Snapshot

For many lovers of coffee, their commitment to the daily ritual is of the utmost passion and dedication, bearing similarities, not unlike patriots. One company merging these two devotions is Black Rifle Coffee Company, a veteran-founded company serving premium coffee to “people who love America”. BRCC develops their “explosive” roast profiles with the same mission focus they learned while serving in the military. In addition to quality premium coffee, BRCC provides content and merchandise designed to “inform, inspire, and entertain”, building its vast legion of followers, while committing to supporting its community of active military, veterans, and first responders.

With operations in Utah, Tennessee, and Texas, BRCC offers a wide range of premium coffee products and high-quality merchandise that aims to enable its community to showcase the brand. By consistently delivering exceptional products and content, BRCC has built a strong following of loyal customers throughout the United States. It has expanded its community to more than 2 million consumers, almost 300,000 active coffee club subscribers, and 12 million followers across its related social media accounts.

Benefitting from a low-churn, direct-to-consumer (DTC) subscription business, a growing wholesale business and roster of retail partners, and an expanding base of retail coffee shops, BRCC has a comprehensive omnichannel offering with a military focus on further rapid expansion.

Background

BRCC was founded in 2014 by former Green Beret Evan Hafer, when he took a one-pound roaster in his garage and began roasting, packaging, and shipping bagged coffee called “Freedom Roast” through a friend’s apparel website. The coffee sold well, so Hafer launched his own brand and website and soon added branded accessories to his sales.

The company quickly expanded across the country with an online, DTC coffee subscription service and physical coffee shops. Products are also featured in firing ranges, tactical stores, Bass Pro Shops, 7-Eleven, and Walmart, among others. BRCC has grown to over 800 employees, 50% of which are veterans or veteran spouses. While its production is now served by two of its own coffee roasting facilities in Tennessee and Utah.

In November 2021, BRCC merged with SilverBox Engaged Merger Corporation via a special purpose acquisition company to raise funds for its expansion, ultimately going public in February 2022.

Leadership

Founder, CEO, and Chairman Evan Hafer has been at the helm of BRCC since the company’s inception following two decades of service in the US military and CIA and has been instrumental in developing its assertive brand and loyal following. Supported by fellow military compatriots, BRCC’s management team is backed by extensive business experience across a range of well-known brands including Starbucks, Overstock.com, US Airways Group, PepsiCo, Sony, and Gap Inc.

Customer

BRCC’s extensive range offers over 20 varieties of roasted whole bean and ground coffee, plus Ready-to-Drink (RTD), single-serve, and instant coffee, while its merchandise features apparel, drinkware, coffee brewing equipment, and outdoor and lifestyle gear.

Utilizing a three-pronged approach, BRCC aims to inform, inspire, and entertain. By striving to inform customers on all the facets of coffee, inspire them with the pride they take in their product, the veterans they employ, and the causes they support, as well as entertain to drive excitement, the company aims to craft a unique brand that resonates with its customer base.

Hafer started BRCC with the simple premise to provide a quality product while giving back to the veteran, active military, and first responder communities through direct hiring and charitable donations, which exceeded $4 million in 2021. This vision has evolved into building an enormous social media following dedicated to sharing inspiring stories about its community. Furthermore, it now puts significant effort into not just hiring veterans, but helping them to become entrepreneurs and highlighting for other businesses the benefits of hiring veterans. The company has also established a BRCC Fund focused on causes important to the company, including education and job training for veterans and scholarships for family members of those killed or wounded in action.

BRCC is emphatic in its approach noting that growing customer enthusiasm for its coffee and mission continues to drive strong results, as people overwhelmingly want to buy from companies that share their values.

Thematic

Since its inception, the company’s website at www.blackriflecoffee.com has been the core of the business and its heavy weighting in the DTC channel. Evidenced by a revenue mix that is currently dramatically skewed towards the DTC sales, with wholesale and Outpost sales making up less than 30% of revenue in 2021. However, with the company’s focus on expanding its Outpost footprint and looking beyond coffee and merchandise, BRCC anticipates the mix will change considerably. Continuing a trend that has already seen contributions from the DTC channel as a percentage of total revenue shift from 90%, 84%, and 71% in 2019, 2020, and 2021, respectively.

Included in the DTC channel, BRCC offers a subscription service, called Coffee Club, through which consumers can receive ground, whole bean, single-serve, instant, or RTD coffee shipped to their home or office as frequently as every fourteen days. Coffee Club’s value and convenience for consumers have seen it secure more than 287,000 subscribers, a number that has grown by more than 20 times in five years and resulted in more than 40% of the company’s revenue coming from recurring subscriptions in 2021.

Complementing DTC sales, the Wholesale channel, sees coffee, apparel, and gear distributed through leading outdoor, DIY, and lifestyle retailers, while RTD coffee is in leading convenience, grocery, drug, and mass merchandise retailers.

Accounting for approximately 5% of sales in 2021, BRCC operates and franchises Black Rifle Coffee shops, known as “Outposts”. These aim to redefine the typical coffee shop experience, offering consumers an immersive environment in which to enjoy premium coffee, purchase merchandise and bagged coffee, while connecting with members of the local community. With sixteen Outposts open across six states as of December 2021, the company is in the early stages of nationwide growth that is targeting 78 locations by the end of 2023. The strategy aims to capitalize on the high margins of instant consumption beverages which drive a compelling economic return for each new location.

Despite the challenges presented by the covid pandemic impacting businesses in affected areas, BRCC actually saw an increase in e-commerce spending and the strengthening of its brand. Direct-to-consumer revenues significantly benefited from a demand surge for in-home coffee products as consumers changed their consumption preferences, as well as more consumers shopping online while remaining at home. While wholesale revenues were temporarily adversely impacted due to store closures by wholesale customers, offsetting this impact was revenue related to new RTD product sales and a new marketing agreement with a large retailer.

Looking ahead, in addition to its aggressive plans to expand its Outpost locations, BRCC is focused on building its digital native brand, investing in enhancing its omnichannel experience with initiatives such as:
• integrated loyalty and gift card programs across both retail and digital channels
• creating a fully integrated Retail Experience with order-ahead capabilities, in-store DTC subscription management
• a re-imaged Coffee Club with exclusive perks and content
• implementing AI technology to capture valuable customer analytics to mitigate churn risk and provide a personalized product offering

Despite the vast reach of the DTC channel, BRCC believes there is a significant opportunity to improve brand awareness and further grow the business. Whilst the RTD market, new product development, and significant expansion of its wholesale distribution network will also allow it to take advantage of multi-billion markets.

Financials

In just a few years, BRCC has grown its annual revenue to $233 million in 2021, up from $164 million in 2020, and $82 million in 2019, representing growth of 42% and 100% respectively. Growth in 2021 was largely driven by the expansion of the customer base, increasing wholesale doors, and new Outpost openings. By business segment, the larger DTC channel generated revenue of $165.3 million, increasing 20% on 2022. Whilst the Wholesale channel generated $55.8 million and Outposts ended the year with $12.0 million in sales, achieving increases of 139% and 329% respectively, year-on-year.

With expanding points of distribution, strong retail traction, in addition to the opening of 15 to 20 new company-owned Outposts, BRCC is forecasting net revenue to hit $315 million in 2022, maintaining comparable year-on-year growth of approximately 40%.

Before BRCC went public, they were constrained in terms of capital and capacity expansion, yet with the listing completed in February adding $150 million to its balance sheet, it is now well-placed to deliver on its comprehensive plans for expansion across its channels.

Risks/Competition

While BRCC has a unique cultural offering within the $45 billion coffee market, competition in the space is fierce, therefore its focus on high-quality ingredients and production process will be critical to challenging incumbents like Starbucks.

BRCC also benefits from its powerful media platform and an already loyal customer base that regularly engages with the brand. Its sought-after merchandise like apparel, banners, and decals, that customers proudly display also provides a valuable marketing channel not enjoyed by other brands. Conversely, this widespread following is not without risk as BRCC has produced several controversial pro-gun and socially conservative views. In some cases, it has had to take steps to distance itself from negative far-right personalities including the rioters who stormed the U.S. Capitol wearing the company’s branding.

To date, BRCC has noted that they experienced minimal supply-chain disruptions as a direct result of the covid pandemic. Additionally, disruptions of transportation have not resulted in significantly higher costs or delays. However, like its competitors, it remains subject to developments in the broader economic environment relating to the supply chain of coffee, and other ingredients, that could have a direct impact on business performance and profitability.

Conclusion

While Black Rifle Coffee Company is virtually at the beginning of its growth journey, if its initial years are anything to go by, then it looks set to become a major player in the coffee market. Supported by a unique and passionate following of dedicated customers that engage with the brand well beyond a morning caffeine fix, BRCC’s broad plans to expand its omnichannel offering leave little doubt that the company will continue to boost sales and significantly increase its bottom line.

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