Whiskey drinkers aren’t the only ones that will get a hangover from too much of the amber spirit. Distillers will soon be feeling some pain as well, a New York activist short-seller said Thursday.
Spruce Point Capital said whiskey’s long run as a popular drink, especially among younger drinkers and women, has attracted an over-saturation of distilleries.
The same thing happened to vodka in the early 2000s, when there was a flood of so-called vodka “craft labels” that tried to take market share from giants Smirnoff and Absolut.
But as tastes changed away from vodka, vodka-only distilleries were three times more likely to exit the industry than distilleries that made multiple liquors, according to a 2015 white paper by Coppersea, a New York distiller.
A rush of new whiskey distilleries is most likely to hurt MGP Ingredients, a Kansas-based distillery that has a production facility in Lawrenceburg, Ind., Spruce said.
MGP may not be a household name, but it is the contracted distiller for many of the fancy, old-timey labels — like Bulleit and WhistlePig ryes — showing up at trendy watering holes.
The rise in popularity of specialty cocktails, especially whiskey-based drinks, has helped to propel MGP’s shares nearly ninefold since 2014. However, the stock could come crashing down as much as 70 percent, Spruce said in its report.