Good morning and welcome to the MGP Ingredients Inc Third Quarter 2020 Results Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Mike Houston. Please go ahead.

Thank you, Cameron. Good morning everyone, and thank you for joining the MGP Ingredients conference call and webcast to discuss the company's financial results for the third quarter 2020. I'm Mike Houston with Lambert and Company, MGP's Investor Relations firm, and joining me today are members of their management team including Dave Colo, President and Chief Executive Officer; and Brandon Gall, Vice President of Finance and Chief Financial Officer. We will begin the call with management's prepared remarks, and then open the call up to questions. However, before we begin today's call, it is my responsibility to inform you that this call 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. If anyone does not already have a copy of the press release issued by MGP today, you can access it at the company's website, www.mgpingredients.com. At this time, I'd like to turn the call over to MGP's President and Chief Executive Officer, Dave Colo. Dave?

Thank you, Mike, and thank you all for joining us. On this call, we will provide an overview of our results for the quarter, updates on key financial performance metrics and a discussion of progress against our strategy. Now I will turn to the results for the third quarter. I am very pleased with the strong results this quarter, which highlighted the diversity of growth across our product lines and segments. Aged whiskey sales experienced a record quarter while new distillate and specialty ingredients also yielded strong double digit sales growth. While we anticipate continued uncertainty related to the pandemic through the end of this year, and into 2021, we believe we remain well positioned to execute our long-term strategic plan. The overall American whiskey market remains robust. Consumer trends seeking to increase the amount of plant-based protein and dietary fiber in their diets as part of an overall healthier lifestyle are also strong. We believe our portfolio products are well positioned to provide sustainable, long-term growth while our position within each market remains strong. Looking at each segment individually, in our distillery product segment, sales for the quarter were up 11.4% to $81.6 million. We are very pleased with the continued strength of our aged whiskey sales this quarter, which equated to record results and strong double digit revenue growth from the prior year period. Our objective of optimizing brown goods profits continued this quarter by delivering one of our best gross profit results. However, total segment gross margins were negatively impacted by approximately 350 basis points resulting from decreased barrel putaway as we continue to align our aging whiskey inventory with projected demand. Segment gross profit increased to $17.3 million, while gross margin decreased 50 basis points to 21.2% of segment sales. Despite this year-over-year decline, we continue to achieve brown goods pricing in line with our expectations for both new distillate and aged whiskey sales. Premium beverage sales had a strong quarter growing 20.9% over the prior year period. The strength of our aged sales this quarter was also very encouraging and highlights both the demand for aged whiskey and our unique ability to meet that demand. In fact, we have sold more barrels of aged whiskey year to date than we did all of last year and the barrels sold this year represent a healthy balance of vintages across the portfolio. This demand is driven by our customers’ desire to bring new brands to market sooner, fill holes in their inventory for their existing brands, and support their growth aspirations for brands they acquire. Our prior investment in building a diverse library of aging whiskey has us well positioned to meet those needs. And we believe we are well positioned to meet projected demand, while delivering sustainable growth and value creation for the company. Brown goods premium beverage sales this quarter were up 29.2% as compared to the third quarter of last year. While we are very pleased with the results this quarter; I would like to remind our listeners that there will continue to exist an inherent quarterly unpredictability in the business due to customers' buying patterns and inventory needs, as well as the ongoing potential impacts to on-premise sales related to the COVID-19 pandemic. While the consumer trends for American whiskey remain robust, we continue to believe that the underlying growth rate for our target market is gradually slowing, becoming more in line with a long-term trend for the overall category. We also continue to focus on the long term, working to improve our position in the market by consistently recruiting new customers, strengthening our relationships with existing customers and expanding our geographic sales coverage. New customer acquisition growth for our new distillate and aged whiskey products remains strong despite the uncertainty related to the pandemic. We are doing an outstanding job recruiting new customers for our new distillate and aged whiskey offerings, adding more new customers this quarter than both the year-ago period and last quarter. While we experienced strong demand across the board for new distillate and aged whiskey this quarter, our craft brand customer sales continue to remain below the historical average due to the pandemic. As a result, our aged sales during the quarter were primarily driven by our national and multinational brand customers. Internationally, we are beginning to see more activity while gaining better traction abroad. International sales were up versus the prior year and are beginning to comprise a larger percentage of aged whiskey sales. The long-term macro trends supporting the ongoing growth of the American whiskey category remain encouraging. Continuing on to the other areas of the segment; sales of premium beverage white goods increased 6.5% for the quarter. Sales of industrial alcohol were down slightly 0.3% for the quarter. Demand for our industrial alcohol products as a result of the COVID-19 pandemic continues to remain elevated with pricing slightly increasing over the prior year quarter. However, volume sales for industrial alcohol were down slightly to support increased optimization and sales of white goods premium beverage alcohol. As a reminder from our last quarter's call, we are currently in the midst of contracting for next year's industrial alcohol customer needs. And we are experiencing improved pricing today. Sales of dried distillers grains or DDGs decreased 7.7% reflecting short-term micro factors. Our outlook for DDG pricing continues to be based on the unchanged macro environment that led to the lower pricing in the first quarter of 2017. Revenue from warehouse services increased 8.1% reflecting in part growth in the number of customer barrels aging in our whiskey warehouses, and other services we provide. Turning to ingredients solutions, sales grew 22.7% to $21.3 million, while gross profit increased 102.9% to $5.9 million, or 27.4% of segment sales. We are very pleased with the overall progress in this segment as we achieved double-digit sales growth in both specialty wheat starches and proteins. The continued strength of our ingredients solution segment and its diverse customer mix are reflected in the strong results this quarter. The team has made admirable progress this year to expand the specialty ingredients customer base, and includes repeat and new customers, as well as brands both large and small. In addition to recognizing efficiencies to improve throughput and profitability, we were also successful in continuing to optimize our product mix this quarter. Consumer trends seeking to increase the amount of plant-based protein and dietary fiber in their diets as part of an overall healthier lifestyle continue to align well with our ingredient product portfolio and underscore our confidence in the sustainability of these improved results going forward. Overall, both of our business segments continue to benefit from favorable consumer trends. We continue to see strong demand and pricing for our products and remain very confident and encouraged about the long-term outlook. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers.

Thanks, Dave. For the quarter consolidated sales increased 13.5% to $103 million, reflecting an increase in both the distillery products and ingredients solution segments. Consolidated gross profit increased 23.3% to $3.2 million, as a result of increased gross profit in both the ingredients solutions and distillery product segments. Consolidated gross margin increased approximately 180 basis points to 22.5% of sales, up from 20.7% in the prior year quarter. As Dave mentioned distillery products segment gross margins were negatively impacted from decreased barrel putaway. As we continue to align our aging whiskey inventory with projected demand. The adverse financial impact of putting away fewer barrels is likely to persist in the coming quarters as we continue to evaluate the projected demand for this inventory as well as our barrel putaway strategy on a monthly basis. On a separate note, the improved gross profit results in the quarter do not include any positive impacts related to the insurance claim filed as a result of the cyberattack that temporarily disrupted production at our Atchison facilities in the second quarter. We're seeking to recover a portion, if not all, of the $1.7 billion profit impact, which includes the profit associated with any loss of revenue resulting from this event. As a reminder, we have since resumed normal operations and there remains no evidence that any sensitive or confidential data breach occurred. Corporate selling, general and administrative expenses for the quarter were $9.5 million, up 32.3% versus prior year. The increase was due to higher incentive compensation expenses and professional service fees, which are partially offset by decreased costs related to the prior year EPA settlement. As a reminder in the last two quarters of 2019, the SG&A accrual related to incentive compensation expense was mostly reversed out as a result of that year's financial performance. We did not make the same reversing entry this quarter. As a result, our SG&A expense related to incentive compensation was higher than the same period last year. Consolidated operating income increased 17.7% to $13.7 million, compared to $11.6 million during the prior year quarter, primarily due to strong operating results in both ingredients solutions and distillery product segments. Non-GAAP operating income increased 17.8% to $13.7 million exclusive of CEO transition costs. Our corporate effective tax rate for the quarter was 21.6% compared with 26.9% in the year-ago period. The decrease quarter-over-quarter was primarily due to the release of a portion of the company's valuation allowance. In 2019, there were amendments made to some tax laws at the state level. And we've subsequently taken a conservative tax position until these changes could be better understood. After more time with the guidance, we're now confident we can benefit from this law change and we've reflected this in our third quarter 2020 income tax provision. This impact is discrete in nature and will not be recurring. Net income for the third quarter increased 26.4% to $10.4 million and earnings per share increased $0.13 to $0.61 per share. These increases from prior year were primarily due to improved operating results. We discussed the strong fundamental cash generating capability of our business. I'm very pleased to announce that in this quarter cash provided by operations totaled $23.5 billion. In addition to improved operating performance, the main drivers of this fantastic result were an increase in accounts payable, reduction in accounts receivable, and a combination of record aged sales and reduced putaway for aging inventory. Although we saw reduction in accounts receivable despite our second largest quarter of sales in recent history, we expect this will ebb and flow to the growth and evolution of our business and our customers, particularly as we develop longer sales histories with craft customers, and new relationships with export customers and new long-term supply agreements with large customers. During the period, our investment in aging whiskey inventory decreased by $4.7 million to net $108.4 million at cost. This net decrease was driven by increased sales of aged whiskey and decreased putaway during the quarter. As Dave mentioned earlier, we're realizing the long-term value of this inventory as reflected in our operating cash flows, and believe we are well positioned to meet projected demand while delivering sustainable growth and value creation for the company. Despite the uncertainty related to the pandemic, we believe our library of various mash bills and vintages will continue to contribute strong levels of profit for the company going forward. Although we are currently putting away less inventory for aging than in previous quarters, it's important to note that fluctuations in our quarterly investment can also be impacted by a number of factors including customer demand for new distillate, production efficiencies, mixing capacity, and sales of aged whiskey. MGP's balance sheet and access to capital remains strong, allowing us to continue investing in our growth and drive long-term shareholder value. We remain well capitalized with debt totaling $54.5 million and a strong cash position of $20 million. As of September 30, 2020, approximately $285 million remains available under the $300 million revolving credit line. Our capital allocation strategy continues to contemplate sustainable growth opportunities that are consistent with long-term strategy. Recently, the Board authorized the quarterly dividend in the amount of $0.12 per share, which is payable on December 4, to the stockholders of record as of November 20th. The Board continues to view dividends as an important way to share the success of the company with shareholders. Let me now turn things back over to Dave for concluding remarks.

Thanks, Brandon. Now I'd like to touch on some additional initiatives that support our long-term strategic plan. We remain confident in our long-term strategy and our ability to align with strong macro consumer trends across the organization. As Brandon mentioned, our investment in aging whiskey inventory decreased this quarter to $108.4 million at cost. This decline was primarily driven by increased sales of aged whiskey and decreased putaways during the quarter. We are realizing the long-term value of this inventory as reflected in our operating and free cash flows. We remain confident in both demand and pricing for aged whiskey, as well as our plan for maximizing the long-term economic value. We continue to progress our brands initiative and are pleased with the strong gains we have made in our current markets. The launch of Remus Repeal Reserve Series IV, as well as our single barrel offerings of George Remus Bourbon and Rossville Union Rye Whiskeys during the quarter has exceeded our expectations while infusing additional consumer excitement for our brands. We were also pleased with our results at this year's Whiskeys of the World Competition; George Remus Repeal Reserve Series IV won gold best in class, while Rossville Union master-craft rye and George Remus Straight Bourbon Whiskeys each took gold during the competition. We are proud of the many awards our brands have won over the years, which underscore the high-quality liquid our team creates. We remain focused on accelerating our brands through increased distribution and sales velocity in both existing and new markets. We are very pleased with the strong results achieved by our team this quarter despite the uncertainty surrounding the pandemic. We continue our commitment to take the necessary measures to ensure the safety and well-being of our employees. As we navigate the effects of this pandemic, we remain focused on maintaining our strong competitive position. Although we did not experience any significant impact this quarter from the potential headwinds we've shared during our last two calls, we wanted to provide an update on what we're seeing across the spirits industry. The first related to the potential pantry loading in the early part of the pandemic, causing off-premise sales to significantly spike. Branded distilled spirits continued to experience increased sales year-over-year in the off-premise channel. While the growth rates have come down a bit since March and April, they remain elevated and we believe demand for American whiskey and distilled spirits remains strong. Second, the partial closures of bars, restaurants, and tasting rooms continue to have an immediate impact on our craft customer sales. As mentioned earlier in the call, we did experience strong demand across the board for new distillate and aged whiskey this quarter. But our craft brand customer sales continue to remain below the historical average due to the pandemic. We anticipate this headwind to continue throughout the balance of the year and into the first quarter of 2021. The third potential headwind is related to our multinational customers. While most have strong balance sheets and access to capital, it is unclear how their conservation of cash may impact our brown goods sales throughout the balance of the year and into next. We have experienced some of our multinational customers exercise prudence in their order patterns around goods these past few quarters and anticipate that to continue. The last potential headwind we identified was our near-term ability to grow international sales and export our distilled spirits overseas. Year-to-date results indicate some promising activity, but reduced travel and tariffs in key international markets persist, impeding our ability to further develop this opportunity in a meaningful way. We continue to believe that our investments to expand international sales will provide long-term shareholder value and continue to position ourselves to optimize that growth opportunity once the pandemic headwinds abate. We regularly monitor each of these potential headwinds and we'll provide additional updates as they become available. Both of our business segments continue to be aligned with strong macro consumer trends. And we believe our strategy has us well positioned for longer-term growth that will drive superior, long-term shareholder value. Furthermore, we continue to evaluate M&A activity as a vehicle for growth and remain committed to assessing opportunities to strengthen our position in growing markets, in concert with our financial position in the coming quarters. Operator, we are now ready to begin the question-and-answer portion of the call.

Your first question comes from Mitchell Pinheiro from Sturdivant.

Hi, good morning. I have a question for you just trying to put your last comments about multinational customers, which are being a little more prudent on the brown good orders. How does that fit with what you did in this quarter where you saw strong demand for new and aged distillate? Is it not coming from the multinationals? It's not coming from the craft. So where's it coming from?

Yes, Mitch. We did see strong demand from multinational and national customers in the quarter, the headwind comment was that we have seen some customers take a conservative position with cash, which has caused them to delay or push out some of their brown good purchases. But as you can tell from the quarter, it did have a significant impact this quarter. We had very good results from multinational and national customers during the quarter.

And you also talked about, you added a lot more, you added some new customers in the quarter. What type of customers were they?

Yes. A lot of the new customers that we added during the quarter were primarily craft customers. Even though our craft sales are being impacted by the pandemic, we continue to experience the ability to acquire new craft customers. And that's helping to drive craft sales, albeit at a slower rate than historically due to the pandemic. But I think it demonstrates the viability of our offering of aged whiskey and the ability to continue to attract craft customers.

Is there any change in the industry, sort of outlook for the craft distillery? We saw maybe three, four months ago; there were calls that 40% of craft distillers are going to go out of business. And I'm curious to see what you're hearing and seeing three months later here.

Yes, I mean, there's still - we're still hearing similar talk to that, Mitch. And kind of what we're seeing as well is some of the - there are some craft customers that are struggling but there's also craft customers’ businesses that are doing quite well. And it's being driven by the fact that the longer the pandemic goes on, and consumers are shopping when the pandemic initially started, consumers were going to the larger well-known brands and large sizes, as the pandemic has continued to go on longer, what we're seeing is consumers are now starting to shop the aisle again and look for unique and different offerings. And that's helping to drive some of the more well-known craft brands to do quite well. So that's probably the most significant dynamic that we see playing out over the last few quarters.

Okay, and then just one final question on the ingredient solution side. So as you look for, in terms of the demand that you've been, you've had several quarters of really strong demand. Is there - is this something that's accelerating? Or are you seeing this level out, the type of demand we're seeing at these levels? I mean, are you getting new customers? Or is this sort of category growth within your existing customer base?

It's a combination of both. But what I would say is the demand is consumer driven. Our ingredients portfolio; the products that are doing extremely well, right now are wheat-based specialty proteins and wheat-based specialty fibers. And those are in line with consumers who continue to look for more plant-based proteins and fibers in their diets. So that's the primary driver of the growth. And as our customers continue to develop products and create innovation to meet those consumer needs. We're also seeing that innovation drive some of the demand for these product lines.

Would there be any, and this is sort of a near-term thing. Would there be any reason to think that your gross profit margins in that segment, is there any seasonality that would affect the fourth quarter? Or is it sort of - should we see similar levels to what you've been recording all year?

Yes, Mitch, this is Brandon. It's a good question. We report that we don't experience seasonality to our business. And what we said specifically around the ingredients segment is that this has been a gradual build to where we are now; it doesn't necessarily feel like that. But I think if you look over the history of the last say, 12 to 15 quarters, you've seen it gradually get here. So we are confident and we said this earlier that this is sustainable growth in these levels, and gross margins are, as you stated, are sustainable. So we're going to continue to look to optimize the business, look at production and sales demand side as we move forward.

Your next question comes from Bill Chappell of Truist Securities.

Thanks. Good morning. First question, can you just help me a little bit more on the 350 basis point hit to segment margins from I guess less barrel putaway? And I guess what I'm trying to understand, seeing that if you sold more inventory that aged inventory that has much higher margins, I would think the gross margins would go up. But two, what do I - how do I look at this as your goal to meaningfully reduce that inventory over the next few quarters? Will I see a similar type hit or I see a bigger hit to gross margin going forward? Just any color there because I was certainly surprised to kind of see it?

Yes, Bill. I'll go first, this is Brandon. Thanks for the question. So, yes, we did see a 350 basis point impact in the quarter due to reducing our barrel putaway, obviously, a significant number that we wanted to bring to everyone's attention. So I guess in layman's terms in discussing it, when we produce less whiskey for putaway as we did this quarter, it results in unfavorable operating variances which in turn need to be absorbed by the balance of the products produced. So from an accounting perspective, it's a mix utilization issue and fixed cost absorption dynamics. So rather than those fixed overhead costs getting capitalized on the balance sheet with aging inventory, it gets expensed through the P&L in the current period as cost of goods sold in other products, which is what we saw this quarter. So in theory, historically, as we've been putting away more than we're selling, gross margin percentages have probably been higher than they would be if we were at equilibrium. Where the opposite is true in this quarter, which is we actually sold more than we put away, which resulted in artificially low gross margins, then we would be at if we were in at equilibrium. So we also had mentioned in the call-in part of our script earlier that we do expect this dynamic to continue for the coming quarters until we get to closer to an equilibrium type level.

The other thing we're trying to communicate there as well is that we achieved our pricing objectives for the quarter on both aged product and new distillate. And we wanted to communicate that the expected gross margin improvement you should see because of the increased sales we had at brown goods, was actually dampened by the fact that we put away less whiskey, which caused an increase in our cost of goods sold that offset the favorability in gross margin that you would have expected.

Got it. I guess I'm trying to look at them. Again, I think your goal is to get down to more like closer to $50 million, $60 million; you only knocked off about $5 to 10 million this quarter. So it sounds like it could be a much greater than 350 basis point hits over the next couple quarters. And is that right?

Yes, no, we've not communicated a goal to reduce our aged whiskey to those levels, Bill. What the way that we evaluate this is the value of aged whiskey that we carry is a dynamic number. And it's based on every month; we go through a sales and operations planning process where we look at our inventories. We look at our customers’ near term and long-term demand. And that's how we make decisions on the type of mash bills and the quantities of whiskey that we're going to put away. So it's a dynamic process that occurs every month. So we will adjust our inventories based on the demand factors that we're seeing and how our inventory is positioned relative to demand. So I don't want you to think that there's a fixed number out there that we're targeting. It's much more dynamic than that, and it can certainly change quarter-to-quarter.

And to your other comment, you're saying is don't read the gross margin drop and the increase in aged as you all of a sudden put a fire sale on instead of moving into, are you still very comfortable with getting the kind of the value out of the age inventory? Is that the right way to look at it?

Yes, that's exactly right, Bill.

Okay, and then switching gears to industrial alcohol. I think this is the timeframe where you would be renegotiating the contracts for next year. And I thought it was interesting that you actually pulled off a little bit of industrial alcohol to switch more to premium white spirits. So can you help me understand what you're seeing and any change to expectations for next year?

Yes, we're, as we go into the contract season, we are seeing some improved pricing versus last year. So from prior calls, we've discussed the potential for that to happen, and it is playing out. So that's looking promising as we go into this contracting season. As far as the demand for industrial alcohol, it's consistent. I mean, we have all that volume is primarily contracted and we're simply meeting our contractual commitments for the quarter. And we're also continuing to see some pretty strong demand in white goods and beverage alcohol, so nothing too dramatic to report on the change in the quarter there. And we're continued to do our work as we contract industrial alcohol for the balance of the year.

But you continue to think industrial alcohol will be positive in terms of pricing and margins next year?

We do, based on what we're seeing at this point.

Your next question comes from Alex Fuhrman at Craig-Hallum.

Great. Thanks very much for taking my question. Wanted to talk a little bit about this bourbon versus rye whiskey, can you give us a sense of which mash bills were more in demand on the aged side? And do you feel that the mash bills that you currently have in inventory reflect your broad assortment? Or has there been more of a focus on rye whiskey versus bourbon whiskey?

Yes, we're seeing good demand across all our primary mash bill types. So no significant movement in preference over one particular type over the other; we're seeing good demand across the board.

Okay, that's helpful. Thanks. And then if I could just ask on the food ingredients side, that's been a really nice consistent grower for you in terms of profit. Can you give us a sense of with the heightened growth that we're seeing this year? How many customers have been driving that growth? Is it fairly fragmented? Or have there been one or two customers of yours that have really taken off and brought you with them?

Yes, it's across a broad spectrum, and type of customers, which is obviously kind of where you want the grower to be coming from versus being reliant on a handful of customers. So, overall, we're selling to a diverse group of customers that also have a diverse product mix utilizing these specialty proteins and starches. So pretty good demand we're seeing across the board in all different types of customers.

Your next question comes from Ben Klieve with National Securities Corporation.

All right, thanks for taking my questions. And congrats on the good quarter here. Just a couple of questions from me. First on the ingredient segment, reiterate the comments that have been made earlier just fantastic quarter out of this segment. I'm curious if you can elaborate a bit on the scale of the infrastructure within the segment, especially on the higher value good. I mean what is this segment? What is your infrastructure built to be in the long term? Is there a level of revenue here that you're trending towards that you're going to have to start making investments in growth? Is that a long way away? And any comments on that front would be helpful.

Yes, I think with our current infrastructure, and we've talked about this in the past a little bit, we have an amount of capacity, but that capacity has some flexibility between shifting to the different product types in our portfolio. And what we've been doing is obviously, focusing the production on our higher margin products that are driving these results, based on our current capacity, and some of the initiatives we have in place where we're trying to optimize the efficiency of that capacity and the utilization of that capacity. At this point, we think we've got probably a couple more years that we can support the growth of this business before we'd be in a position to start investing CapEx.

Got it. That's helpful on. And then just one other question for me on the distillery side and the impact of tariffs, can you talk about kind of what you're seeing from your customers in terms of how tariffs are specifically affecting their purchasing decisions? Are these multinationals kind of waiting on the sidelines for clarity on tariffs or are they waiting for potentially any political fallout here from the election before making purchase decisions? Really how are tariffs affecting these customers across the board?

Yes, I mean, it's a pretty punitive tariff rate, right. It's 25%. And I think the information in the category, I think, American whiskey exports are off like 40% versus prior year due to these tariffs. So it's kind of an across the board impact on anyone that's trying to export products in American whiskey in particular. And what we're seeing as well is as we try to grow our international business, I'd say another thing that's impacting us, maybe equally as much as the tariffs is just the impact of the pandemic and the inability for our customers, whom we're trying to sell to, to travel over to see our distillery or for our team to travel to meet with customers and have the face-to-face contact that is typically required in international sales. So it's a combination of those factors that when we talk about, it's impeding our ability to grow our international business.

Got it. Okay. And so I didn't appreciate that dynamic. So you said in your prepared remarks that travel is an issue with this. So you're specifically referring to kind of BD purposes rather than travel, a lack of travel like limiting demand on downstream. This travel issue is really a BD issue from your perspective.

Yes, that's exactly right.

Your next question comes from Donald McLee at Berenberg.

Good morning guys. So I had a quick follow-up on the craft customer base. Could you talk a bit about how far down craft sales are versus the prior year? And maybe in comparison to what your expectations were at the start of this year prior to COVID?

Yes, that's a great question, Donald. And we don't go into a great amount of detail within the customers, except to say that, historically, in total brown good sales, it's usually about a third between craft, national, and multinational. And we've also said that with aged sales, historically speaking, the craft share based sales have been historically larger than that. What we have seen so far year-to-date is that the proportion of craft aged purchasing as a percent of total has been down. So as the interest in the demand from the national, multinational has increased so far year-to-date, craft, and the craft customer has not kept up proportionally with their historical rate of purchasing. So that's what we're seeing. It's a market and customer segment, we continue to watch very closely. As Dave said, there have been brands within that group that have been very resilient, and then others that have been probably more impacted than average due to the current environment, but it's still an ongoing, very important part of our overall business in our brown goods business, and something we're going to continue to monitor.

Okay, that's helpful. And then maybe asking at a higher level just in terms of the channel mix, how has customer behavior changed quarter-over-quarter as the on-premise channel begins to reopen a bit, at least in the US?

Yes, it's been spotty. I think, in the third quarter; we started to see more on-premise locations open up capacity or increase capacity. In the recent last couple of weeks that started to be impacted again as we have seen spikes in COVID cases. So I think as we sit here today, we continue to see strong growth in off-premise. I think the syndicated data, if you look throughout COVID to date; spirits, distilled spirits were typically averaging up 25% to 30% in off-premise channels. They took a little bit of a dip, as on-premise started to increase I think it got down into the low 20% plus growth range. And then it's starting to come back up as we're seeing some more issues emerge in on-premise. But the dynamics are continuing to be relatively steady, with more spirits being sold off-premise as on-premise has been impacted by COVID.

Okay, and then the last one for me just on the ingredients solution segment. So you talked about the strength of demand for wheat specialty proteins and fibers. Are you seeing similar levels of demand for ProTerra and how's new product progressing in the year?

Yes, we are seeing some good demand for ProTerra albeit off of a small base. But we are seeing a lot of interest. We're seeing a lot of ideas coming in from customers in our new product development pipeline around that product platform. So a lot of strong interest and we're starting to grow but off of a small base at this point; we continue to believe that product line has a lot of potential long term.

Understood. And then just going back to your earlier comments around being positioned for multiple years of growth within that specialty portfolio; does that apply, I guess, in the same way to the ProTerra product as it does to the broader wheat-based portfolio? Or is there some maybe limiting factor because of the different type of protein there?

No, I'd say it applies to ProTerra as well. I think, as we have the ability to continue to expand that portfolio for the foreseeable future. So at this point, I really don't see any constraints on the supply side of the equation. Thank you. That concludes our question-and-answer session for today. I would like to turn the conference back to David Colo. Please go ahead. Thank you for your interest in our company and for joining us today for our third quarter call. We continue to make progress toward implementing our long-term strategic plan and remain confident that it will provide us the resources we need to create shareholder value. We look forward to talking with you again after the fourth quarter.