want to be able to back out onetime costs related to acquisitions. So we want to be able to show the true performance of the business. Net of those costs, we think we can grow mid- to high single digits in that particular area. And then we continue to think we're going to have very strong free cash flow about 75% of our EBITDA should convert to free cash flow. So we will give official guidance for fiscal '22 on our Q4 earnings call in February. But we want to share after you've heard about all the strategies we have for this business over the next few years, how does that really translate into financial performance. So that's what the long-term goal section of this represents? So with that, I think that's the last slide. So we're going to go into Q&A. Michele, I know we're well ahead. So you want to give us a little update?

[indiscernible]

Okay. Let's do it. All right. Thanks, everybody. [Break]

All right. We're good to go? All right. So Mike is going to walk the mic around if you have any questions. So let's ask away. Okay. No questions. Thank you.

Here's Bill Chappell with Truist. And I'll start, why don't we start just a little bit on the ingredient side? And as you look back, maybe you can talk first on what changed? I mean 4 or 5 years ago, there might have been two employees, and it looked like it was going to be discontinued. And so I guess what really switched, would be one question? Where can margins go? I mean I know they've gone 900 basis points higher is great, but I mean how much further is there to go? And then the third question, and I'll repeat them all again if it helps. Help me understand the competitive landscape because this is a kind of area that's not -- most of the companies are private. We don't -- or small parts of bigger companies. And so it's hard to understand like who you're winning against and, for that matter, who you would want to buy and to add to capabilities. So help me understand what's changed, where margins can go and maybe the competitive landscape a little bit more.

Well, it's like three or four questions, so you may have to help me remember all that. So what changed? I think when I joined MGP in 2014, the charter I was given is take a look at the business hard, use your industry experience to take a look at not only just sales and marketing and also lack of R&D but also the operations side. What's going on in the plant? What are the capacities? Where are you on your leverage, right? So my first 6 months to a year was really kind of taking a part of the business, using some of my engineering background, to be quite frank. My first 5 years, I was a process engineer with Hormel Foods. And so I've spent some time in the plant, met a lot of the people working alongside Steve Glaser. The change that occurred was with our Board share that said, "You know what? We want to keep ingredients, and we want it to grow. That's really a fundamental change, right?" And so when Gus Griffin was hired, he hired me to assess the business and then make some impactful changes as fast as I could. And so the big thing for the first maybe 1 year to 18 months was quite a bit of blocking and tackling to be quite frank. It was a matter of understanding where we were from a processing side, what the outlook was there, what kind of capacities were really being underutilized, and then assess the sales organization, how are they being utilized, taking a look at marketing. And when I walk you through to your point, Bill, when I walked through R&D, it was cobwebs. I mean it was literally kind of scare. People's desks were just vacated, and that happened during the downturn with the new [ Kirk ] administration, and a lot of people left -- have left. And it looked and appeared that they had left kind of abruptly. And it was sad, right? And so -- but I looked at it as, wow, what a great opportunity. I mean this building needs to be filled up, and there's a lot of great opportunities in the ingredients space. So we began rebuilding. We actually began rebuilding with getting a new Chief Science Officer back on board, Dr. Maningat. We ended up putting our sales force more focused in the marketplace. We arranged four regions, big changes here, but it brought more focus and intent to their energy. A lot of times, they were crisscrossing the country, and they weren't calling on the right customers. And so I did a whiteboard session with them. And I just went through every region, all key accounts, and we're highly leveraged in baking and pasta. And so we began to discover together where do we focus, with which customers, like I mentioned in my talk. We want to align ourselves with some big industry players that have key brands, I mean big time brands. And that's focused energy. Big change was focusing the energy of the commercial organization, rebuilding a new product development platform. We now have a culinary chef. We have a vice president of R&D. We actually have three scientists now continuing to help develop new products there in unison with trends in the industry. I had -- just had a great talk. I think Jim and I were talking. How are you doing this versus your competitors? So now I'm going to go into this competitive set. How are you able to do this? I think a lot of it is how we're organized. I have the functions of research. I have the functions of sales. We work very closely with customer service, logistics, also marketing. We work on marketing. You can call it whatever, a matrix organization if you want. But what we do better, I think, than some of our big competitors, like Ingredion, Tate & Lyle, ADM, we have very open lines of communication. We discover and then leverage the consumer trends together, and we do whiteboard sessions on how we want to go, where do we want to go, the timing of how we want to go, the investments that we want to make. And so a lot of what you heard this morning was around, like the foodservice opportunity, this was purely a whiteboard session talking about our product lines and how we can take one product line and get closer to the consumer. Is it foodservice? Yes. We found out that we could do that. Could that actually go to retail and be a plant-based snack? Sure. We know how to do it. It's shelf-stable. We have a chef on board now that knows how to flavor these products. And so it was really around discovery but also open communication between these functions. I think some of our larger competitors, they talk about having that kind of communication. But when you have separate leaders within R&D and then on marketing and then another separate leader in sales reporting into whatever it might be, a group VP, sometimes things can get lost in the shuffle. Sometimes they're slow. What we provide is fast. We're very nimble in how we work with our customers. We can get solutions to them quite quickly. And we actually are much more collaborative than our competitors. We're very open to coming alongside their bench or having them come alongside ours. Under the right kind of development agreement, I might add, confidentiality, development agreements, we protect our intellectual property. We protect our formulas. But it's amazing what you can get done in that kind of environment. And we actually get this feedback from our customers. You guys are really fun to do business with. You're highly collaborative. You're offering solutions faster. I gave an example in my talk about a keto bread product. That actually came to market with one of the biggest industrial bakers in record time. How did that happen? We have a great baking lab now with an application scientist. She's amazing, a K-State grad, and actually already had a lot of her leg work done around what this customer could do. And when you present that as a team -- so just to give you one last comment, we have a salesperson go along -- or bring along our science. This selling platform is just not the commercial lead. They bring along the chef. They bring along the scientists, and they actually talk to the team at our R&D facility. And so when I talk about major, major big industrial bakers, we talked to those scientists, those food engineers, and we give them the solutions and how they can get their product faster. I think that's competitive advantage, Bill. That's how we go to market. Did I...

[indiscernible] 9 months of experience in ingredients. It's really, really a lot of detail here. But here's what I'm going to answer it. What changed? I don't know the history of what they did, but what change is the consumer, okay? Don't believe me? Go to your grocery store, wherever you shop. I challenge you to walk down an aisle, any aisle, not just the specialty food aisle and not find a plant-based alternative. If you open your eyes and you look, it's everywhere. Now I need to eat a few plants, okay? Get off the meat. But as I go through the other day, I was in the cheese aisle. I picked up some shredded cheese for some tacos, but it was real hamburger meat, but I picked up some cheese [indiscernible], and I had plant-based cheese alternatives in my hands. It's packaged. Why is it there? The consumer wants it. At the end of every business that we do, at the end of every day, if we're not aiming what we're doing directly at that consumer and we do it through wholesalers and distributors and being venues for various ingredients like you talked about, but you're wasting your time if you're not giving them something they can put on the shelf and make their products in demand. As it exists today, he's -- we are a key ingredient in that supply. And now there's a bigger demand than there was 2 years ago, regardless of the history. Go look at it. It is there.

One last question on margins, right?

[indiscernible] margins and also, like, give me an example and [indiscernible] if you're looking at M&A, like what are you trying to add [indiscernible] portfolio if you're looking at M&A?

So on margins, let me comment on that, and then I'll finish with M&A. I'm happy to report that we have a really robust risk management program with MGP. We work with our risk managers and procurement group. And I'll give you an example, we're nicely insulated right now going in 2022 when you look at inflation. And we do that by really managing, looking at futures and then looking at where our minimum margins have to go on these materials that we're buying in order to meet certain criteria on margin finished good. So we kind of reverse engineer it. And then we -- when I give price guidance to my team, we're in the sweet spot based on futures. And so we're well insulated going into the new year as far as margins for 2022. Some of my counterparts in the industry, who I remain friends with, they are a little bit stumbling about this. It's a little bit more murky. It's not murky for us. And so that's one thing about insulating margins. Where can they go? Higher. I don't -- can I say that, Mike?

[indiscernible]

I'm not going to hear from them. Mike, there you are. Is that okay, I think? We won't talk percentages, but we have opportunity, Bill. That's the main thing for everyone to know. We have opportunity, and we insulate where we are today. So we're insulated, and we have opportunity. And as far as M&A, that's an interesting question. We actually have a team. Do you want to take that?

Okay. Yes. So on M&A, let's just talk because we're probably going to get a lot of questions around M&A today, and I'm guessing. So let's about how we manage it because I think that's pretty important. We have a newly dawned M&A committee. But it's always been the same people, but we're trying to form more because, candidly, there's so many deals coming our way. We've got to add a little bit more structure to it. So the way it works is David and Brandon, all the deals initially come into them, right? And then myself, TJ and Amel are on committee, and we'll have a meeting, could be every 2 weeks. And Bratcher here, as you could probably tell, the guy's a force of nature, okay? He's also very detailed, and he keeps really good records. He keeps track of all these deals for us, corrects all the communication that's going back and forth between our company and a potential -- another company. We meet every 2 weeks, and we talk about what's in the deal pipeline? And we go pass, keep, go to the next step, et cetera. So we manage it kind of on a committee approach because that's beneficial because if you just have one person looking at it, like it was just me, it's not going to be a high -- as high-quality product at the end of the day. So we've got a good balance of how we manage it in the different perspectives we look at. So that's the process. And like I said, the deal flow has gone up exponentially since we announced the Luxco deal, as you can imagine. On the ingredients space to the evolution of that business, we're taking a similar approach in ingredients as we are in branded spirits. We're going to grow organically. Mike's done a masterful job of margining up the product mix and who we sell to. But we also want to continue to go up the margin ladder and get closer to the consumer. So from an M&A perspective, we might look at deals that give us an additional ingredient type to sell, right? We like the plant-based space. I don't know that'd be -- we may not limit ourselves exclusively to that area, but we like that space. We like higher-margin categories, could be seasoning blends. Things of that nature carry much higher margin profiles. We might look at things that give us access to different channels that we're not in today. Mike talked about foodservice. That could be one. We also like the idea of having some consumer brands in that space. So that's kind of the general categories, if you will, that we're looking at for potential M&A and ingredients.

I'd add to that. One of the things that Dave said was the organic growth, okay? So we actually, with Fletch on board with us now running marketing for MGP -- the last few weeks, we have literally been focused on how do we take the ingredients that we have today and give them a real brand presence, whether you're just putting them in a bag and shipping it off and it ends up something else. We want to be that brand of preference for them. And it's no different than when you buy whiskey or tequila or vodka. People go by the name recognition of it. So that organic growth that he alluded to, it's going to come from that. We already sell this, but once we can be the name inside of their head for the people that are using it goes a whole different level.

Great. I have a lot more questions, but I'll see if other have first. I'll come back. Mitch?

Mitch Pinheiro with Sturdivant. So I just want to say with Mike the sustainable ingredients for one second. When you talk margins, are we talking a price/mix is what's going to drive it higher, price architecture, scale? Is it the combination of the three? And is it visible? Do you see this line of sight to these margins without M&A?

So it is -- all of the points that you just -- very artfully make. I mean it is mix-related. It's actually additional throughput. So we've rationalized SKUs away that had -- that came with lower margins in the market. And we've replaced those SKUs with high-margin specialty ingredients. So it is mix-related. And at the same time, rationalizing SKUs, we've increased capacity and throughput. So now we've got costs coming down because we have more throughput in the plant. And so as far as we're where margins -- where they can go for us, I'm actually -- as I said, Mike, I'm optimistic. I'm optimistic on the future because of how we actually manage forward buying, how we actually some of the key ingredients like wheat flour for example. And then we actually reverse engineer our pricing to make sure we hit targets as best as we can, as best as we can. So the runway actually is really quite good, quite long. And we see these consumer trends as long-term trends now. I've been tracking them for the last 7 years but actually longer than that. I've been in the business for 35 years. But these trends, they're not fads. These are longer-term consumer trends. And one of the reasons that we're confident with that is as I'm looking at these large, large industrial pasta makers and bakers and where they're putting their bets and their marketing dollars, it aligns so nicely with our package. It's just kind of like wow, we bring the solutions that they're looking for.

And then just last on that before I move to spirit side. But the -- so you've seen -- talked about the plant-based meats. They're struggling in the grocery store right now. Is that -- from your perspective, are you seeing a pause in that growth? Are you seeing -- is it just we need some reformulation because of a product complexity? Where -- can you talk a little bit about that?

Are you talking about retail or in the freezer case, all of above?

[indiscernible]

Right. Well, I think a lot of companies, and Dave and Dave, you might have kind of your ideas on this as well. But the space got flooded pretty quickly. I mean people were trying to be fast followers everywhere. And many times, some of the quality was sacrificed, just to be frank with you all. I'm not going to name any names or brands. I'm just saying that as they were fast followers trying to get out into this space, sometimes maybe not the best premium opportunity was presented. And what we find ourselves was we're associated with brands and companies that are more in the premium space. These are not like brands that maybe are looking at a different price point at retail. And so we're aligned with the right customers, and no, we are not seeing that volume go down in this platform. We actually are bullish on it. And we're -- and then we see that from projections from customers that we're working with. And that's also the platform that we believe has opportunities in foodservice because we have the ability to value up this proposition and get into cafeterias like maybe college campus cafeteria style, right, or even large companies like Google or Cerner in Kansas City, where they still have -- when they open their cafeterias. So that's kind of how we're insulating ourselves, but I think the space got flooded in a hurry. Did you want to...

Just expand question, too. I think what's incredible and I've learned from working with Mike and his team is with his R&D team, the chef and what they have, to take what's trending in food flavors right now and coming up with different products that can really expand beyond what you just think of like a meatless hamburger or something like that, right, if there's pizza or any of these other products. So it's a -- what's been exciting to me is this very versatile product. It can be used in so many different food applications. I think the sky is really kind of the limit, and that's what's going to be fun to really work on with the team and start to expand that and how can we start to introduce some of these new products to consumers in the next few years.

[indiscernible] 9 months of retail experience, and my research includes going to Schnucks and beer bars in St. Louis. Okay, let me qualify it. But here's what I see that's different. And I think you'll see it if you just think about the channels and the grocery store is typically specialized. If you want keto-friendly or you want sugar, they've been very -- you go to a certain area in your store. And I don't know that every consumer ever just wanted past that. But the next time you're in a store, start looking, really look at this. And what you see is they're leaving those specialty aisles, all right? Because I think they've realized like they have to get out of that mindset of I only want that consumer that is only going to do plant-based. And I think where the opportunity, and we spent a lot of time talking about this in marketing, is getting meat eaters, like me, to go, "Oh, maybe I can do this a day or 2 a week. Maybe this is the right thing to do. My 26-year-old son talks about this. Maybe it is the right thing and take that, but I'm only going to do that through the funnel that Fletch showed you earlier, making me aware, giving you into consideration set and then making that purchase."

Let me add to that. So to build on what David just said, you guys are familiar with the organic food category, right? Consumer products organic. Do you remember what's played out over the last 15 years at the retail level with organics? They did just what he said. They started because consumers couldn't find the organics. They created entire organic stores within the store, okay? Then as organics have become more mainstream, the retailers are taking those sections out and putting the organics back in the main aisles, okay? And that's kind of what you just said, right? As there's an opportunity here, people think of these alternative proteins typically a hamburger replacement, the Impossible Burger, Beyond Meat, et cetera. But the cool thing about our portfolio is you can put these things -- our product lines can be used in just about every type of food category. And we really -- we're specialty in baking, pasta, snacking. So that's where our focus is initially in this space, but we think there's much broader opportunities for it. The question about why are those big guys struggling that are public now and report. I think a lot of competition, the Mike's point of view, came rushing in the market. These guys were the leaders, but now there's a lot more competition out there. And I think that, combined with maybe some of the quality of the product, the efficacy of the product, maybe kind of dampening the category a bit right now.

I was wondering if -- Dave, maybe you could unpackage the long-term growth targets you laid out in terms of, specifically, the organic growth on the revenue side. Maybe you could talk a little bit more about the segment level, how you see each of growing in terms of top line? And then if I can be candid, low to mid-single-digit growth, I would hope is not an aspirational goal. So what are some upside drivers there? And what are some possible headwinds that we're maybe not thinking about?

Sure. Yes. Great question. So let's go segment by segment. I think in Mike's ingredients business, the food type categories typically grow with population growth. That's just a kind of general rule of thumb, right, a traditional CPG or even ingredient space. We're more specialty than that as you've learned. So we can beat that from a top line growth perspective. I think Mike's business, he has -- instead of low to single-digit growth, he's going to be probably north of that because of the things that he described. We think there's still opportunity. He's an effective -- he has effective ability when commodity costs go up. He can tend to not only price up for but maybe even price up a little more and get some margin. So we're going to see that play out over the next year or so in his business. His product mix, and he's selling things that have the highest demand but also have the highest price points. And then he's got an emerging platform in this ProTerra product line, which is a texturized protein that has a much higher price point. So he's got ability to probably go north of that for those reasons. Dykstra's business, the distillery products, revenue is not a great measure there. And the reason for that is the underlying commodity costs tend to play a pretty big impact on what revenue is. So not necessarily in the whiskey business, okay, but just about in every other part of his portfolio. So we could have a very strong profit year in his business and have a significant sales decline, right, because white goods, industrial alcohol, they may come off. The DDG market could drop substantially. But as long as he can protect his margins in those, the top line is not really that important. It's really not. Where we look for his business to grow on the top line perspective is in the brown goods, the new distillate and aged. That's why our consolidated guidance is in that range because his business -- he has such large revenue and he moves so much volume that if those white goods or DDGs or those parts of his business the revenue drops, it can move the needle for the total company in a pretty significant way. That's why the consolidated numbers kind of look the way they do for the most part. On branded spirits, I'm really bullish on that business. I mean you guys heard what we're doing, but I'll tell you there even as we shift more and more focus on the premium and ultra-premium brands, that means you can't spend as much time on the premium and value brands. So we actually can plan and see where we might actually be lowering the sales revenue coming from the mid- and lower part of the portfolio, drives down revenue, as we focus on ultra-premium and premium, which drives up margin. So that business, you could actually see -- you might even see flat revenue or a slight tick down, but you're going see the overall profitability go up. So when you factor all that together, that's why that growth looks kind of mediocre. It's because you've got all those different competing factors.

That's very helpful. And just a couple of things on capital allocation. In terms of M&A, I feel like in the past, on the branded side, we were always concerned about paying high multiples for some of these brandeds. So now that we have Luxco in the distribution, are we more comfortable paying the higher multiple that you kind of -- the market is demanding for some of these higher growth, smaller craft brands because of the synergies that we can immediately get? And then secondly, often, we were thinking about acquiring. I was wondering is your -- our shift towards premiumization, will we consider selling any of the value brands? Maybe it's a lot of volume, but it's not the gross profit dollar that we're looking for.

Yes. No, the multiple question, we get asked that a lot. We look at each deal on its own merits, right? So before Luxco, I would tell you, we couldn't afford to go out and buy a high multiple business because typically, the reason -- unless it's a global brand that's extremely well known, the reason you're paying high multiples and the brands that are attracting that are these smaller regional brands that are showing a lot of growth but on a regional basis, and people pay for that projected growth. But oftentimes, there's no operating income generation or EBITDA generation. So you're paying a multiple off of revenue, right, which can be quite high, and you're getting no EBITDA for it. So what I've said historically is those deals aren't for us, right, because we can't go pay $200 million for a brand that's not spinning off any operating income or EBITDA. The math doesn't work for us. Now that we have Luxco and this branded spirits portfolio, the opportunities that we can look at are much broader. And here's the simple way I think about it or we think about it is if we can go out and buy a brand that has stable growth or it's stable at the top line, ideally, it'd be growing as well. But even if it's just stable, it's in a good category and it is margin accretive at the gross margin level and the operating income level to our current branded spirits portfolio, we'll look at those all day long, okay? The reason I state that is because that's where the most opportunity is. As everybody else is chasing just ultra-premium brands and paying all those multiples, they're taking other brands in their portfolio that still could have 50%, 55% gross margins and selling them, okay? We'll buy those all day long if we can get the right valuation on them. So that's part of it. The other piece is, would we ever go buy a brand that has a huge multiple? Yes -- I mean the answer now could be yes if we think we can take that brand and scale it or a combination of scaling it from regional to national and maybe there's a lot of synergies, quite frankly, on the SG&A side because we have a platform now that we could buy it, strip out a lot of the SG&A bolted into our system. That's a -- it's more of a possibility now than it was prior to the Luxco acquisition.

I'd add to that just a little since we're going to unpack that in two pieces, the margin accretive piece. There are brands out there, all the big guys are playing in the arena. There are brands out there that they sell off. They're not necessarily selling all the ones that are driving their ultra-premium sets and stuff, okay? So there are a ton of brands out there that really are margin accretive to our business. They're going to be stable. Donn and I did many, many deals where we just bought brands, and I can think of one off the top of my head we did in '99. I sell the same number of cases and make the same profit, but it was margin accretive. It was there. It added cash flow to the business. There are lots of those things out there, and they're reasonable multiples, okay? They are very, very reasonable multiples. When you get into the high multiple turns, is as you go after big nationally known brands or something that has that what he was saying that very high regional influence that they see it there, then you're going to pay for them. You're absolutely going to pay for them. And I do think there are opportunities there. I know we talked about the M&A Committee. Brandon and I are talking to folks five times a week, different things going on and taking a look at those and what's there and what's not there, what's of interest and what. There's more opportunities that come to us that -- than you can imagine, to be honest with you. The secret sauce is picking out which ones, to be honest with you. The last piece of that is you also have to think if you're the big guys in the world, the Diageo and stuff in the world, they're going to spin off their mid-tier brands. That's typically what they're doing. They have a similar strategy. This is what we're talking about is not just Luxco or MGP. It's a very known strategy. What's interesting about those mid-tier brands for us is, is revitalization of it, all right? So we need to take an eye and when we're taking the brand, it will bring it in. Yes, is it margin accretive? Check box. Is it stable? Check box. And then the next that we have to go through there, is there a way I could reposition this because I can tell you in our own portfolio, most of what you see in the premium sectors is what we recreated. There were value proposition. They put off the shelf, relaunched them and came back at it hard. So I think there's lots of opportunities in there that we can pay reasonable multiples and do the right things to create brands.

I agree.

Jeremy Javidi from Columbia Threadneedle. Can you talk a little bit about your international opportunities and your ambitions there and what you think success will look like in 3 to 5 years?

Sure. Let's start with bulk spirits. David, do you want to talk about how we can grow, and then maybe David or...

Yes. For our international business, we're taking the same strategy that we've had here in the United States. We're hitting that -- those markets now with marketing campaigns, staying in front of them constantly, reminding them what we do. We're targeting pretty much the same customers we have here, the mid-majors, primarily first and then some of the regional brand-owning companies, not so much the crafts. The craft movement over there's not near as big, but we're -- most of our focus is on the EU, Australia and Japan right now. And that's big enough for us to start. We can have a lot of growth there. And we think it can be -- well, honestly, we believe we might be able to double each year for a while and get it to be a significant portion of our -- of growth for our business. It's going to be a very slow process as we go.

What I'll do is I'll have Ryan first, talk about our organic piece of this, what we're doing with our brands today. And then I'll follow up with you when I think the opportunities exist.

So yes, we do have a significant amount of opportunity with our branded business. As we look very similar to Dykstra, looking at Australia, Japan, looking into the South America where your high whiskey countries are, we believe that there is a substantial amount of opportunity, and we do believe that there's growth within the next 5 years. I think we're starting at a much smaller base. So it's not going to be as effective as a lot of what Mr. Dykstra has. But at the same time, there is plenty of opportunity in branding outside of the U.S. into the U.K. and to Canada.

This is one area that I didn't want to talk about a lot, quite honestly, because there's two ways. No different than the U.S., you build this. You either do it organically, like you just heard, or you go buy something. And the distribution networks in the EU and everywhere else in the world are totally different than they are in the U.S. So what we need to be able to do and what we brainstorm a lot is we need a platform. We need to go out and look for an international platform, just like what they did domestically, all right? And so we spend a lot of time and know a lot of people, and we actually kind of research that. So I think the initial growth you're going to see here a little bit is what [indiscernible] about is taking our existing brands. How do we get them into distribution there? How do you -- and by the way, just because the American whiskey is great here doesn't necessarily mean -- whiskey over there means scotch, okay? So it's a little bit of a different format. It's a little different reintroduction. And I do think there are tons -- it's nothing but upside when we sell to that side. But if we're really going to get to be a serious player about it, it is about buying a platform at some point.

I want to talk a little bit about marketing in the category. So some of your big players, like, say, Jack Daniel's, I haven't -- I didn't really drink Jack Daniel's. It's been like since college. But they've amped up their game with small single barrel ryes and little bottles, and everybody seems to be amping up their game. So -- and then at the same time, there are more little quality brands of rye and bourbon whiskeys out there than I've ever -- I know fewer than I don't know. And I -- how do you differentiate? People want authenticity, want the story, but people also don't want to -- and once you get too big, then you're not maybe as endearing, once you get to the Beam size or something. And then I mean there are so many brands, I just don't know how everybody can try and get their arms around what's available to you. So is it really going to be about spending to get above the noise? So that's one question. Then the other question I have unrelated to marketing is are you interested in the [ Buchanan ] Cocktail sort of growth? Is that a category you want to be in with your brands? Or is it something you want to stay away from because it's smaller.

So the first question there as far as spend, if I back up, I think, to where you initially started with it is that point of differentiation with the brands. So I'll use Ezra Brooks for an example. We've taken that brand. If you look at it 5 years ago, 90 Proof, square bottle. The bourbon was the only real brand that we had in that brand family. Selling around $16 -- $14 to $16 a bottle at retail. And what we've been able to do as a team over the past few years to start to expand on that, right? We have the 99 Proof offering that we came out with this year. We've introduced a single-barrel program that we've then expanded on, right? So we have 2 options within that single-barrel program. There's an opportunity for retailers/customers to come in here, that stone house right behind us. That's where we do our VIP barrel picks, right, to build on that experience, right, to have an opportunity to sit down with our master distiller, taste through a brand, have him talk to them about it. Old Ezra 7, we totally relaunched that. We went to -- we were taking it to whiskey fests and sampling the product, and we realized that, "All right, we need to totally reposition this brand, make that more authentic," right, because the consumer is looking for an authentic story that's out there, something believable. That's what I spoke to about before that we've got these great stories and how do we leverage that. Spend is one way to do that, but you also have to have the full -- all the pieces of the puzzle, right? What are you doing to sample that product out at retail? How are you getting your distributors back to this brand up? Sales and marketing really working together as a team, so you're covering all angles of that. I think for us and where we're at with our brands, we can be a lot more nimble, a lot faster. We're coming out with expanding on the portfolio that we have with the brands. I think that's something that these bigger players are a little bit harder to do. And when they do, do that, that for a consumer to really believe that, that's authentic, that -- because I think they're viewed as too big at that point at some times, right? So it's a whole mix of that. It's that packaging, that story, the team, how we're supporting these brands in order to get them into engage to consider that and to lead the purchase. The barrel picks? Yes, expand on it a little bit more. Yes. I mean, I gave that example of the barrel picks here that we have at Lux Row. We offer that for Ezra Brooks and Rebel, but we have that at Limestone Branch Distillery, too. We've got that in-person experience. We have sample kit. We have multiple offerings that are out there that, again, give the opportunity to build on that portfolio. This is something we're expanding with Ross & Squibb Distillery with George Remus and the Rossville Union brands as well. How can we start to build on those barrel programs more? They have barrel program offerings, but how can we build upon that? Step 2 of that will be, "Okay, can we get a more of a consistent kind of experience at the distillery to bring consumers and accounts in to experience those brands too, meet with our distilling team there?" El Mayor Tequila. Same thing. We've got a barrel program on that product as well, too, with Reposado and Añejo, and we're starting to introduce the Extra Añejo. So those are the opportunities. And then you look at it multiple ways, it gets a consumer to learn more, to get kind of a unique taste on that product, too, but to really bring in the account and look at accounts. Hey, you've been carrying our portfolio and working on that. We've got these barrel programs. This is how you can continue to expand, support the brands and offer something new to consumers what they're looking for."

Can I add to that? the other piece that we have or the point of differentiation is our partnerships with our distributors, whereas you look at some of these more regional brands, they don't have that breadth of portfolio that we can maximize with the power that these national distributors have to put our brands in the face of the consumer, have this conversation with retailers, have those conversations with specific consumers talking about our brands and what that story is, talking more about this. We want to educate our distributors as much as possible. We want them here. We want them to be true ambassadors in the market when they talk about our portfolio. And the size that we are, we are really at a good opportunity to leverage that business with those distributors that they are the face of our brands out in the market.

While you have the mic, why don't you touch on your view on canned cocktails?

Yes. So there's 2 things. Canned cocktails are a very crowded category at this point, okay? And we're already starting to see at retail them thinning out the amount of offerings that they're carrying. The other piece of that from experience that we have in the canned cocktail business is it's not very margin enhancing. It's a very low-margin item that you have to be in the face of the consumers or distributors pushing it, and it will cost a lot of additional marketing dollars to support those type brands. So at this point, to me, canned cocktails are going to end up being a couple of major large players, and that's going to be the extent of it for a while.

And that's what you get when you work with someone for a long time. I almost could have said that exactly for him because that is what's going on. It's a very crowded space. Let's be honest, it's [ Whitehall ] and [ Truly ], and then you got AB and everybody else rushing in. It's a volume game. Low margin sets. But if you're cranking it out, it's the volume. You can't accumulate mass on it. It actually is a pretty capital-intensive business because to be able to run the line speeds you need, its specialty equipment different than what we do, and we're talking whereas something when we run bottling lines is a fraction of the speed that they run canon lines on. So I think for us to -- we actually do -- if you go to our website, we have a little product called Vita Frute. We have Salvador's in the can. We stick our toes in it. But we also made a decision starting in 2021 like, I'm not going to dump marketing money in this. We'll sell it. If our wholesalers want it and they want an option, great. We're aren't going to spend money on it because there's no way you're going to compete with those big guys on this. They want you to chase them down the tube on this. So I think what Ryan said is right on. It's obviously a huge category, but now it's dominated by the few.

As I said, I have a lot of questions, so bear with me. I'm just going to kind of start -- I actually want to start back with the Distillery Products, just a few follow-ups. One of the issues going back 3, 4 years ago is building up the age inventory. It was going to be this golden egg, and everybody was going to win. It didn't play out that way. The strategy has changed. And so -- and now from the idea at one point of lowering your inventory, you're actually continuing to build it or keep it up. So one, what does the pipeline look like? I know you're not -- you haven't contracted it all out, but it sounds like you've gotten more customers, more comfort, more visibility to -- for example, you have a small customer who isn't putting in an order today, but you know in 3 years they're going to need it. Is that what's happened with the customer base growing up? And on that, it's certainly impressive that the number of customers has gone from 90 to 260. But if there are thousands of whiskey players out there, it seems like it could go a lot higher. So what -- is that correct? Or are you at kind of a good equilibrium in terms of numbers?

No. Our actual customer base number is higher than, say, 267. That's what's being bought every quarter. And the customer mix, you're right, changes. And it's getting to be a lot more predictable than what it once was. The customer flow moves in and out per quarter quite substantially. But we know -- we've gotten to the point where we know they're going to come back in 2 quarters and buy for so. So that much higher base of customers has made it a little bit more predictable. We call it our day-to-day business. We kind of know on a per-month basis we can count on this much in barrel sales and this much in revenue, and it will lead to this much in gross profit. But I think Dave said during his presentation, we still have large sales that occur. Those are still not predictable, especially with multinationals. They come in. They inquire. They say, "We'll be back to you in a week," and then they're back to you in a week, and you're done, most of the time. Every now and then, it takes a little bit longer than that. But, say, 80 -- 75%, 80%, it's that quick. We have no visibility to that. There's no warning to it. And so that's what's getting hard to predict. And that's why we still -- you still see swings in our marketplace. But we believe as we continue to get higher in the customer base, we can do that. And I know we -- it took us several years to build our inventory. We didn't sell a lot for a while to get it built. I mean we certainly -- in the last 2 years, that whole strategy obviously played out and it worked, just not in a timely fashion, especially relative to '19. But it did work in '20 and '21, just like we thought. And we had some things we were working on in '19 that just didn't pan out in '19, but they happened in '20. So we still believe that's a very viable strategy. And we are rebuilding our inventory, just simply because we're selling a lot more than we ever thought we would and depleting a lot of inventory. So we're having to lay down more each year than what we anticipated.

and in terms of customers, I mean, do you see that customer base just in general, doubling? I mean is that potential -- because it would seem like there are, again, thousands out there.

I don't see it -- just me. It's just my opinion. I don't see it doubling. I think what's not really talked about is a lot of these guys fail. They move in and out, and someone else starts one. And so the number keeps getting higher. I'd like to think we can sell to 50% of them. I mean there's a segment of that group that just won't buy from someone like us. They want it to be authentic. And -- but the reality is once they get to a certain size, they're going to come to someone like us because it's -- they can either make -- what most of them do, they make a choice between building a much bigger distillery that costs tens of millions of dollars or they spend it on marketing. And I think most come to the realization that they got to spend it on marketing. And so they come to someone like us.

And moving down to the Luxco's, I mean, combination from your standpoint, I mean, have there been opportunities that have arisen? I mean I know all bourbon is not the same. But, say, like Yellowstone, you're probably selling a lot more than you thought you would when you put it away 2, 3, 4 years ago. Is it -- are there ways to utilize the 2 companies together to backfill certain areas or expand where there's some more integration?

Well, I'll take it first, and you can jump in. I mean their brands are Kentucky brands. This facility is going to supply their brands. But the other side of it is they can help us immensely help grow our business, especially relative to the control labels for the major supermarkets and such. So that's where the real opportunities lie. It's amazing how many people call them instead of calling us about certain things. And so we worked -- he sent me lots of things since we've gotten this deal done. So there's a lot of synergies there. And he and I work well together. I mean we've known each other for 25 years or something like that. So...

On the control brands, so are you doing any of the control brands now? Because somebody is doing Costco or elsewhere. And do you have -- I mean do you have to displace those? Or is that easily displaced? How does that work?

Yes.

Yes. There are some new customers out there that have opportunities for private labels. Replacing a new customer is a challenge but something that we are going to address as we move forward. We have met with a number of those key customers. And again, it's a challenge, but there is opportunity. We are looking at any strategic partner that can help us support our overall portfolio. I mean for us, it's still off the branded business, but one that we can partner together that makes sense to build out a control label that again supports both sides.

Yes. And I will say some -- you notice we're saying control label versus private label. And that -- because we don't want to do private label. We want to do control label because we want to control the label, so that if the retailer decides at some point down the road they're not going to carry it anymore, we still own the label, and we can take that brand to other locations. But today, we're in -- control labels are liquidus, but we didn't have the bottling capabilities. So it's not a turnkey. But we're a liquid in a lot of control labels out there. Now what we're doing is looking at -- because of the additional capabilities that we have with Luxco, actually going direct to the customer turnkey.

Got it. That helps. And then one last one, and then I'm going to jump over to Luxco. Industrial alcohol, yes, the fluctuations have -- had made interesting quarterly reports over the past 4 or 5 years. It's very tough to predict. And you talk about trying to eventually exit that business. I mean is that realistic? Did you ever realistically exit the business? Or is it just something we should expect to get smaller and smaller each year? I know it's not as big of a -- not as important now that you're part of Luxco, and -- or they're sort of coming together, but just kind of understanding how to look at that over the next few years.

Yes. We will always have some industrial alcohol. It's a good outlet. Plants don't run perfect all the time. But you will see it get smaller and smaller through the years. It -- we've really shrunk it down in the last 3 years. We'll probably be on that pace over the next 3 years as well. And yes, it's been a good business at times for us. It's been a horrible business at times. And right now, it's looking like it's going to be a horrible business for the next 2 to 3 years, just to be honest. So it's something that has to be done, and we're having those conversations as we speak. Had several yesterday, not pretty ones, but it just has to be done.

No. I appreciate the color. So, Luxco. I'm sorry, I'll only ask one more. On that Slide 33, hey, we're in every category. We're in every price point. Why is that a good thing? I mean -- and I ask that of Jack Daniel or Brown-Forman has 1/5 of the brands that you have. They're focused. They can focus marketing. They don't worry that the popular or the entry price point is declining. They don't have to face those headwinds. They have plenty of scale. And I know it's a different business, but explain to me why that's also good, that you're in every single one, which seems like you're spread -- could be spread too thin.

Well, the key to that is there's a number of different customers that are out there that buy within each of those different price points. So when you look at the premium -- sort of ultra premium to super premium, we want to be in all those categories as that customer fluctuates back and forth. They have an everyday item that they want to buy on a regular basis, but on special occasions, they may value up. So we want to have an offering within each of those sets that we can capture that customer every time they go into the store. I don't know if that answers completely.

Can I add to that? The only thing I'll add to that, there's a huge portfolio of brands, but which ones are we investing behind, as far as the support and which ones we want to grow? That's where it starts to narrow down even more. And that's where we're pinpointing where are the ones that are -- have the opportunity long term, the ones that have the right ones that we're behind.

Let me add kind of another twist to that. So there's 2 reasons. A, we focus about 0 energy personally on -- I call them, transactional orders. We don't have our sales team go out and talk about value vodka, right? Wholesalers just send us an order, customer service keys it in and out the door it goes. So it is a great way to displace overhead, right? It keeps plants running. That is one of the reasons we do it. The second reason, and Ryan, maybe you can touch on this a little bit, is at a wholesale level in the United States, you have this vision that we're selling in, and every sales rep is selling everything. It's not how it works in a wholesaler. They actually firewall you by supplier. So when if you're stuck into a firewall, as what we call it within the supplier, you need to have a full portfolio, okay, because they're calling on those accounts, competing within their own wholesale operation to be able to carry that account and offer every opportunity, period. So if they don't have that vodka choice or they don't have that rum choice or they don't have that, the other division within the same wholesaler, and they're all probably controlled entities, get to come in, and [ their charge ] has taken them back out. It's actually amazing, within a wholesale operation, how competitive it actually is through this. Anything you want to add to that?

No. I mean I think you touched on everything. And there is a lot of movement within the supplier community from one distributor to another, and having those additional brands within the different price points does, as David said, allows us the opportunity to take on the business that may have been lost by that distributor and, again, give us the opportunity to grow even further.

And this -- one thing -- this is one topic myself, and he's actually looking down at a phone right now in the corner. We spent a lot of time talking about this very topic, back and forth, back and forth, back and forth, because we were first for a while, in all honesty, in that camp. I was going like, "Why are we doing this? Let's move on." And he was in the other camp and he's going like, "No. David, you need to back up, and you need to think about the total portfolio. You need to think about the option." What do you lose if you're doing it?" And then that's when -- it's like a little lightbulb kicked on. I go, "There is nothing." You know why? How much energy that thing puts into it? Zero. You know why? Because when you walk into a wholesaler in the United States and talk to it, this is the rule of thumb. You get 3 brands to talk about at any given meeting. They don't want to hear about the 100 brands we have. You get to pick 3 to 4, all right? And you build a promotion around it, and it's literally you could take Southern Glazer's or an RNDC and go state-by-state and build different programs. And that actually is a strategy that we do, so that we get that distribution we want, but what we focused in one state with RNDC, it may be different in the next state because each of these units operate almost like independent little companies.

And just to make I understand, there's not risk of those brands, you're not focusing on being deleted because you have the full portfolio, one-stop shop. And so is that the right way to think about it?

I mean from a value perspective, yes, there's opportunity for some of those brands to fall off. But again, they're the value set, we're not putting our time and energy into it. It's not necessarily a bad thing.

There's the other piece of this, too. So one of the strategies that when Don and I were doing this that we did compromise on is because there are large suppliers, privately held suppliers that would love for you to value price vodka and chase them on this value proposition. So you're taking an eye off the ball over here. And so one of the other strategies, when Don and I finally connected up on this, and we probably discussed it, what, 2 years or so. It was a long time. But one of the other strategies that we came to is, "Great. Ryan, here you go. Sell it. Don't lose a damn penny." Okay? And if that means we're not going to chase that value option because that's what they want to do, and it means our price has to be at a value level, $50, $75 higher in a bottle, and it gets you not to a loss, play with it. And here's the amazing thing about it. Once we started doing that, we started noticing that our competitor wouldn't drop because there was no reason for them to drop. The moment we would walk in and go, "Give me the lowest price. Give me $0.50 below that," well, they can go $0.50 below, and it just perpetuates itself. Once we said, "We're not going to compete with you. We're going to stay one just spot above you," guess what they did? They stayed up there as well. So I mean it really is a strategy that it is a lot of cases within the portfolio, but it really is a central office transaction.

Yes. I'll add to that, too. And as those are lower-margin items for us, especially on the value side, it's the same with our distributor partners. So as those items do fall off, they have opportunities to raise their margin and focus more in on our premium brands, which enhances all of their margins and ours as well.

And literally 2 more questions.

[indiscernible]

Yes. That's part of the condition here. And the -- is there an ACV or a distribution opportunity of the existing brands? I get the MGP brands that came in, but -- and I probably can find Yellowstone most places, but can I find all of your top 15 brands everywhere?

Yes. No. We are continuing to work on points of distribution. We're continuing to leverage our distributor partners. There's a lot of national account opportunities. There's on-premise that we really need to get more involved with, and that's kind of the direction for us as we move into 2022 and beyond, is to have that as our secondary piece of awareness from the marketing side. We need to have a showcase in the on-premise, so there they can see our product and be able to buy it at retail and saying they've had that cocktail at a bar or restaurant.

So where are we in that process? I mean is that -- next year, we're going to see a big step up? In the next few years, we'll see a big step up? Or -- and is there any way to quantify like it's -- how...

It's pretty tough to quantify, I mean, because what ends up happening is you have -- what's the distribution fall off, what's the distribution to add on. It's all about quality. So when -- you're statement on ACV, yes, those are something that we're constantly tracking and trying to build out the right points of distribution. We are constantly working on our distributors to target the right accounts that can drive the volume and keep us moving through product.

I'd also add to that, that there's also this myth of, "Okay, great. We're going to go out and market -- we're going to set it out there, and it just happens." No, it doesn't. You take a brand like Yellowstone. It was 5 years in the distribution. I could have spent multimillion dollars worth putting it on TV. The person walked out there, and it wasn't there. It's money down the drain. So I think as we look at these brands going forward, especially the ones that we're going to promote on what we'll consider on a national basis, Yellowstone for example, then there is a lot of time before you ever will see that nationally because you -- it's only national if you can find it in every store. Again, I'll go back to the Yellowstone. It's not in every single store, but that's the opportunity. Now that we've got enough, it is in every state. It isn't every [indiscernible] store within those states. And now we can take the marketing opportunity, put more money on it, and guess what. The other ones [ that get in got sales ], okay? But it always starts with the distribution points first.

I'll kind of piggyback that again. We are still with the Yellowstone and a lot of our brands are in the infancy stages because a lot of larger chains and strategic accounts are waiting to see the success of the brand before they actually add it to their portfolio mix. We are seeing that success now with a large portion of our brands. That is the next step for us. That's the large portion of distribution that we could gain. But again, it's a lot of hard work. Timing is very difficult within chains and on-premise. So it's something that will definitely take some time, but it is a huge opportunity of growth.

And then going back to M&A. You like a fast-growing, great brand name that's got good margins, so would everybody. So -- and in the industry. Yes. So -- and I understand that you now have scale and obviously dry powder. But I mean what puts you to the front versus others? And what -- help me understand, for especially an established brand, what's the value-add of joining this family? In terms of, hey, I'm making great money. I'm growing just fine. Help me understand like why that's going to change.

That's a complicated question, so let me try to dissect it for you. There's 2 things. This is actually one of the synergy points between us. Because, guess what, every one of those -- not everyone. A vast majority of those craft brands set right here, okay? So for me, once that my eyes were open to the world of MGP, I'm going like, "Holy smokes, there's all these M&A opportunities that are depending on us." Here's where it also connects back. He mentioned like, "Hey, every now and then, David calls me and says something." You know why? Because I got wholesalers calling me and going like, "There's this brand over here in this state that's really doing well. I know these folks. Can you help them out?" Yes, I can. Here, David Bratcher, go and do that. We've had multiple deal calls using exactly that. The problem is, it's picking the right one. Because if you got something that's got 10,000, 20,000, 30,000, that's hard. You've really got to believe in the story, and I'm bringing that right back to here. They need to have authenticity. You can't BS consumers anymore. It's just not the way it works. The Internet and social media has changed everything. If they don't have a real story to start with, and I'll go back to Yellowstone one more time, one of the reasons why we did that transaction, because there's a real story there. [ Steve Beam ] who you all met, great, great grandfather started the brand, all right? So the -- you've got to find that right mix of adding to it. I don't think -- if we just wanted to go on an M&A spree and buying stuff up, it's there. But it's about finding the right fit in it because the other question you said is, "You don't want to spread yourself too thin." How many focus brands can you focus on and actually have dollars and cents on it? So we've got to be able to choose the right things to do that.

Yes. And just to build on that a little bit, what kind of makes us different, Bill, is after we announced Luxco, you can imagine the hundreds and hundreds of craft customers we have, are calling us. And directly, they're not going through a banker. They're calling David and his team and saying, "Hey, can we speak with Brandon or with David Bratcher?" And there's really 3 reasons, and some of these are unique to MGP, and some are not. So they're looking to grow their brands. They're looking to potentially, almost in all cases, monetize, right? But to do that, they need access to capital, which they know they can get through us, but that's -- capital is pretty cheap these days. But the other 2 things that we offer, one is whiskey, right? We have, in their minds, an endless supply. We can fulfill their wildest dreams in terms of getting their brands, the bottles filled, so to speak. But what Luxco brings in that these entrepreneurs see is the distribution. They know how hard it is to get accounts. They know how difficult it is to launch a new state, and they know how expensive all of this is, too. All of a sudden, we just start checking these boxes for them and our phone is ringing, and we're being reactive to a flood of great opportunities. Again, that can be recreated somewhat out there, but not to the same scale that we have in terms of David [indiscernible] and his team's customers. So hopefully that shares a little bit more about it.

So we've got time for one last question here.

Hang on. I'm just thrilled he sounds like -- I was on the investor call. I thought there was like a recorded voice. That's your real voice. One thing that I think is really important that you kind of talked about a little bit, but I think while we have this audience is really important for you to explain is the Luxco relationship with our wholesalers and how important that is to brand building in the CPG business versus just General Mills or General Foods that can go kind of direct. And then maybe talk about the margin relationship, that conversation, kind of how we build our brands and...

You already know the answer to that.

Well for the... I'm not going to do it because...

Well, will you please answer that?

No. I'm going to let you guys know. David and I did it together, and Ryan and Fletcher, we've all done it together.

But I don't think you can underestimate it because it's a critical reason or a critical part of this whole platform.

So there is -- there's 2 pieces of this. I going to take the first piece, you take the second piece. So you got to understand the largest wholesalers in the world, really are all privately held family companies. Give me my phone, and will -- Don and I can call Wayne Chaplin, who's the CEO of Southern Glazer's tomorrow or today, and he will get back. I mean there is what we bring because they are family companies -- by the way, we're not the only one. There are still a couple of family -- big family companies in this business -- is access. They want to see you succeed, all right? Because they are dealing with a lot of other multinationals and stuff that have a very different sales strategy, which I will have him chat about. But having that access to that family relationship is critical. And I'll close in saying that this is how critical it is. Don and I have done this for a long time. We've gone in. I'll gone in and said, and they saw people like me or Ryan for 24 years. I'm good for my word. When I cut you a deal, it may not always be the best deal, but they know I'm going to come back and stare at them the next day and say, "Oh, I screwed up, " or "I know that was great. Let's do it again." There's that confidence in the people that we have because they're family companies. They don't care about all this other stuff. It's family business. What are you going to do to generate cash for the family? And that's the sales strategy part of it.

And within that partnership, I mean we're not a company that comes in and pounds our fist on the table. We are very collaborative in nature when we're working with our distributor partners. That's something that they don't get from every supplier. And that's why we get a little more of the jump balls. We also align ourselves from a strategic standpoint with their margin sets. They want to grow their margins just like we do. So they're more apt to spend time on the brands that will do that. And that's exactly what we're aligning with them right now with the current portfolio that we have. So with that strategy of, "Hey, we've got premium brands that we want to sell," supports you, supports us. We've got a great partnership. It all works together.

One last comment on it that we get because we do get that access and stuff is that what you find people like Ryan do, and I think it's different than, let's say, some other multinational, because multinationals are coming in because of scale. They can bang their fist on the table a little bit. They've earned that. They can do that. But what Ryan and his team does, I think, is different, and I've sat through a ton of meetings with them there, is that, that collaboration is a word that's overused, but it really does play out because what we help them do is understand. Because the amount of data -- this touches back to our CIO, the amount of data that we have and the business intelligence that we have within our own systems and our wholesaler systems is incredible. So when we walk into a room or Ryan and them walk into the room, they can really pull up their data and go, "Here's your margin set. If you sell this, you sell this, you do this, your internal margin goes from X to Y." By the way, they love that because then they have direction. Why? Because they're all compensated from the same thing as well, and it transacts to the sales team. One of the things that Ryan did a couple of years ago, which I think is super smart, he actually aligned our sales team's bonus goals directly with the distributors. That whole -- that salesperson sitting there in that room signing off on it got paid their bonus if his person and vice versa got paid their bonus. You talk about people to get motivated pretty quick. People like their dollars. And I think that having that access to that is key. It can't be underestimated. By the way, that's why MGP made this awesome purchase into Luxco, right? They had brands for a few years, all right? And they had big players in the brands in it, right? So they bought the platform. They bought the access to the platform, and that's what we bring to the table.

Don, how did we do?

Is that good enough? All right.

Good. All right. Mike, was that really the last question? Yes. Well, thanks everybody. Okay Michele, do you want to come up and talk about the tour? For those on the webcast, thanks for your participation today, and thanks for the interest in MGP.