Executive Summary / Key Takeaways

• Black Rifle Coffee Company (BRCC) is strategically expanding its Wholesale presence, driving significant unit growth and market share gains in packaged coffee and ready-to-drink (RTD) beverages, while optimizing its Direct-to-Consumer (DTC) channel.
• The company's new Black Rifle Energy line, launched in partnership with Keurig Dr Pepper , is rapidly gaining distribution and is expected to be a key growth driver, leveraging a "clean energy system" and natural ingredients.
• Despite inflationary pressures from green coffee and tariffs, BRCC is improving profitability through operational efficiencies, strategic pricing actions, and an Operational Improvement Plan targeting $8 million to $10 million in annualized cost savings.
• BRCC maintains a robust long-term outlook, targeting a 10-15% revenue CAGR and 15-25% adjusted EBITDA CAGR through 2027, underpinned by continued distribution expansion and product innovation.
• The company's mission-driven brand identity, strong customer loyalty, and agile "guerrilla warfare" operational mindset serve as critical competitive advantages in a dynamic beverage market.

The Mission-Driven Brew: Setting the Scene for Black Rifle Coffee

Black Rifle Coffee Company (BRCC) stands as a distinctive force in the premium beverage market, rooted in its identity as a Veteran-founded and led enterprise. Established in 2014 by U.S. Army Veteran Evan Hafer, the company began with a direct-to-consumer (DTC) model, personally roasting and shipping coffee to build a loyal customer base. This foundational connection to military, veteran, and first responder communities remains central to its brand and business model, fostering a powerful sense of authenticity and loyalty that differentiates it in a crowded industry.

BRCC operates across three primary channels: Wholesale, Direct-to-Consumer (DTC), and Outpost, offering a diverse portfolio including roasted coffee, RTD beverages, energy drinks, and branded apparel. The company's overarching strategy has evolved to prioritize growth in the Wholesale segment, a strategic pivot in response to shifting consumer preferences post-pandemic. This shift has seen resources reallocated to expand brick-and-mortar retail presence, a move that has proven instrumental in driving recent growth.

The broader industry landscape presents both opportunities and challenges. The U.S. coffee category within Food, Drug, and Mass (FDM) has shown strength, growing 13.2% in Q3 2025, largely driven by higher shelf pricing. In contrast, the RTD coffee category has faced headwinds, declining 3.1% overall in Q3 2025. However, the energy drink category is a significant and rapidly expanding market, generating over $20 billion in retail sales in 2024, presenting a substantial growth avenue for BRCC.

Competitive Landscape and Strategic Positioning

BRCC operates as a challenger brand, leveraging its unique mission and brand identity to carve out a distinct position against larger, more established competitors such as Starbucks Corporation (SBUX), Keurig Dr Pepper Inc. (KDP), and J.M. Smucker Company (SJM). While these rivals benefit from immense scale, broader market penetration, and often more robust financial resources, BRCC distinguishes itself through its authentic connection to military culture and a highly engaged customer base.

In the U.S. coffee category within FDM, Black Rifle has consistently outperformed the market. In Q3 2025, BRCC's sales were up 36.7% year-over-year, nearly triple the category's growth rate. This growth is driven almost entirely by unit gains, which were up more than 20% year-to-date in Q3 2025, indicating strong consumer demand rather than just price inflation. This contrasts with many competitors whose dollar growth is primarily from price increases. BRCC's "land-and-expand" strategy in Wholesale, starting with a focused set of SKUs and earning additional shelf space, has been effective in building retailer confidence and driving velocity.

In the RTD coffee segment, BRCC has demonstrated resilience. Despite the category's decline, Black Rifle's performance was down just 0.6% overall in Q3 2025, and its RTD sales in grocery grew 18%. The company has established itself as the third-largest RTD coffee brand in the U.S., expanding its All-Commodity Volume (ACV) by 7 points year-over-year to 53% in Q3 2025. This strong performance in a contracting market highlights the brand's loyalty and effective execution. While larger players like Starbucks benefit from extensive distribution and brand recognition, BRCC's focused approach and strong unit growth allow it to gain share.

The entry into the energy drink market further illustrates BRCC's strategic positioning. The company designed Black Rifle Energy with a "clean energy system" featuring green coffee extract and natural caffeine sources, appealing to a consumer base that increasingly prefers natural ingredients. This product differentiation, combined with a distinct can design embodying its mission-driven ethos, aims to set it apart from competitors like Ghost (distributed by KDP) which often feature more artificial, candy-like flavors. BRCC's partnership with KDP for distribution provides access to a vast direct store delivery (DSD) network, enabling it to scale rapidly and efficiently, a critical advantage against competitors who might lack such an extensive network.

Technological Differentiators and Operational Agility

BRCC's competitive edge extends beyond its brand to its operational agility and strategic use of technology across its value chain. While not a traditional "tech company," BRCC employs a "guerrilla warfare" mindset, leveraging lean operations and resourceful tactics to maximize impact.

The company's digital ecosystem serves as a key technological differentiator. Recent website and mobile app updates have "enhanced navigation and checkout speed," while "back-end improvements support smarter merchandising and more efficient SKU management." These enhancements are critical for optimizing the DTC channel, which, despite a strategic shift towards Wholesale, remains vital for deepening customer relationships and providing valuable consumer insights. The subscription platform has also seen new functionality, including prepaid options and exclusive offers, aiming to enhance the customer experience and foster loyalty.

In product development, BRCC's "clean energy system" for Black Rifle Energy, utilizing green coffee extract and natural caffeine sources, represents a strategic technological choice in formulation. This approach directly addresses consumer demand for healthier options, with all four launch flavors scoring highly in consumer testing. Similarly, the company's new cold brew RTD items are "25 calorie, low sugar, exceptionally developed items," demonstrating a commitment to innovation that aligns with evolving health and wellness trends. These product innovations are designed to drive "leading growth" and increase distribution.

Supply chain management and quality control are also areas of operational excellence. BRCC boasts 100% U.S. coffee roasting and employs a licensed, Coffee Quality Institute-certified grader for cupping, grading, scoring, and sourcing its diverse green coffee beans from over ten countries. This meticulous approach ensures product quality and contributes to "productivity improvements and favorable mix" that positively impact gross margins. The company's ability to diversify its sourcing from countries like Colombia, Brazil, and Nicaragua also mitigates risks associated with single-origin dependencies.

The "so what" for investors is clear: these operational and product-related "technologies" contribute directly to BRCC's competitive moat. The digital enhancements improve customer retention and acquisition efficiency, while innovative product formulations cater to evolving market demands, potentially leading to higher average selling prices and stronger brand loyalty. A robust supply chain ensures consistent quality and cost management, underpinning profitability.

Strategic Initiatives and Execution

BRCC's recent performance reflects a disciplined execution of its strategic initiatives, particularly in expanding its Wholesale footprint and launching new product lines.

The Wholesale channel has been a primary growth engine. In Q3 2025, Wholesale net revenue increased 5% to $67.03 million, driven by "an increase in Energy revenue, growth in packaged coffee distribution and SKU expansion at FDM retailers." For the nine months ended September 30, 2025, Wholesale revenue grew 4% to $185.14 million. The "land-and-expand" strategy has been successful, with grocery ACV increasing 6 points year-over-year to 48% in Q3 2025, and total ACV across all tracked channels rising 9 points to 54%. This expansion includes new retail partnerships and increased shelf presence with existing customers.

The Direct-to-Consumer (DTC) segment, while experiencing a 4% decline in Q3 2025 revenue to $27.84 million, showed "slightly positive" results when adjusted for a prior-year loyalty reserve benefit and promotion timing shift. The company is focused on stabilizing and optimizing this channel, with "meaningful gains through leading third-party marketplaces" like Amazon (AMZN) and walmart.com (WMT). Subscription counts have shown stabilization, with positive subscriber growth in September 2024, indicating effective retention efforts.

The Outpost channel, comprising company-operated and franchised stores, saw a 6% revenue increase in Q3 2025 to $5.84 million, driven by "higher franchise fees and increased average order values." While growth in this channel is expected to be limited in 2025 due to reallocation of investments, BRCC is refining its store template and evaluating the optimal balance between company-owned and franchise units, with a full strategy anticipated in 2026.

A significant strategic initiative is the launch and expansion of Black Rifle Energy. By Q3 2025, the product was available in nearly 20,000 retail locations, reaching approximately 22% ACV. The partnership with KDP is crucial for this rollout, providing access to 180,000 retail doors nationwide. Management anticipates a two-year distribution ramp for the energy product, with targeted expansion in key launch markets, particularly in the convenience channel where two-thirds of energy drink sales occur.

To support these growth initiatives and improve overall efficiency, BRCC implemented an Operational Improvement Plan in Q2 2025, which was modified in Q3 2025. This plan involved headcount reductions (approximately 48 employees initially, with an incremental 15 from modification) and the relocation of corporate headquarters and inventory. The plan is expected to deliver $8 million to $10 million in annualized cost savings in the second half of 2025.

Financial Performance and Liquidity

BRCC's financial performance in 2025 reflects a company in transition, balancing growth investments with a focus on profitability and efficiency. For the three months ended September 30, 2025, net revenue increased 3% to $100.71 million, compared to $98.20 million in the prior year period. However, for the nine months ended September 30, 2025, net revenue remained flat compared to the corresponding period in 2024.

Gross margin decreased to 37% in Q3 2025 from 42% in Q3 2024, and to 36% for the nine months ended September 30, 2025, from 42% in the prior year period. This decline was primarily attributed to "higher inflationary costs, primarily in coffee bean prices and shipping cost," and "increased investments in trade and promotions," partially offset by "productivity improvements and favorable mix."

Despite gross margin pressures, the company demonstrated improved operating leverage. Adjusted EBITDA for Q3 2025 increased 19% to 8.4% of sales, representing a 115 basis point improvement year-over-year. This was driven by a 9% decrease in total operating expenses in Q3 2025, with marketing and advertising expenses down 14% and salaries, wages, and benefits down 13% due to headcount reductions. General and administrative expenses, however, increased 5%, partly due to costs related to a change in logistics providers and increased depreciation from software useful life changes. Other operating expense, net, saw a significant 326% increase for the nine months ended September 30, 2025, primarily due to a $4.30 million increase in legal contingencies.

Liquidity remains a focus. As of September 30, 2025, BRCC held $9.50 million in cash and cash equivalents, with working capital of $27.30 million and $49.30 million in available borrowings under its credit facilities.

The company strengthened its financial position in July 2025 through a public offering of Class A Common Stock, raising $37.40 million in net proceeds, which were used to retire outstanding debt and support growth initiatives. This capital raise, combined with $5.6 million in free cash flow generated in Q3 2025, is expected to provide sufficient liquidity for the next twelve months.

Outlook and Guidance

BRCC's management has provided a clear outlook for 2025 and reaffirmed its long-term targets, signaling confidence in its strategic direction. For the full year 2025, the company expects to achieve at least $395 million in revenue, at least 35% gross margin, and at least $20 million in adjusted EBITDA. This guidance reflects a realistic assessment of ongoing market and cost pressures, with management indicating that results will likely be towards the lower end of the previously communicated ranges.

A sequential step-up in revenue is anticipated throughout 2025, with the fourth quarter expected to see a larger increase due to normal seasonality and the benefits of pricing actions. Q4 gross margins are projected to be closer to the 35% level seen in the first half of the year, influenced by typical promotional activity and a greater impact from tariffs.

Key assumptions underpinning the margin outlook include significant headwinds: at least a 300 basis point impact from green coffee inflation (net of pricing actions), a 250 basis point impact from increased trade investment (particularly for the energy line and normalized promotions), and at least a 100 basis point impact from recently implemented import duties. These pressures are expected to be partially offset by at least 200 basis points of benefit from productivity initiatives and a more favorable product mix. The Operational Improvement Plan is on track to deliver $8 million to $10 million in annualized cost savings in the second half of 2025.

Looking ahead to 2026, BRCC has already secured approximately 50% of its expected coffee needs through forward purchase agreements. Management anticipates that if green coffee spot pricing remains stable, it will have a neutral impact on gross margins in 2026, representing neither a material headwind nor tailwind.

The company remains confident in its long-term guidance through 2027, targeting a 10% to 15% revenue Compound Annual Growth Rate (CAGR), adjusted EBITDA growth of 15% to 25% CAGR, and gross margins of 40% or better. This growth is expected to be driven by continued distribution gains, particularly reaching "full distribution" (70-75% ACV) by the end of 2026, and the ramping contribution from the Black Rifle Energy line.

Risks and Challenges

Despite its strategic momentum, BRCC faces several risks and challenges that warrant investor attention. Fluctuations in green coffee prices and the impact of tariffs remain significant headwinds, largely outside the company's direct control. While BRCC has hedged a portion of its 2026 coffee needs, sustained volatility could pressure margins.

The Operational Improvement Plan, while designed to enhance efficiency, carries inherent risks such as potential negative impacts on workforce morale, loss of institutional knowledge, and challenges in executing strategic plans with a different employee mix. Furthermore, the company's reliance on third-party suppliers and co-manufacturers exposes it to supply chain disruptions, which could affect product availability and costs.

Competition in both the coffee and energy drink categories is fierce. While BRCC's brand differentiation is strong, larger competitors possess greater scale and marketing budgets, potentially leading to pricing pressures or challenges in gaining shelf space. The ongoing shift in consumer preferences away from DTC channels also poses a continuous challenge for that segment, requiring sustained optimization efforts. Legal contingencies, as evidenced by the $4.30 million increase in other operating expenses for the nine months ended September 30, 2025, also represent a potential financial risk.

Conclusion

Black Rifle Coffee Company is executing a compelling growth strategy, transforming from its DTC origins into a formidable omnichannel beverage player. The company's unwavering commitment to its mission, coupled with a disciplined approach to Wholesale expansion, product innovation, and operational efficiency, forms the bedrock of its investment thesis. Despite facing inflationary pressures and a dynamic competitive landscape, BRCC's ability to consistently outperform category growth rates, drive unit volume, and strategically leverage partnerships like KDP underscores its potential for sustained market share gains.

The path to achieving its ambitious long-term financial targets hinges on the continued successful rollout of Black Rifle Energy, the optimization of its core coffee business, and the effective realization of cost savings from its operational improvement initiatives. With a strengthened balance sheet from its recent public offering and a clear roadmap for distribution expansion, BRCC is well-positioned to convert its strong brand momentum and loyal customer base into enhanced profitability and long-term shareholder value. Investors should closely monitor the execution of its energy drink rollout, the effectiveness of its pricing strategies against commodity costs, and its continued ability to expand distribution while maintaining its distinctive brand identity.