Executive Summary / Key Takeaways

• Westrock Coffee Company is undergoing a transformative period, leveraging significant investments in its Conway, Arkansas facilities to become a premier integrated beverage solutions provider, driving record-breaking quarterly results.
• The company's strategic focus on a "crop to cup" integrated platform, enhanced by proprietary technology and data intelligence, is attracting major global brands and fueling substantial market share shifts in single-serve, RTD, and core coffee segments.
• Despite macroeconomic headwinds like high coffee prices and tariffs, and initial Conway ramp-up challenges, recent capital infusions and debt covenant realignments have strengthened liquidity, positioning Westrock for accelerated EBITDA growth and significant deleveraging by 2026.
• Management projects consolidated Adjusted EBITDA of $60 million to $65 million for fiscal 2025, rising to $140 million in fiscal 2026, with a Beverage Solutions net secured leverage ratio expected to drop to 3.0x by year-end 2026.
• Key risks include ongoing coffee commodity price volatility, tariff impacts, and uncertainty surrounding a major single-serve customer's M&A transaction, though Westrock expresses confidence in its ability to mitigate these challenges.

The Integrated Powerhouse: Reshaping the Beverage Landscape

Westrock Coffee Company (NASDAQ:WEST) is strategically transforming the beverage industry, evolving into a leading integrated solutions provider for coffee, tea, flavors, extracts, and ingredients. Founded in 2009, the Little Rock, Arkansas-based company has embarked on a mission to become the premier strategic supplier to preeminent global beverage brands, a vision underscored by a nearly $400 million investment over the past 2.5 years. This substantial capital has been channeled into building and equipping the country's largest roast-to-extract ready-to-drink (RTD) facility, a new single-serve cup manufacturing facility, and a state-of-the-art distribution center, all located in Conway, Arkansas.

This ambitious expansion was a direct response to "generationally rare consumer-driven value shifts" in the coffee and related beverage market. These shifts demand profound business model changes from suppliers, and Westrock aims to be an invaluable partner by offering technological expertise, a broad product range, and a customer-centric approach that encompasses innovation, dependable sustainable sourcing, and low-cost processing and packaging. The company's platform is built on four fundamental pillars: a transparent supply chain, innovative beverage solutions tailored to customer needs, high-quality and comprehensive product offerings, and a scaled international presence serving blue-chip customers.

Technological Edge and Operational Scale

At the heart of Westrock's competitive strategy lies its advanced manufacturing infrastructure, particularly the Conway complex. These facilities, spanning over one million square feet, are designed to produce and distribute hundreds of millions of RTD cans, glass bottles, and multi-serve bottles, alongside billions of single-serve cups annually. This scale provides a significant tangible benefit, enabling Westrock to meet the high-volume demands of major CPG brands and retailers efficiently.

The company's technological differentiation extends to its product development capabilities, boasting 35 food scientists dedicated to creating and matching flavor profiles across various formats, including cups, bags, multi-serve bottles, and cans. This expertise fosters "multi-product shopping" by brands and private label owners, who increasingly seek integrated solutions from a single partner. Operationally, the main can line at the Conway facility is already nearing 80% of its original planned capacity, with some production runs achieving 80% to 125% of standard volumes. The glass line is expected to commence commercial product sales in December 2025, and a second can line, installed in Q3 2025, is slated for commercial production in Q1 2026. A third can line is already on-site, ready for installation as demand dictates. Furthermore, Westrock has added significant water and tank farm capacity to the Conway plant, facilitating the rapid addition of future lines without extensive infrastructure overhauls. This modular approach to expansion means Westrock can add "5 billion more cups in that facility alone" within 24 months if orders are secured, representing a meaningful shift in global market share.

A new body of work focused on ultra-filtered milk-based, high-protein products is also emerging, leveraging Westrock's existing retort lines and newly installed can lines. This initiative, driven by strong customer interest, demonstrates the company's agility in expanding its product portfolio into adjacent, high-growth categories. The company's two-year relationship with Palantir (PLTR) further enhances its operational efficiency, providing process, data intelligence, and risk mitigation insights that have significantly contributed to profitability, particularly in trading and physical logistics, with future applications in manufacturing.

Competitive Landscape and Strategic Positioning

Westrock operates in a highly competitive beverage market, facing established players like J.M. Smucker Company (SJM) and Keurig Dr Pepper (KDP), as well as more specialized entities like Farmer Bros. Co. (FARM). While J.M. Smucker and Keurig Dr Pepper benefit from entrenched brand recognition and broader market dominance, Westrock's integrated platform and focus on sustainable sourcing provide a distinct competitive edge. Westrock's ability to offer a "one-stop shop" for product development and manufacturing across diverse formats differentiates it from competitors who may specialize in only one segment.

In the single-serve market, Keurig Dr Pepper is often considered the "800-pound gorilla" with over 80% market share. However, Westrock is actively gaining ground, with its second single-serve cup manufacturing facility in Conway launching seamlessly and contributing to a 50% increase in monthly cup production. This growth is driven by new private label wins and major brands transitioning from other platforms, underscoring Westrock's ability to take market share through aggressive pricing and superior service. The RTD market is also ultra-competitive, but Westrock's new Conway factory, touted as the "largest lowest cost factory of anybody in the world," has attracted major brands and scaling smaller brands alike.

Westrock's commitment to a transparent and digitally traceable supply chain in its Sustainable Sourcing & Traceability (SST) segment further differentiates it, appealing to environmentally conscious customers and driving long-term commercial value. This focus on responsible sourcing, particularly for green coffee, positions Westrock favorably in a market increasingly valuing ethical practices.

Financial Performance and Operational Momentum

Westrock Coffee Company delivered record-breaking results for the third quarter of 2025, showcasing strong operational momentum. Combined Segment Adjusted EBITDA reached $26.2 million, an 84% increase over the same period in the prior year. For the first nine months of 2025, combined Segment Adjusted EBITDA grew 55% year-over-year to $60.7 million.

The Beverage Solutions segment saw net sales increase by 60.4% to $263.0 million for the three months ended September 30, 2025, with Segment Adjusted EBITDA growing 73.8% to $20.4 million. This growth was primarily fueled by a 70.9% increase in coffee and tea product sales, including an 84.8% surge in single-serve cup volumes and a 4.1% increase in core roast and ground coffee volumes. Sales of flavors, extracts, and ingredients also rose by $28.5 million, driven by a 59.6% increase in multi-serve bottle volumes and the ramp-up of can production at Conway. The SST segment also demonstrated robust performance, with net sales increasing 61.5% to $91.8 million and Segment Adjusted EBITDA soaring 132.5% to $5.8 million for the third quarter of 2025. This was largely due to a 43.1% increase in the average sales price per pound, correlated with global commodity prices, and a 15.3% increase in sales volume.

Despite these gains, the company reported a net loss of $19.1 million for Q3 2025, reflecting ongoing investments in the Conway facility's scale-up phase. Interest expense increased to $14 million, primarily due to higher outstanding borrowings on the revolving credit facility. Selling, general and administrative (SG&A) expenses in Beverage Solutions increased by $1 million, driven by employee-related costs, partially offset by reduced Conway start-up expenses.

Liquidity and Capital Structure Strengthening

Westrock's liquidity needs are primarily for funding operations, debt service, and capital expenditures. For the nine months ended September 30, 2025, the company reported net losses of $67.90 million and net cash outflows from operating activities of $55.70 million.

To address the working capital impact of historically high coffee prices and tariffs, Westrock secured a new $30 million infusion of capital through 5% convertible senior notes due 2031 in November 2025. This was coupled with Amendment No. 5 to its Credit Agreement, which modified financial covenants and extended the Covenant Relief Period to October 1, 2026.

The maximum secured net leverage ratio was adjusted to 5.50x for December 31, 2025, stepping down to 4.00x by December 31, 2026. As of September 30, 2025, Westrock's secured net leverage ratio stood at 4.58x, well within the allowable limits. Management expressed confidence that this capital raise and covenant realignment will enable the company to reach 4.5x debt to EBITDA by the end of 2025 and become free cash flow positive after debt service within the next four to five months. Approximately $15 million in capital expenditures remains for the Conway Facility, with the majority already completed.

Outlook and Growth Trajectory

Westrock's outlook is characterized by strong confidence in its ability to deliver significant growth. For fiscal year 2025, the company estimates Consolidated Adjusted EBITDA to be between $60 million and $65 million. Beverage Solutions Segment Adjusted EBITDA is projected between $63 million and $68 million, and SS&T Segment Adjusted EBITDA between $14 million and $16 million. The Beverage Solutions credit agreement secured net leverage ratio is expected to be 4.5x by year-end 2025, a 40 basis point improvement from prior guidance.

Looking ahead to 2026, Westrock anticipates Consolidated Adjusted EBITDA of $140 million, with no Conway scale-up operating costs as the plant is expected to be fully scaled. Beverage Solutions Segment Adjusted EBITDA is projected at $133.5 million, and SS&T Segment Adjusted EBITDA at $6.5 million. The company aims to achieve a Beverage Solutions net secured leverage ratio of 3.0x by the end of fiscal 2026, aligning with its long-term goal of operating within a 2.5x to 3.0x range. Management is internally targeting $200 million in EBITDA within the next three to four years, driven by existing customer relationships and product offerings.

Risks and Challenges

Despite the optimistic outlook, Westrock faces several pertinent risks. The volatility of green coffee prices, an exchange-traded agricultural commodity, remains a significant concern. While cost increases are generally passed through to customers, these price hikes, coupled with tariffs (such as the 50% tariff on Brazilian coffee, a major source), can impact working capital and potentially dampen consumer demand. Management acknowledges that pricing increases often lag cost increases, affecting liquidity.

Another key uncertainty for 2026 is a pending M&A transaction involving a significant single-serve customer, which could impact volume commitments. However, Westrock has conservatively accounted for this potential loss in its credit covenant resetting and is confident in its ability to replace any lost volume through existing and new customer wins. The initial ramp-up of the Conway facility also presented challenges, including slower-than-anticipated volume starts and higher-than-planned start-up costs. The company operates in an "ultra-competitive" RTD and roast and ground market, requiring continuous battle for market share.

Conclusion

Westrock Coffee Company is in the midst of a profound transformation, evolving from a traditional coffee provider into an integrated, technologically advanced beverage solutions powerhouse. Its substantial investment in the Conway facilities, coupled with a strategic focus on innovation, sustainable sourcing, and comprehensive customer solutions, is generating significant market share shifts and robust financial growth. The recent capital raise and debt covenant adjustments have fortified its balance sheet, providing the necessary liquidity to capitalize on its expanded operational capabilities.

While challenges such as commodity price volatility, tariffs, and customer-specific uncertainties persist, Westrock's management has demonstrated a clear strategy and operational agility to address these headwinds. The company's strong guidance for accelerated EBITDA growth and deleveraging over the next two years, underpinned by a fully scaled Conway facility and a pipeline of new customer engagements, paints a compelling picture for investors. Westrock's commitment to being a strategic partner, leveraging its integrated platform and technological edge, positions it to continue capturing value in a dynamic and evolving beverage market.