Brandon Gall

Thanks David for the third quarter of 2024. Consolidated sales decreased 24% from the prior year period to $161.5 million excluding the impact of the and distillery in both periods, consolidated sales decreased by 14% reflecting lower sales in all three operating segments within the Distilling Solutions segment reported sales declined by 36% excluding the impact of the Access and distillery in both periods. Segment sales declined by 18%.
Grounded sales declined by 22% as compared to the prior quarter due to lower age and distillate sales. A warehouse related sales increased by 12%.
Our brand and spirit segment sales decreased by 6%. Primarily due to the planned optimization of our mid and value tiered brands sales for our mid and value portfolio collectively decline by double digits. Largely consistent with year-to-date trends. This decline is driven by lower sales volumes as we increase pricing on certain lower margin made in value brands. Our premium plus sales increased by 1% as our brands being American whiskey and tequila categories within this price tier continue to perform well.
Our premium plus growth decelerated from the second quarter as we cycled the initial launch of the Penelope brand in key large markets. During the third quarter of last year, the green solution sales declined by 18% driven primarily by decreased sales volumes of specialty protein as well as lower commodity and specialty start sales.
Specialty protein sales were negatively impacted by the stronger US dollar. We expect specialty protein sales to return to growth in the fourth quarter as we onboard new domestic customers to offset lower export sales.
Our specialty store sales which provide FDA approved dietary fibers under the fibroin brand continue to benefit from the long term consumer driven tailings across several large food categories.
Third quarter, consolidated gross profit decreased by 10% to $65.8 million representing 40.8% of sales excluding the impact of the distillery in both periods. Third quarter, consolidated gross margin improved approximately 30 basis points from the prior year period as we delivered the second consecutive quarter of higher than 50% gross margins in our brand and spirits segment.
Distilling solutions and ingredient solutions gross profit declined to 28.6 million and $4.7 million. Respectively.
Distilling solutions segment, gross margin increased by 10% points in Green Solutions gross margin declined by 16% points excluding the impact of the still in both periods. Distilling solutions gross margin declined by 3% points due to lower ground good sales.
While Green solutions gross margin declined by 11% points, primarily due to lower specialty protein sales and incremental costs to commercialize the way our stream advertising and promotion expenses for the third quarter increased modestly to $9.6 million. Reflecting ongoing investment behind our premium plus portfolio granted spirits related MGPs totaled $8.7 million for the quarter and represented 14% of segment sales.
We remain committed to investing behind our faster growing higher margin premium plus price tier brands as we seek to capture a greater share of the American whiskey and Tequila categories.
Third holder operating income increased 64% to $32.6 million. While adjusted operating income decreased 9% to $39 million as lower gross profits, more than offset lower SG&A costs.
Net income for the third quarter increased 82% to $23.9 million. While adjusted net income decreased 5% to $28.8 million.
Basic earnings per common share increased to $1.07 per share from $0.59 per share in the prior year period. While adjusted basic earnings per share decreased to $1.29 per share from $1.36 per share in the prior year period, adjusted I bead decreased 9% compared to the year ago period to $45.7 million.
Moving the cash flow cash flow from operations was $73.5 million for the year-to-date period. Up from $48.6 million in the prior year period. I'm proud of our cash generation there in a tough quarter. As we continue to focus on managing our working capital, including lower accounts receivable and barrel inventory put away our balance sheet remains healthy and we remain well capitalized with debt towing $290 million in a cash position of $20.8 million. At the end of the third quarter, our net debt leverage ratio remained largely stable at approximately 1.3 times at the end of the quarter.
Capital expenditures were $20.9 million during the quarter and $43.5 million year-to-date. We now expect full year 2024 Capex of approximately $78 million as work on some projects is now expected to carry into 2025 to reduce overall costs and better line up with our needs.
The mini fuel plant which is expected to mitigate additional costs related to treatment and disposal of waste wheat starch is an example of such carryover and is now likely to come online by the end of the first quarter, 2025 we continue to expect 2025 Capex to be below 2024 levels and we'll share more on our Q4 in this call.
That whiskey put away was $12.1 million. During the quarter and $32.7 million year-to-date. Well below your levels.
During the first quarter, the board approved a $100 million share repurchase program. And during the third quarter, we repurchased approximately $2.5 million of our common stock, bringing the year-to-date share repurchase amount to approximately $10 million.
The board of directors also authorized a quarterly dividend of 12¢ per share which is payable on November 29th to stockholders of record. As of November 15th, the board continues to view dividends as an important way to share the success of the company with stockholders turning to the outlook for the full year. You're reiterating the updated full year guidance provided along with our preliminary third quarter results. Two weeks ago, the updated 2024 guidance includes full year sales in the range of $695 million to $705 million adjusted in the range of $196 million to $200 million adjusted basic earnings per share in the $5.55 to $5.65 range.
The basic weighted average shares outstanding expected to be approximately $22.1 million at year end, an effective tax rate of approximately 24%.
As we look to the fourth quarter, we continue to expect our brown goods sales and profit to remain under pressure as unfavorable category supply demand dynamics will lead to lower spot and contracted whiskey sales than previously anticipated.
While retail trends for our premium plus portfolio continue to improve further inventory tightening at distributors is expected to pressure our brand and spirit shipments in the fourth quarter.
We expect the ingredient solutions segment to return to positive sales growth in the fourth quarter as we continue to win new specialty protein business.
But we will provide 2025 guidance with our fourth quarter results. I'd like to provide some additional color.
As David mentioned, given the current category dynamics, we're significantly reducing our brown goods production to better align with demand in 2025. At the same time, softer American whiskey growth in elevated barrel inventories continue to constrain demand for each whiskey and increasingly our new tot. While we are optimizing our cost structure to mitigate the impact of lower production. Lower aged and distillate sales are expected to drive a nearly 35% decline in distilling solution segment sales and a nearly 50% decline in distilling solutions segment gross profits in 2025.
On the other hand, we expect our ingredient solutions segment to stabilize and return to profitable growth in 2025.
Additionally, we expect our Brande saying to deliver top line growth and margin expansion in 2025.
And now let me turn things back over to you and the market.

David Bratcher

Thanks Brandon. While I am not pleased with our 2025 outlook for the Brown goods business. This reset reflects current market conditions. And more importantly, our proactive actions I discussed earlier to stabilize our Brown goods business.
We are actively engaging our customer list, tightening our contract terms and further reducing our exposure to spot and age sales which I believe will light and mitigate risk in our contract distilling business.
Our ingredient solutions segment continues to be well positioned to thrive to independently post the distillery closure though unexpected complexities from that transition have impacted recent performance. We expect this segment to return to positive growth next year.
Finally, I am most enthusiastic about our progress towards becoming a premier branded spirits company. The Luxco acquisition firmly puts us on that path. I anticipate 2025 could mark the 1st year in which our branded spirits business not only becomes our biggest segment by sales but also our primary growth engine. Most importantly, our key premium plus brands continue to have growth runway ahead, positioning us to deliver attractive growth for years to come.
I would like to close by thanking the NGP team for their hard work and focus in this challenging environment.
I'd also like to welcome Kathleen Melany to our NGP team keep joins us as general counsel and we'll continue to add strong talent to our organization that concludes our prepared remarks. Operator, we are ready to begin the question and answer portion of the call.

Operator

We will now begin the question and answer session to ask a question. You may press star then one on your telephone keypad. If you're using a speaker phone, 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.
First question comes from Bill Chappell with Truist Securities. Please go ahead.

Question and Answer Session

Bill Chappell

Thanks. Good morning.
Just I guess we want to start with kind of this year and then, and then a couple questions on visibility into next year. But 1st this year for this quarter, is it fair to say that ingredient and branded were actually in line with expectations and, and majority of the, the my comes from Distilling Solutions and within that miss from aged or was there more to it for the quarter and to the guidance?

Brandon Gall

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

David Bratcher

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

Bill Chappell

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

David Bratcher

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

Bill Chappell

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

Brandon Gall

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

David Bratcher

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

Bill Chappell

Great. Thanks so much.

David Bratcher

Thank You.

Operator

The next question comes from Robert Moskow with TV Cowen. Please go ahead.

Robert Moskow

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

David Bratcher

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

Robert Moskow

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

David Bratcher

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

Robert Moskow

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

David Bratcher

Would you say cutting back, are you referring to their inventory or the rumors about them cutting heads or which would you say cutting back.

Robert Moskow

The rumors to cutting heads?

David Bratcher

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

Robert Moskow

Okay, great. Thank you for that.

David Bratcher

Thank you. Thank you, Rob.

Operator

The next question comes from Marc Torrente with Wells Fargo. Please go ahead.

Marc Torrente

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

David Bratcher

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

Marc Torrente

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

David Bratcher

Yeah, the question how much inventory out there is, is, is a good question. We do spend a lot of time trying to figure out who ho who's holding what you know, who are the brokers out there? Who are the multinationals inventory they have? Because remember they got substantial inventories as well. So, we, we constantly are looking at that and trying to analyze it. Do we have perfect visibility into it? No, no, that, that's the H1st. Do we know what we've sold and what we hear and what we see in some of the TV reports? Yes. So, there is inventory out there and it's held. But one of the things that people, the reason why we have, I think we haven't seen tremendous pricing pressure yet is because everybody is sitting and waiting, everybody is sitting here going like I may not, if I'm buying spot, I may not be buying spot right now. But I want to see how this plays out. I want to see how my own inventory plays out. I also, I think I've said this in the past, but now I'm saying it now is if you're a major supplier in our industry, you know, they're, they're, they're brands companies, okay? And one of the things that you will start seeing on the shelves and you already see it to a certain degree is they'll age up their their offerings, you know, for the longest time for years. And I know we've had this in prior calls. People couldn't sell anything over a four year old because we didn't keep up with it. Now, they got inventory. So you're going to see the players on the brand side start to offer seven year old, 10 year old, 12 year old products. They're, I don't speculate and I'm just speculating that they're going to dump that on the market. Could they sell some barrels? Yes or no? What you will see hit the market is P/E back companies that have invested in it, brokers that invested in it. But as Brandon, I've said many, many times that's a one off.
But those are one offs. Once they dump that, then it's back to the hatch directly to the brand's growth. So look, the supply, the excess inventory was built all around huge optimism across the industry on American whiskey and that softened enough that people are sitting back and doing their jobs and going, oh, wait a minute, let's take a breath, let's analyze where we're at, right? Anything you want to add to that?

Brandon Gall

Yeah. As far as the cost market, you're exactly right. So firstly, in 2024 we have reduced our putaway on a net basis, you know, more, more than 30%. So that work's already begun this year. And as David said, it's going to continue next year as well. And and there is, yeah, there's a number of fixed costs that that will need to be absorbed. And the team has been working now for, you know, some time already on addressing that to mitigate those as much as possible.
Okay, thanks guys.
Thanks, Mark. Thank you, Mark.

Operator

The next question comes from Ben Klieve with Lake Street. Please go ahead.

Ben Klieve

All right. Thanks for taking my questions. Got one on the ingredient business. You noted an expectation that that business was going to improve here in the fourth quarter as some of the export ones kind of dissipated and you brought in some new domestic customers. I'm wondering if you can kind of help parse out those two part of the business. Can you talk about the kind of success year-to-date of the domestic business? That, that gives you, you know, a sense of optimism in the fourth quarter and then, and then really how, how material that export had one has been not only in the third quarter but year-to-date.

Brandon Gall

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

Ben Klieve

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

Brandon Gall

Yeah, thanks for letting me clarify them. Yeah, they are domestic. That's right.

Ben Klieve

Okay. All right. Very good. Okay, I appreciate you taking my question plenty more to talk about, but I'll leave it there. I'll get back into you.
Thank you guys.

Operator

The next question comes from Sean McGowan with Roth capital markets. Please go ahead.

Sean McGowan

Hi. Thanks. First a quick one. Would you come back, you know, give them.
Yes. Can you hear me?
Yes, yes, sir. Okay. Okay. Yeah. Do you expect given the headwinds that you described that advertising as a percentage of revenue in 25 would be at a higher level than what we've seen in 24 so far?

Brandon Gall

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

Sean McGowan

Okay. Thank you. And then a kind of a more general question, you know, given not only the change in the landscape and your outlook but also the change in the stock price. Do you, do you see a change in your capital allocation plans regarding, you know, sharing purchases or, or our acquisitions? You know, just general commentary there. Has there been a shift?

Brandon Gall

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

Sean McGowan

Okay. Thanks for that clarity. I appreciate that.

Operator

The next question comes from Mitch Pinheiro with Sturdivant, please go ahead.

Mitch Pinheiro

Yeah. Hey, good morning.
So on me.
So just getting to, you know, the, the barrel distillate that you've put away, you know, it's up like $40 million roughly year over year and I know there's some inflation in those numbers but is all that is, is all that related to your own, you know, your own branded spirit brand.

Brandon Gall

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

Mitch Pinheiro

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

Brandon Gall

Yeah, it's a little tricky because you know, the age barrels we sell in bottle tend to be, you know, 34 more years old. So meanwhile, anything we put away, for example, this year is starting off at zero years. So, it's going to keep that average age and right, which we don't disclose that for competitive purposes, you know, pretty, you know, pretty, you know, pretty low in terms of, you know, less than, you know, 43 years. But, but yeah, I think as David said, the, the tendency right now in the market is, is to age up, that's a really good way to, to, you know, resonate your brand with consumers in this market and to differentiate yourself. And to your point, you know, these, you know, barrels tend to, you know, grow in value with age and not the other way around. It's just distinct to our industry. So, you know, we've been here before this number of years ago where we slowed our put away. That was pretty short lived as you all recall because this, this market can be dynamic and fluid. But that's that, that's the beauty is we can, you know, plan as we are now for 2025. And if things change then, you know we'll change with them.

David Bratcher

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

Brandon Gall

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

Mitch Pinheiro

Oh, thank you for that. And then you know, you expanded luxury this year. Is that with, with a little bit of the slowdown? Is that going to have some fixed cost, negative leverage in 2025?

Brandon Gall

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

Mitch Pinheiro

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

David Bratcher

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

Mitch Pinheiro

Okay? Thank you. Appreciate the appreciate the answers.

Brandon Gall

Thank you much.

Operator

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

David Bratcher

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

Operator

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