Black Rifle Coffee Company (BRCC): Brewing Up Impressive Profitability Amid Rapid Growth

Published on September 24, 2024 | Ticker: BRCC

Black Rifle Coffee Company (BRCC) has emerged as a rapidly growing Veteran-led premium coffee and media company, showcasing impressive financial performance in the first quarter of 2024. The company's strategic focus on operational excellence and profitability has propelled it to new heights, delivering record margins and cash flow while maintaining industry-leading growth.

Financials

In the first quarter of 2024, BRCC reported revenue of $98.4 million, up 18% from the prior year period. This growth was primarily driven by a 51% surge in the Wholesale channel, as the company continued to expand its presence in the Food, Drug, and Mass (FDM) market. The company's entry into the FDM market, along with increased sales of its Ready-to-Drink (RTD) products, were key contributors to the Wholesale channel's impressive performance.

The company's Direct-to-Consumer (DTC) channel, which includes its e-commerce business and subscription services, saw a decline of 11% in revenue compared to the prior year period. This was due to lower customer acquisition as a result of declines in the overall DTC market, as well as a strategic shift in advertising spend to other areas with higher returns and reduced promotional offerings to focus on profitability.

BRCC's Outpost channel, which includes its company-operated and franchised retail coffee shop locations, experienced a 20% decrease in revenue compared to the prior year period. The company remains on a tactical pause within this channel as it sharpens its strategic plans and focuses on improving unit economics, particularly for underperforming stores.

Despite the revenue mix shift, BRCC's profitability soared in the first quarter of 2024. Gross margin expanded by 990 basis points to 42.9%, driven by product mix shifts, productivity improvements in the RTD business, and lower green coffee costs. The company's focus on operational efficiency and cost control also contributed to the significant improvement, with SG&A expenses declining to 38.9% of revenue, compared to 53.6% in the prior year period.

As a result of these operational enhancements, BRCC reported net income of $1.9 million in the first quarter, a remarkable turnaround from the net loss of $17.3 million in the same period last year. Adjusted EBITDA also improved significantly, reaching $14.1 million, or 14% of revenue, compared to a loss of $5.2 million in the prior year period.

Outlook

The company's strong financial performance has allowed it to increase its full-year guidance. While maintaining its revenue target of $430 million to $460 million, BRCC has raised its gross margin guidance to the top end of the 37% to 40% range and its adjusted EBITDA guidance to $32 million to $42 million, up from the previous range of $27 million to $40 million.

Business Overview

BRCC's success in the Wholesale channel has been a key driver of its growth and profitability. The company has continued to expand its presence in the FDM market, adding 3 new retail partners in the first quarter and reaching an ACV (All Commodity Volume) of 38%. Management expects the company to be fully deployed in the FDM market by the end of 2025, with the FDM channel representing approximately 40% of the overall coffee category.

The company's partnership with Keurig Dr Pepper (KDP) is another exciting development, as it will allow BRCC to accelerate its growth across its current portfolio and gain access to new channels. The long-term agreement for manufacturing and licensing of BRCC's single-serve pods with KDP is expected to provide the company with significant operational efficiencies and the ability to innovate within the CPG sector.

BRCC's RTD business has also been a strong performer, outpacing the overall RTD industry by 3x. The company has made significant improvements to its RTD product margins, driven by supply chain optimization, inventory management, and logistics enhancements. These initiatives have resulted in a 540-basis-point improvement in RTD product margins quarter-over-quarter.

While the company's DTC channel has faced some challenges, BRCC has made enhancements to its website and subscription experience, which have led to a 17% increase in new subscribers' average order value. The company believes these improvements will help stabilize the DTC business this year.

Recent Developments

BRCC's commitment to its mission of supporting active duty military, veterans, first responders, and their families remains a core focus. The company is planning a special event to commemorate the 80th anniversary of D-Day, which will include custom long-form content and an honorary jump over the hallowed battlefields.

Conclusion

BRCC's impressive financial performance in the first quarter of 2024, marked by record margins, profitability, and cash flow, demonstrates the company's ability to execute on its strategic initiatives. The company's focus on operational excellence, coupled with its strong brand and mission, positions it well for continued success in the rapidly growing premium coffee market. With the partnership with Keurig Dr Pepper and the ongoing expansion in the FDM channel, BRCC is poised to further solidify its position as a leading player in the industry.

You may be interested in...

Starbucks (SBUX): A Powerhouse Brand Navigating Global Complexities

Starbucks Corporation, the undisputed leader in the global specialty coffee market, has etched an indelible mark on the consumer landscape over the past three decades. From humble beginnings as a single store in Seattle's Pike Place Market, the company has transformed into a behemoth with a presence spanning 86 countries and over 39,400 stores as of June 30, 2024.

Veteran-Founded Black Rifle Coffee Company (NYSE:BRCC) Brews Up Long-Term Growth as it Expands Its Portfolio Beyond Coffee

Business Overview Black Rifle Coffee Company (NYSE:BRCC), the veteran-founded, mission-driven premium lifestyle brand and coffee company, has steadily built a loyal customer base by delivering high-quality coffee products and embracing its support for the military and first responder communities. However, the company is now looking to diversify its offerings beyond its core coffee business, positioning itself for long-term growth.

Barfresh Food Group Inc. (BRFH): Innovating the Beverage Landscape

Business Overview and History Barfresh Food Group Inc. (BRFH) is a leading manufacturer and distributor of ready-to-drink and ready-to-blend beverages, specializing in smoothies, shakes, and frappes. The company's innovative product offerings and strategic initiatives have positioned it for substantial growth in the coming years.

Coffee Holding Co., Inc. (NASDAQ:JVA): A Journey Fueled by Resilience and Innovation

Coffee Holding Co., Inc. (NASDAQ:JVA) is a publicly traded integrated wholesale coffee roaster and dealer located in the United States. The company’s journey has been marked by a steadfast commitment to quality, adaptability, and a relentless pursuit of growth. With a rich history spanning over three decades, Coffee Holding has established itself as a prominent player in the dynamic coffee industry.

Westrock Coffee Company (WEST): A Robust Player in the Evolving Beverage Landscape

Westrock Coffee Company (WEST) is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States. The company's comprehensive platform spans the entire value chain, from sourcing and supply chain management to product development, roasting, packaging, and distribution. Westrock's unique approach and strategic positioning have enabled it to navigate the dynamic beverage market with resilience, positioning the company for continued growth and value creation.