Westrock Coffee Company (NASDAQ: WEST) is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States. The company has built a reputation for delivering innovative, value-added beverage products and services to some of the world's most iconic brands across various industries, including retail, foodservice, hospitality, and consumer packaged goods (CPG).
Business Overview Westrock Coffee Company was founded in 2015 as a coffee sourcing, supply chain management, and distribution services provider. The company initially focused on serving the retail, foodservice, and hospitality industries in the United States. Over the next several years, Westrock expanded its capabilities to include product development, roasting, and packaging, allowing it to offer a more comprehensive set of solutions to its growing customer base.
In 2020, Westrock made a strategic acquisition of SD Coffee, Inc., a specialty-grade coffee roaster known for its focus on the emerging influencer-led brand space. This acquisition enhanced Westrock's product marketing and development resources, positioning the company to capitalize on shifting consumer consumption trends.
The COVID-19 pandemic in 2020 presented significant challenges for Westrock, as it disrupted global supply chains and consumer demand. Despite facing various operational and financial obstacles during this time, the company remained committed to its mission of being the leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider.
A major milestone in Westrock's history came in 2022 when the company completed a de-SPAC merger transaction, converting from a Delaware limited liability company to a Delaware corporation. This transaction provided additional capital to fund the company's growth initiatives, including the construction of a new 524,000 square foot manufacturing facility in Conway, Arkansas. The Conway facility was designed to expand Westrock's extract and ready-to-drink production capabilities to meet increasing demand from its customer base.
Throughout its history, Westrock has demonstrated resilience and adaptability, navigating various challenges while remaining focused on developing innovative beverage solutions, maintaining a transparent supply chain, and delivering high-quality products to its blue-chip customers around the world.
Westrock's business model is built upon four fundamental pillars: transparent supply chain, innovative beverage solutions, high-quality and comprehensive product offerings, and leveraging its global presence to serve its blue-chip customer base. The company operates manufacturing and distribution facilities in the United States, Malaysia, and Rwanda, as well as trading and representative offices around the world.
Financial Performance Westrock's financial performance has been mixed in recent years, as the company has invested heavily in its infrastructure and capabilities to support its long-term growth strategy.
For the full year 2024, Westrock reported net sales of $850.7 million, a decrease of 1.6% compared to the prior year. However, the company's gross profit increased by 10.0% to $153.8 million. Despite these topline challenges, Westrock's Consolidated Adjusted EBITDA, a key metric for the company, reached $47.2 million, up 4.6% year-over-year. This figure included $12.8 million in scale-up costs associated with the company's new extract and ready-to-drink facility in Conway, Arkansas.
Westrock's Beverage Solutions segment, which accounts for the majority of the company's revenue, generated $659.4 million in net sales, an 8.8% decrease compared to 2023. This decline was driven by lower volumes in the core coffee and single-serve product categories, particularly a 16.4% decline in single serve cup volumes and a 13.2% decrease in roast and ground coffee volumes. However, these declines were partially offset by a 13.8% increase in sales of flavors, extracts, and ingredients products. Costs of sales in the Beverage Solutions segment decreased 11.6% to $527.4 million, driven by the lower sales volumes. Segment Adjusted EBITDA for Beverage Solutions was $53.6 million, representing a 29% increase over the prior year.
The Sustainable Sourcing & Traceability (SS&T) segment, which primarily consists of green coffee sales, saw a 34.9% increase in net sales to $191.3 million, reflecting higher green coffee prices and a 39.5% increase in sales volume. Costs of sales in the SS&T segment increased 32.6% to $169.5 million, primarily due to the higher sales volume. Segment Adjusted EBITDA for SS&T was $6.4 million, an 84% increase over the prior year.
For the fourth quarter of 2024, Westrock reported revenue of $229.0 million and a net loss of $24.5 million. The company's full-year net loss for 2024 was $80.3 million.
Liquidity and Capital Structure As of December 31, 2024, Westrock had $26.2 million in cash and cash equivalents, and $9.4 million in restricted cash, for a total of $35.6 million in cash. The company's total debt stood at $447.7 million, including $72.0 million in convertible notes issued in 2024. Westrock's net debt position (total debt less cash and cash equivalents) was $412.1 million.
The company also had a $200 million revolving credit facility, of which $112.5 million was drawn as of December 31, 2024. Westrock's current ratio stood at 1.20, while its quick ratio was 0.61, indicating a relatively tight liquidity position.
The company's capital expenditures for the full year 2024 totaled $159.6 million, with the majority of this investment directed towards the buildout of its extract and ready-to-drink facility in Conway, Arkansas. Westrock ended the year with a Beverage Solutions segment net secured leverage ratio of 4.7x, within the covenants of its credit agreement.
Growth Strategies and Outlook Westrock's growth strategies are focused on leveraging its integrated platform to deliver innovative, value-added beverage solutions to its global customer base. The company is well-positioned to capitalize on the industry's shifting consumer preferences towards cold brew, extracts, and ready-to-drink offerings.
In their Q3 2024 earnings call, Westrock had projected $50 million in consolidated adjusted EBITDA for FY 2024, with $10 million in Conway scale-up costs. While the company achieved its FY 2024 segment adjusted EBITDA targets in Beverage Solutions and SS&T, the Conway scale-up costs ended up being $12.8 million, higher than projected, due to lower sales volume at the Conway extract and RTD facility to absorb those costs.
For 2025, Westrock expects to deliver Consolidated Adjusted EBITDA of $66.5 million, which includes $15.0 million in scale-up costs associated with the Conway facility. The company anticipates Beverage Solutions segment adjusted EBITDA of $75.0 million and SS&T segment adjusted EBITDA of $6.5 million.
Looking further ahead to 2026, Westrock forecasts Consolidated Adjusted EBITDA of $140.0 million, with no additional scale-up costs, and Beverage Solutions and SS&T segment adjusted EBITDA of $133.5 million and $6.5 million, respectively.
The company's Beverage Solutions segment net secured leverage ratio is expected to peak at 5.7x in mid-2025 before declining to 4.9x by the end of 2025 and 3.0x by the end of 2026, as the Conway facility ramps up and the company deleverages.
Risks and Challenges Westrock faces several risks and challenges that could impact its future performance. These include volatility in green coffee prices, potential changes in consumer preferences, integration and execution risks associated with its growth initiatives, and competition from other integrated beverage solutions providers.
The company's reliance on a limited number of large customers also presents a risk, as the loss of or reduction in sales to one or more of these customers could have a material adverse effect on its operating results. Additionally, Westrock's ability to successfully navigate regulatory environments and comply with evolving laws and regulations in the various jurisdictions in which it operates is crucial.
Conclusion Westrock Coffee Company is a well-positioned player in the dynamic coffee, tea, and beverage solutions industry. The company's comprehensive offerings, global reach, and commitment to sustainability and innovation position it as a strategic partner of choice for many of the world's leading brands. While the company has faced some challenges in recent years, its focus on expanding its extract and ready-to-drink capabilities, coupled with its strong customer relationships and operational efficiencies, suggest a promising path forward. As Westrock continues to execute on its growth strategies, investors will closely monitor the company's ability to deliver sustainable financial performance and create long-term shareholder value.