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

Thank you. Good morning and welcome to the MGP Ingredients Second Quarter 2026 Earnings Conference Call with Julie Francis, President and CEO, and Brandon Gall, CFO. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star then 2. Please also note this event is being recorded today. In addition, this call may involve certain forward-looking statements. The company's actual results could differ materially from any forward-looking statements due to a number of factors, including the risk factors described in the company's annual and quarterly reports filed with the SEC. to update any forward-looking statements made during the call, except as required by law. This call will contain references to certain non-GAAP measures, which the company believes are useful in evaluating the company's performance. A reconciliation of these measures to the most comparable gap measures is included in today's earnings release, which was issued this morning before the markets opened and is available at www.mgpingredients.com. At this time, I would like to turn the call over to Julie Francis, President and CEO of MGP Ingredients. Please go ahead.

Good morning. I'd like to thank you all for joining us today on our second quarter 2026 earnings call. For the second quarter, sales came in at $124.4 million down versus the prior year as expected, adjusted EBITDA of $27.6 million, and adjusted basic EPS of 72 cents also declined versus the second quarter of last year. However, both of these key metrics were ahead of our expectations. These results reflected continued momentum in our premium plus portfolio led by Penelope Bourbon and Yellowstone and an improvement in select mid and value price brands. We also delivered sales growth in ingredient solutions against our best quarter of 2025, which reflects continued strong customer demand supported by approved, operational reliability, and inventory availability. In a challenging environment, our distilling solutions team delivered both lower distillation costs and favorable sales price and mix, resulting in gross margin expansion versus the prior year. We are pleased with this performance as it reflects the success of the actions we took during the second quarter to execute against our strategic roadmap. It also demonstrates the positive impact of our efforts to strengthen and revamp our sales, marketing, and supply chain functions while adding specific capabilities across all levels of the company to address new and existing problems. existing growth opportunities. We also continue to drive progress across the business by eliminating waste, driving efficiencies, and maximizing effectiveness through the implementation of our Ownership Cost Management Initiative, which I've discussed in previous calls. While we'll talk more about our segment performance later in the call, I'd like to take a few moments to update you the progress we have made with our key initiatives. As I've mentioned previously, we've been strengthening our core by adding specific capabilities to our leadership team. Yesterday, we announced four strategic appointments designed to expand our commercial and marketing excellence across the Silling Solutions, Brand and Spirits, and overall MGP. Tom Nyhalsos joins us as Vice President to lead Distilling Solutions Sales. For Brand Experience, Saul Clayhane is now serving as Managing Director and Leader of National Accounts, while Marilyn Chen has taken the role of Brand Director to lead the marketing efforts behind Penelope Bourbon. On the corporate side, David Sanders has joined us as Vice President to lead enterprise financial planning and analysis. Together, these appointments expand our leadership and expertise across customer strategy, national retail and on-premise partnerships, brand marketing and planning, as well as reinforce our focus on driving growth across our business and executing against our strategic roadmap. Before turning to our business segments, I want to address the recent distributor news regarding RNDC's bankruptcy filing. Since the beginning of the year, we have known about RNDC's financial challenges, and while the bankruptcy has a financial impact, which Brandon will cover in his remarks, I want to highlight the significant progress we've made strengthening our national distribution network, and expanding our route to market capabilities. The team has been executing a disciplined transition strategy, conducting extensive market by market distributor assessments and carefully evaluating each market's unique dynamics. Through this process, they successfully identified, vetted, and validated new distribution partners to ensure business continuity and position the portfolio That preparation is already impacting results. During June, we successfully transitioned 10 markets to raise the beverage group with minimal changes to our route-to-market model and disruption to customers or field operations. Just last month, we launched But less is importantly, the partnership is generating early positive momentum. During the first month of operation, depletions in our Premium Plus and mid-tier portfolios increased 7% and 4% respectively. While we are encouraged by this early success, our work is not yet complete. We are currently progressing through various stages of distributor transition for certain open and control states with many transitions targeted to go live later this quarter. Together with our new distributor partners, we will concentrate on expanding distribution, elevating in-store execution and accelerating growth across our premium plus portfolio. Now turning to our business segments, I'll begin with Branded Spirits, our primary long-term growth platform. The second quarter provided another strong proof point that our strategy is working and our initiatives are strengthening performance despite a challenging industry backdrop. Throughout the quarter, we continue to outperform the broader spirits category by accelerating growth in our premium plus portfolio while stabilizing our mid and value tier price brands. At the same time, we remain focused on building the capabilities needed to sustain long-term growth, including digital marketing, trade marketing, national accounts, and on-premise execution. While reported sales were modestly below prior year, excluding sales of our other products category, which primarily consists of contract bottle products sold in Europe, our branded spirits sales increased 3% compared to prior year. This performance exceeds both Nielsen industry trends, which declined 2% during the quarter, and NAPCA trends, down 3 percent. Our premium plus portfolio grew 5 percent in the quarter, significantly outperforming both Nielsen and NAPCA, which were down 3 percent and 5 percent respectively. We also delivered approximately 1% growth in our mid and value price brands, comparing favorably to declines of 2% at Nielsen and 4% at NAPCA. These results reflect the strength of our portfolio and the effectiveness of our brand building and revenue growth management, or RGM, initiatives. Profitability also continued to improve. Second quarter gross margin expanded 20 basis points to 53%, driven by favorable portfolio mix and early benefits from our RGM efforts. Gross profit totaling $31.6 million was below prior years, resulting from the anticipated decline in our other products category. Overall, we are encouraged by the continued momentum in Brandon Spirits and believe our portfolio remains well positioned to deliver differentiated growth while gaining share in a difficult operating environment. Let's take a moment to focus on our Premium Plus portfolio, which continued to be a key growth engine during the quarter, led by Penelope, Yellowstone, and Everclear. The NLP sales increased 13% despite cycling the highly successful launch of Weedit in the prior year period. Growth was supported by continued strength in 4Grain, an original core brand, which benefited from increased media investment and expanded distribution. The core also benefited from recent innovation, including the introduction of 2Grain. new core expressions, Penelope Kentucky Straight Bourbon and Penelope Rye. We were We're also excited to add to our ready-to-pour portfolio with the launch of our new BlackBerry Old Fashioned, while also staying true to our brand's ethos with newly introduced limited time offerings of Penelope Rivera and Architects of Golf. Yellowstone delivered another exceptional quarter, with sales increasing 54%. Growth was driven by innovation, including our recent limited-time release commemorating the United States' 250th anniversary, as well as improved performance of Yellowstone Select in targeted markets supported by increased marketing investment and RGM initiatives. Everclear grew 13% reflecting increased consumer engagement in key consumption occasions and continued strength in the brand's core positioning. Turning to our mid-price portfolio. Stabilization efforts continue to gain traction. Growth was led by Exotico, Juarez Tequila, and Ezra Brooks, and driven by improved distribution, targeted price actions, and successful distributor transitions and focused brand support. Overall, these results reinforce our confidence that the portfolio is becoming increasingly more balanced with growth in premium plus brands complemented by improving performance across our larger heritage brands. Another important strategic initiative is portfolio optimization. During our last earnings call, we discussed plans to rationalize lower priority brands and SKUs to improve focus and profitability. I'm pleased to report that we've exceeded our original expectations. As of the second quarter, we have rationalized 52 brands, representing approximately 47% of our product portfolio. While these brands account for approximately 1% of sales, this effort is expected to improve analyzed gross margin by approximately 25 basis points, while also enhancing the sales top-line performance estimated to be 42 basis points through improved commercial focus. Beyond the direct and readily visible P&L benefits, this initiative is creating enterprise value by simplifying operations, improving inventory management, and driving working capital efficiencies across the business. Expanding distribution remains a key strategic priority and an important source of future growth. During the quarter, we grew our national and regional chains off-premise points of distribution by 7% and on-premise points of distribution by 4% sequentially. For these same customers, our Premium Plus portfolio grew off-premise points of distribution by 14% and grew on premise by 10% sequentially. Overall, we are encouraged by the momentum across brand and spirits and remain focused on expanding distribution, increasing consumer awareness, optimizing our portfolio, and accelerating growth across our highest priority brands. Turning to distilling solutions. Second quarter sales were 29.2%. down 42% compared to prior year. Gross profit of 11.3 million declined 40%. However, gross margin improved approximately 110 basis points to 38.7%, driven by favorable ongoing cost savings initiatives and sales mix. We continue to make gradual progress and believe we remain well-informed well positioned to compete intelligently and aggressively in a very challenging market. As you know, the industry remains significantly oversupplied with elevated inventory levels continuing to pressure demand. Despite these market conditions, we remain one of the leading global providers of contracted new make and aged American whiskey and continue to focus on the actions within our control to strengthen the business and position it for long-term success. The primary focus of our larger national and multinational customers, which historically represent the majority of our new distillate demand, is reducing inventory and managing working capital. Many customers are operating under strict capital allegation guidelines and are limited in their ability to enter into long-term supply commitments as they work through existing inventory positions. Importantly, these discussions are less about production capabilities and more about balance sheet management in a market that remains oversupplied. In response, we continue to deepen customer relationships by providing solutions beyond traditional new distillate supply. This includes opportunistic aged whiskey sales, premium white goods offerings such as premium GNS and gin, and other services that help customers improve profitability, optimize inventory, and support their broader business objectives. While brown goods sales declined approximately 59% in the quarter versus the prior year, we are seeing encouraging progress in several targeted initiatives. We continue to expand our presence in private label whiskey, and the significant national private label customer we discussed last quarter has increased its business beyond the original demand levels communicated to us. to focus on driving cash generation by expanding our portfolio of value-added services and strengthening customer retention. White House services represented approximately 30% of distilling solution sales during the quarter with both sales and gross profit increasing versus the prior year. While industry conditions remain challenging, we believe our customer relationships, commercial capabilities, aged whiskey expertise, and expanding service offerings position us well to capitalize when the market ultimately normalizes. Turning now to ingredient solutions. Demand across our specialty ingredient portfolio remains healthy. specialty starch sales, including Fibersen, increased 2% and we continue to ship all available production to meet customer demand. Our specialty protein platform marketed under Arise also grew, benefiting from favorable mix in pricing. These results underscore the continued demand for high protein, high fiber, and nutrient-dense food products. Trends such as GLP-1 adoption, lower net carb diets, and protein-focused nutrition continue to drive innovation across bakery, snack, and meal solution categories. second quarter, ingredient solution sales increased 2% to 35.5 million, despite lapping a particularly strong prior year comparison. Growth was driven by favorable pricing and mix within our specialty protein and specialty starch portfolios, as well as improved sales of biofuel and other co-products as operational performance stabilized. These results are also reflected an addition of four significant new national customers. While revenue trends remain encouraging, profitability continues to be impacted by elevated waste starch disposal costs associated with the transition following the closure of the Atchison Distilling and startup of the biofuel facility. As a result, gross profit declined to $3.6 million and gross margin was 10.1% during the quarter. Since the beginning of the year, the team has significantly improved operational reliability and reduced unplanned downtime, resulting in higher production throughput. While these improvements are encouraging, they also generated greater waste start stream during the first half than initially anticipated. Through various engineering solutions, the team successfully reduced during the second quarter. These solutions have proven to be more cost effective than traditional waste disposal methods and reduce reliance on third party providers. However, implementation costs were higher during the quarter than originally expected. While we expect these costs to improve over time as our processes are further optimized, the impact is reflected.

in our updated full year ingredient solutions margin outlook and incorporated into our 2026 guidance. With that, I will turn the call over to Brandon. Thank you, Julie. Turning now to our financial results. For the second quarter of 2026, we reported consolidated sales of $124.4 million, which were down 50% versus the prior year period. Gross profit of $46.5 billion was down 20%. Both metrics were lower versus the prior year, primarily due to expected declines in brown goods sales in this time zone. This was partially offset by higher ingredient solution sales. Consolidated gross margin of 37.4% declined by approximately 270 basis points as higher waste start stream costs in ingredient solutions pressured overall profitability, both in Both branded spirits and distilling solutions saw gross margin expansion in the quarter relative to prior year. Branded Spirits advertising and promotion expenses decreased by approximately 12% year-over-year. It represented 9.3% of Branded Spirits sales, primarily due to the timing of spend throughout the year. For the first time, Branded Spirits sales were down by approximately 12%. For the full year, we continue to expect Branded Spirits A&P to be approximately 13 to 14% of Branded Spirits sales. Total SG&A spend declined by 13% in the second quarter, while adjusted SG&A declined by 19%, with both amounts showing the benefit of our expanded cost savings efforts. These SG&A savings were partially offset by a $2.1 million credit loss provision taken in the quarter relating to the RNDC filing. Net income of $12 million was down 17% versus the prior year, while adjusted net income of $15.8 million decreased 25% on a year-over-year basis. Earnings per share for the second quarter were 55 cents versus 67 cents in the prior year. On net On an adjusted basis, earnings per share of 72% decreased 26% year over year. of $27.6 million decreased 23% over the same period. Capital expenditures declined 66% to $6.4 million on a year-to-date basis. We continue to estimate CapEx of approximately $20 million for the full year as we look to optimize our capital deployment in the current industry environment. As of June 30th, our net debt leverage ratio was approximately 3.5 times, up from 2.1 times at the end of March. This expected increase was primarily due to the Penelope earn-out payment of approximately $111 million, which was made during the second quarter. According to annual guidance, we are reaffirming our expectations for 2026 net sales to be between $480 and $500 million. Adjusted EBITDA is still projected to range from $90 to $98 million. This is consistent with previous expectations as the efficiencies and savings from our recently implemented Cost Management Mindset Initiative are expected to offset our reduced gross profit outlook in ingredient solutions in our Branded Spirits second quarter provision for credit loss. Adjusted basic ETFs for 2026 is still expected to be between $1.50 and $1.80, with weighted average shares outstanding remaining at approximately 21.4 million. We now expect our full-year 2026 effective tax rate will be approximately 23% due to a recent revision to 2025 Kansas State law, which resulted in a favorable revaluation of certain deferred tax liabilities. Turning to our balance sheet and cash flow outlook, we maintain our expectations for of 2026 operating cash flow of $50 million to $55 million and free cash flow of $30 million to $35 million. Both of these exclude the impact of the Penelope earn-out payment. We anticipate our net leverage ratio will peak during the third quarter. We continue to estimate net whiskey put away in the $13 million to $18 million range for 2026, which includes both new production and procurement of barrels. From a business segment perspective, our four-year segment outlook for distilling solutions is consistent with previously shared estimates, with sales down approximately 35% and gross profit down approximately 40%. Our four-year sales outlook of $140 to $150 million for ingredient solutions reflects strong growth as we expect improved year-over-year reliability and throughput gains from our operational initiatives. However, due to increased waste start stream costs, we now anticipate ingredient solutions gross margins to be in the high single to low double digit range for the full year. Our full year segment outlook for branded spirits is unchanged as we continue to expect sales declines of mid single digits with slight gross margin improvement. To close, I'd like to reiterate Julie's previous comments. As we move through the second half of 2026, we will maintain our strategic roadmap and continue to drive our key growth initiatives while prioritizing our best opportunities for growth. We won't stop taking the decisive actions that are key to the company's long-term growth, and we will continue to execute with discipline.

And with that, I'd like to turn it back over to Julie. Thank you, Brandon. Before we wrap up, I want to thank the entire MGP team for another quarter of execution, performance, impact, and care, and for their hard work and commitment to deliver against our strategic roadmap. This strategic roadmap is designed to drive growth across all three businesses. For our branded spirits, we will continue to focus on winning in the premium plus category with Penelope Bourbon, while strengthening our overall brand focus. We will prioritize our best performing brands and plan to rationalize approximately 47 percent of our product portfolio. We will also strive to increase our penetration in national accounts and to strengthen our digital marketing capabilities. For Distilling Solutions, we will remain focused on rebuilding our Asia Whiskey pipeline while broadening our premium white goods offerings to complement our brown goods portfolio. We will also continue to work on attracting and retaining a wider pool of customers by growing our private label and international whiskey programs and by expanding our value-added service offerings. We are pleased to have an industry veteran join who is immediately engaging in the business and with customers. And for ingredient solutions, our efforts will remain focused on driving growth through our industry leading specialty fiber and specialty protein product offerings. We expect to continue our operational reliability, enhance inventory availability, and to make continuous improvements across the segment. Managing high waste disposal costs will remain a key priority for this business. Looking ahead, I'm encouraged by the progress we are making across our organization. As I stated earlier, our strategy remains grounded in focus, execution, discipline, and accountability. We're actively evaluating all levers to operate more efficiently and effectively. While the industry outlet remains challenging, we're committed to addressing our challenges in order to position MGB to emerge as a better aligned and more resilient company that is capable of doing more. capable of delivering long-term value creation. And with that, I'd like to turn the call over to the operator for any questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, Please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Seamus Cassidy with TD Cowan.

Go ahead. Spirits, you mentioned some strong innovation and distribution gains that help drive growth for some of your brands this quarter. So I guess two part question. One, would you characterize this quarter as above average in terms of innovation or is the pipeline fairly well balanced throughout the year? And then two, what's the runway for distribution expansion going forward? and I guess thus far, how have your teams sort of been successful in realizing these distribution gains? Thanks.

Seamus and Julie, the very first part of your question was cut off, so I just want to make sure that we have exactly what you said because you didn't start right away.

Yes, sorry, I was just saying strong innovation and distribution gains drove the growth. So I guess is this quarter above average in terms of innovation or is the pipeline fairly well balanced? Okay, got you. Well, first and foremost, appreciate you joining the call. And yes, this quarter we were.

We're certainly pleased with our brand spirits performance, really driven by our premium plus portfolio. Yes, we certainly did have innovation in the quarter. So it was a strong quarter on innovation, but we had strong quarter last year as well. If you recall, Penelope, I scripted marks, Penelope was up 13% in the quarter, and we were lapping 100% up last year. So very pleased with the team. we're demonstrating that we can cycle very good innovation with new innovation as well. And in the quarter, we did launch in Penelope two new core expressions, Kentucky straight bourbon and also everyday rye. And so now we have a core lineup, all of which are under $40 that we have to put on the shelves. And then we'll continue to certainly spice in those limited time offerings that the Penelope core consumer certainly does appreciate. But I would say that innovation, we're pretty measured over the next couple quarters. And we did have a lot of innovation last year. So we're doing about, I'd say about 15% less innovation innovation, but again, it's better. It's, you know, we have digital investment behind it. And so we feel very bullish that the innovation that we are bringing to market is working. Ready to pours was another opportunity that we saw in the product roadmap that we weren't participating in as effectively as we should, and now we're up to seven, our four of which are in Penelope. We did launch BlackBerry in the quarter as well. And so far those seven SKUs, we already have a 2.4 share. So certainly pleased with the performance. Great. And then just the runway for distribution expansion for the Branded Spirits portfolio. Yes, that's great. Yes, we certainly in the national and regional accounts, I think you've seen the numbers. We're very pleased with the expansion and what we're seeing there. And we do think there's more opportunity. We did recently announce I would say a seasoned 30-plus year industry vet to come lead the national accounts. We do think that we're under indexed in both regional and national. So that runway certainly is there. And I think we've said before, we have anywhere between a 3x to 6x disadvantage in average number of items in national and regional. So we're certainly very pleased with the performance, but we certainly think there's a bigger runway to be had.

Great. Thank you. Next, we have Mark Tarente with Wells Fargo. Please go ahead.

Hey, good morning and thank you for the questions. First, this was another quarter of solid results versus expectations, yet you still reaffirmed the guide. You called out ingredient solutions costs as an offset. Any other changes to your outlook for the other segments or those progressing the plan?.

or are you thinking about cadence for the remainder of the year? Yes, I'll take the first part on that, Brandon, so I'll talk about cadence. But as you saw, Brandon Spheer, we certainly have confirmed our full segment outlook, and we've also done that with Distilling Solutions. And I would say on distilling solutions, you know, certainly the oversupply environment certainly is there, but we're certainly pleased to see some of the performance that we're able to still deliver. The team's doing a great job of managing operating expenses and also in talking to our customers, expanding our white goods, our premium white goods. white goods. And we're certainly pleased to have an industry veteran like Tom join us, you know, three different distilling solutions, multinational companies he's worked for, for our next chapter of of growth we've got our margins were in the mid 30s and we still expect that to be had in green solutions we did update that full segment outlook for the increased costs due to the west the waste stream disposal i'll tell you that we've always had in our full year segment outlook for ingredient solutions that the back half we were going to have you 20% more pounds. So as those pounds are a bit more costly on the waste disposal side, That's why we sequentially took down that performance. And I'll turn it over to Brandon for cadence. Yes, as far as cadence goes, Mark,.

Depending on the segment, it can be a little different, We are, as typical with our business, Q4 will be stronger relative to Q3. And as we're working through the ingredients issues, which are more near end, we expect those to affect profitability in Q3 as well. So Q4 relatively stronger.

than Q3. Okay, I appreciate that. And then entering the year, it seemed you were cautiously optimistic 26 could be a bottom. You had also said that you hope to get some better visibility on key distilling customer needs for 26 and beyond at some point during Q2 or front half of the year.

Any updates here in terms of order outlook and maybe your ability to grow off the 26 base? Thanks. Yes, we'll certainly talk about, let's talk about distilling solutions visibility. I think that's a very good question. You know, Tom and Tina have recently had customers across across large multinational and also certainly the large and medium craft. And all the customers still remain very focused on reducing inventory. They're in an oversupply situation, preserving working capital rather than making new long-term distillate commitments. In addition, tighter inventory finance and availability of attractively priced age WISD continues to discourage new make purchases across most of the customer segments. We do We remain very engaged. Our partnership approach is working with our customers. We'll continue to find opportunities through aged whiskey sales, private label. I think you heard some nice progress and some nice results from our new customer that we just launched in May, and also in premium good and white warehouse services. We're still very bullish on how well we are positioned at the end of this. And as we get through this very difficult time, that there'll be a few winners. And we think we're really we're positioned to be one of those. But the market does continue to be driven by inventory rationalization at capital allocation discussions. We've seen a lot of good things happen. certainly, again, we reaffirmed our full year outlook, which is good. And I do want Brandon, and we do have some new TTV data that would have been launched recently. And I think it's important for Brandon to share that. Yes. And so TTV data was recently updated through March. So we got five incremental months of data recently. And the data supports that exact.

view, which is this is fundamentally an inventory rationalization cycle. On the production side, trillion 12 month, production is down roughly 28% year over year, which is we're now operating as an industry at the lowest run rate we've seen since 2018. On the demand side, we're – dumps for bottling in and others is down approximately 9%, not a great print. However, a lot of this we believe is being driven by weak export data in demand due to tariffs and international trade flows. The most encouraging thing within the data is inventory. Although they remain elevated, year over year inventory growth has been cut roughly in half. from what it was six months ago, which is an important signal that production cuts are beginning to work their way through the system. So overall, Mark, we view the data as supportive of a gradual rationalization scenario. We don't yet see evidence of a sharp recovery, but we also don't see evidence that the industry conditions are deteriorating further. Finally, we're seeing a market that is slowly working through excess inventory, moving towards other routes over time.

The next question is from Sean McGowan with Roth Capital Partners. Please go ahead.

Thank you. I'd like to drill down a little bit more on the ingredient solution side. So can you talk about, you know, what is it that's holding up the improvement in margins.

and when would you expect to start to see some progress on on that year over year yes thanks i appreciate that yes uh here's here's what has improved reliability um As you know, there were significant opportunities as we closed down our Atchison Distillery in operating that facility with RISD. Good news is since March we have been able to produce the pounds that we expected. And again, in the back half, those pounds will be up over 20%. So that's the good news. The opportunity is obviously as we produce those pounds, the waste start stream disposal streams are more costly. The implementation costs and both the costs of disposing them are more costly. costly. We've made great progress on one of the work streams called affluent where we talked last time about sequentially improving that and that has gone down but But we do see this certainly this headwind, especially with the more cows produced in the second half. We do see this persisting to the end of the year and our full segment outlook does represent that. And for 2027, our expectation, again, the same team that has improved the reliability, same team that is solving the fluent is the same team that has identified the different work streams that we can improve the other two different disposals. And so we expect, and I'd say by the end of the 2027, you can expect ending the year around the low 20s for the gross margin. And so certainly pleased with some performance, but not pleased with some of the other areas that we're encountering.

Okay, and if I can ask you to clarify something you said earlier. when you were talking about rationalizing brands. Yes. I think you said that the brands that have been rationalized accounted for 1% of sales. Did you mean 1% of branded spirit sales or 1% of total company sales? No, 1%, yes, that's a great question. No, just 1% of the segment sales. Sorry about that. 1% of the brand spirit sales. Yep. And listen, I do want, since you brought it up, I mean, certainly I'm,.