Banking on its 91% wholesale growth year-over-year in the Food, Drug and Mass (FDM) market, Black Rifle Coffee Company (BRCC) proclaimed it “has never been stronger” in its Q3 earnings report.
The premium coffee brand reported revenues of $100.5 million during Q3, a 33% improvement year-over-year. Gross margin was nearly 34%, driven largely by higher sales volume and a favorable product mix. BRCC reduced its inventory levels down in the last two quarters and will continue to draw down volumes through the next three quarters.
BRCC announced it is now the eighth largest coffee brand overall and the fourth largest in bagged coffee.
“We are leaving no stone unturned to support the business by driving a renewed focus on profitability,” said BRCC’s CFO Steve Kadenacy in a press release statement. “The results speak for themselves and we expect our bottom line margin to continue improving in 2023 and throughout all of 2024.”
Net loss for the Utah-based company in Q3 fell to $10.6 million, compared to $16.1 million in the same period last year. The coffee brand reported $6.7 million in cash and $77.3 million in long term debt after refinancing earlier this year.
Founded in 2014 by ex-Green Beret Evan Hafer, Black Rifle sells dry coffee, RTDs and operates 34 on-premise cafes, or “outposts” (spread evenly between company operated and franchise locations). On the call, Hafer announced that, beginning January 1, recently appointed BRCC president Chris Mondzelewski will take over the role of CEO from Hafer and Tom Davin.
Davin will move away from day-to-day operations and transition to the board of directors while Hafer said he will focus on brand-building and marketing initiatives.
BRCC has partnered in its wholesale accounts with Walmart and Albertsons as well as 12 other small and medium sized retail chains. RTD product sales increased through BRCC’s network of distributors and retailers as “All Commodity Volume (ACV) percentage increased 465 basis points to 41.9% and our total doors increased 21.4% versus the third quarter of 2022,” the company reported in its press release.
Company leadership did concede that it had taken a “tactical pause on its outpost business,” where it had achieved a 20% YoY revenue increase but a step back sequentially, declining 15% between Q2 and Q3.
When asked why BRCC was still invested in its brick-and-mortar outposts, Mondzelewski reiterated that it was still committed to its on-premise business as it aligns with building brand awareness and offering veterans job opportunities – pat of the company’s mission to support former and active members of the armed services.
BRCC remains focused on growing its at-home consumption business through its FDM partnerships. Kadenacy said the company is confident that its “growing pains in the RTD business are mostly behind us” but the company would still incurred non-cash losses through the middle of Q1 2024.
As the brand focuses on its ACV, it is instituting cost-saving measures that are expected to yield $30 million in 2024. BRCC leadership would not offer details on where these cost-savings were coming from but the executive team hinted at some streamlining of its staff.
It’s a combination of “expenses like professional fees” and “reallocating our resources to the things that are really growing and driving profitability,” CFO Kadenacy said. “There is a headcount element to that.”