MGPI to analyze value chain after suffering net loss
October 17, 2008
by Jeff Gelski
ATCHISON, KAS. — MGP Ingredients Inc. will analyze its entire value chain and consider outsourcing in some areas as it seeks to rebound from its first fiscal year net loss in 10 years, Tim Newkirk, president and chief executive officer, said at a shareholders meeting Oct. 16. The company is transforming into a more customer-driven provider of value-added ingredients and alcohol products.
"Improved profit margins through cost cuts and business process improvements alone will not ensure our long-term viability," Mr. Newkirk said. "That’s why we are expanding our analysis to cover the entire value chain inside MGPI. By that, I mean all the activities for sourcing raw materials, manufacturing, new product development and distribution.
"For each of our three business segments we will seek to retain only those ‘links’ in the value chain where we truly create value. Other areas will be considered for possible outsourcing."
The company’s ingredient solutions segment shows promise because of the growing demand for healthy foods, Mr. Newkirk said.
Atchison-based MGPI faced the headwinds of rising cost inputs, particularly for corn, wheat and natural gas, and reduced selling prices for fuel grade alcohol or ethanol while suffering a net loss of $11,742,000 in the fiscal year ended June 30, Mr. Newkirk said. He added strategic moves further impacted profits. The company completed an asset and operational review this year.
"Our strengths in innovation and manufacturing excellence are key assets at MGPI and the bridge to a more profitable future," Mr. Newkirk said. "To be candid, however, I think we developed more of an inward focus over the years. For example, we typically placed greater emphasis on pounds and gallons instead of problem-solving, on production instead of asset utilization, and on invention instead of commercialization.
"Given today’s volatility in the commodity markets, as well as changing customer demands, it is paramount that we become a more nimble and responsive organization."