ATCHISON, Kan. -- MGP Ingredients Inc. announced today that it is exiting the fuel grade alcohol business effective immediately. This decision principally affects MGPI's distillery operations in Pekin, Ill.

In November, the company announced that it intended to curtail fuel grade alcohol production in Pekin until market conditions became more favorable. However, market conditions for fuel grade alcohol have continued to erode and, as a result, the company has determined to cease fuel grade alcohol production at the Pekin plant altogether.

The company also plans to temporarily discontinue food grade alcohol production in Pekin for a period of 90 days. This decision is not expected to affect MGPI's ability to service existing food grade alcohol customers since the company will utilize existing inventories in Pekin while continuing to optimize food grade alcohol production at its Atchison, Kan., facility.

"The cutbacks in alcohol production relate solely to our distillery operations in Pekin, where all but a small fraction of our fuel alcohol is made," said Tim Newkirk, president and chief executive officer. "A smaller percentage of the Pekin distillery's capacity is dedicated to food grade alcohol. Recent adjustments to distillery processes and equipment in Pekin should enable us to more efficiently produce food grade alcohol in Pekin when the appropriate time to restart that portion of our operations is determined.

"With these changes, we are discontinuing the production of fuel grade alcohol as a principal product line while giving full attention in our distillery products segment to strengthening our role as a world class provider of high quality food grade alcohol for beverage and industrial applications. As part of the process of making food grade alcohol, a co-product of fuel alcohol is naturally produced, which, in our case, will amount to about 6 percent of our total distillery volume at this time."

Previous reductions in fuel grade alcohol production led to the temporary lay-offs of 14 union employees at the Pekin facility in early January. As the result of today's announcement, temporary lay-offs involving another 45 union employees and 20 non-union employees at the Pekin site will take effect this week.

"Unfortunately, this change requires several temporary lay-offs within the company," Newkirk said. "The decrease in the utilization of our alcohol production capacity affects not only manufacturing roles, but a number of complementary functions and services. The most difficult and painful aspect of our decision is the impact it has on our workforce."

As previously announced, the company in November discontinued its wheat protein and starch manufacturing operations in Pekin, consolidating the production of these ingredients at its Atchison facility. Just prior to that, the company ended its wheat milling operations in Atchison after entering into an agreement with ConAgra Mills to supply MGPI's wheat flour requirements for use in protein and starch production.

The majority of the Pekin facility's proteins consisted of commodity wheat gluten, which principally is sold for use in breads and other bakery products, as well as in certain pet food applications. Likewise, the bulk of starches produced at the Pekin facility generally were classified as commodity ingredients for a variety of prepared foods, as well as bakery products.

The consolidation of protein and starch operations together with the shutdown of wheat milling operations resulted in a total of 52 lay-offs plus early retirement offers for another 31 union and non-union employees in Pekin and Atchison combined.

SOURCE: MGP Ingredients Inc. via GlobeNewswire.