ATCHISON ? A few short years after wondering if his 63-year-old company would survive, Ladd Seaberg is presiding over a business that has customers clamoring for its products and Wall Street noticing the little wheat-processing firm in northeast Kansas.

After being hammered in the late 1990s by a steep drop in sales of wheat gluten, a baking ingredient that was the company’s main product, Seaberg and other leaders of Midwest Grain Products decided the company had to refocus or risk going out of business.

Midwest Grain changed its emphasis from ethanol and commodity products such as wheat gluten and animal feed to developing specialty ingredients from proteins and starches it pulls out of flour. To note the change, the company was renamed MGP Ingredients Inc.

And in the midst of the transformation, MGP caught one of the biggest breaks in its history when the low-carb craze hit America, ratcheting up demand for its proteins and starches that reduce carbohydrates in bakery and food products.

“Along came Dr. Atkins. It fell in our lap and really accelerated our program,” Seaberg said. “Suddenly, we couldn’t make enough of the stuff.”

The specialty ingredients also have allowed expansion into such diverse areas as pet treats, hair and cosmetic products and even biodegradable golfing tees and cutlery.

MGP also offers Wheatex, a textured protein that, with moisture, can be used as meat filler or a protein source for vegetarians.

The transformation was helped by $26 million in federal funds received after European competitors cornered the market on wheat gluten through what MGP considered unfair trade practices. That money was used to buy or expand its plants, buy millions of dollars in new equipment and enlarge its research and development department.

An explosion at its distillery in Atchison in 2002 even had a silver lining, Seaberg said, because it allowed the company to install state-of-the-art equipment at that plant, which produces ethanol and specialty products for alcohol, such as vodka.

Ahead of the trend

One of the companies leaning on MGP to respond to low-carb diets is Kansas City, Mo.-based American Italian Pasta Co., the largest producer of dry pasta in America. In response to declining earnings blamed mostly on the low-carb trend, the company began marketing several low-carb pastas, using MGP proteins as a base ingredient.

Tim Webster, chief executive officer of American Italian, is a big fan of MGP.

“It’s a company that for the last 10 years, everything that could have gone wrong went wrong. … And they all of a sudden figured out that their products that they had developed for many, many years could be the way to take carbohydrates out of many food products,” he said. “So now their business is on fire; they can’t build capacity fast enough; their stocks going through the roof. And it could not happen to a nicer bunch of people.”

While acknowledging that the low-carb craze “turbocharged” the business, MGP made some of its own luck, said spokesman Steve Pickman.

“We were already working on specialty products,” Pickman said. “We were having back-to-back strategy meetings. We had a leg up when the low-carb diets hit. That pushed us faster, we went from first gear to fourth gear, but we had already started.”

Jonathan Braatz, an analyst with Kansas City Capital Associates, said MGP had positioned itself to take advantage of profitable niches in the specialty products industry.

“They were certainly in the right place at the right time with regard to the low-carb products,” Braatz said. “But all the other things on their plate are going to pay off. They’ve done a good job of developing the higher margin, higher proprietary customers.”

Company turning profits

The numbers back that up. In the third quarter of their 2004 fiscal year, sales of the company’s specialty ingredients increased by 123 percent over sales in the year ago period, easily offsetting a 4 percent decline in the combined sales of commodity proteins and starches.

Total sales of the company’s ingredients segment in the third quarter totaled $29.6 million, more than double the total ingredient sales of $14.6 million in the third quarter of fiscal 2003.

The company’s board approved a 2-for-1 stock split that took affect June 30. It was the second stock split since the company went public in October 1988, when shares sold for $14 each. At one point, the stock fell to $6 a share, but reached a high of $45.10 on May 13 before the stock split. The stock closed up 11 cents at $36.55 Thursday in trading on the Nasdaq Stock Market.

In June, the board also approved $5.5 million in capital improvement projects to expand production and packaging at its plant in Kansas City, Kan., where employment has increased from five to nearly 50. Another 130 people work at the company’s plant in Pekin, Ill., with 350 at the headquarters in Atchison.

While the company will continue to sell wheat gluten and ethanol, Seaberg said it does not intend to grow those businesses because there is little potential for return on its investment.

But Seaberg and MGP officials expect continued growth in the specialty products market, even if the low-carb trend levels off.

“We are better off now, with a broader base,” Seaberg said. “We are not as vulnerable. … We are going to stick with this strategy and see how far it takes us.”