This is an English adaptation of a FoodBud historical article originally published on February 7, 2022.
Black Rifle Coffee announced in November 2021 that it planned to go public through a SPAC transaction at an implied valuation of about $1.7 billion, roughly RMB 10.8 billion at the time.
If completed, the transaction was expected to provide Black Rifle Coffee with $225 million in cash proceeds, including a $100 million equity commitment from Engaged Capital. After closing, the combined company would be named BRC Inc.
According to SilverBox Engaged's February 2 announcement, the deal was expected to close on February 9, subject to shareholder approval, and was expected to provide at least $373 million to support Black Rifle Coffee's digital and omnichannel growth strategy.
Black Rifle Coffee is a Salt Lake City, Utah-based coffee company founded by U.S. veteran Evan Hafer and two veterans who served in Afghanistan and Iraq. The brand focuses on serving premium coffee to veterans, active-duty military personnel, and first responders. It became widely known in the U.S. after publicly pledging in 2017 to hire 10,000 veterans, and later received support from Donald Trump Jr.
Founder Evan Hafer said he had wanted to use coffee to bring people together since operating alone in his garage with a one-pound roaster. He said Black Rifle Coffee was created to provide high-quality coffee while supporting veterans and their families, and that the SilverBox Engaged transaction and support from investors such as Engaged Capital would provide capital for growth, more stores nationwide, and the goal of hiring 10,000 veterans.
SilverBox Engaged executive chairman Joe Reece said the team had reviewed more than 200 opportunities before negotiating with Black Rifle Coffee. He said the company's growth, team appeal, and business flywheel made it stand out. When asked for a comparable company, Reece pointed to Dutch Bros, noting that both companies sell coffee products to loyal followings in different ways, while Black Rifle Coffee's advantage was particularly high customer loyalty.
Black Rifle Coffee co-CEO Tom Davin had prior experience at 5.11 Tactical, Taco Bell, and Panda Express. Like the company's CEO and COO, Davin is also a veteran, having joined the Marine Corps after college.
The company's core story is built around the American dream and a veteran-centered community. Evan Hafer started the company in his garage with $1,800, and by 2015 the business had reached $1.3 million in revenue. Davin described it as a major American success story.
Davin positioned Black Rifle Coffee as a lifestyle brand. In practice, the company sells not only coffee but also branded products such as mugs and apparel. In its retail store business, 48% of sales came from coffee and merchandise bundles.
Like Dutch Bros, Black Rifle Coffee has a distinct culture. The company has applied that culture heavily on social media, using viral videos and frequent co-hosted events to drive reach. Its Instagram account had 1.78 million followers.
Tom Davin said Black Rifle Coffee generated $230 million in sales revenue in 2021, with a gross margin of 40%. The company expected sales revenue to reach $430 million in 2023.
Revenue was $82 million in 2019. In 2020, sales doubled year over year to $164 million.
Black Rifle Coffee's revenue mix was divided mainly into direct-to-consumer, retail stores, and wholesale, with DTC representing the largest share.
DTC revenue was $66 million in 2019 and grew 92% year over year to $126 million in 2020.
In 2020, DTC accounted for 84% of total revenue. The company expected DTC to account for 46% of total revenue in 2023.
As of June 30, 2021, Black Rifle Coffee had more than 270,000 active subscription members. According to the latest filing cited in the article, that figure had reached 285,000. These members showed strong retention, with monthly churn of about 3.5%, below the cited industry average of 10%.
Wholesale products included instant coffee, merchandise such as apparel, and ready-to-drink products. Wholesale revenue grew from $9 million in 2019 to $24 million in 2020, up 182% year over year.
Wholesale products were sold through retail channels such as 7-Eleven and Walmart, as well as through outdoor retail partners including Bass Pro Shops, Cabela's, Scheels, and 5.11 Tactical. Black Rifle Coffee was often the exclusive coffee supplier for these brands' coffee programs.
Black Rifle Coffee launched its retail store business in 2020, contributing $3 million in sales revenue that year.
As of June 30, 2021, it had 7 stores: 3 company-operated locations and 4 franchised stores.
At the time, a new store required an investment of $1.4 million. Davin said in an interview that annual revenue per store was $2 million, with a target of $2.5 million.
Black Rifle Coffee estimated the potential scale of its DTC business at $4 billion. It expected DTC subscription users to grow to 325,000 by 2023.
Davin said in an interview that Black Rifle Coffee had opened 16 stores, split evenly between company-operated and franchised units.
The company estimated its potential U.S. store base at more than 1,300 locations. It expected to have 78 stores by 2023, including 53 company-operated stores and 25 franchised stores.
Davin also said the company was preparing to launch a hybrid functional beverage, expected to debut in physical stores in summer 2022. Black Rifle Coffee saw new store openings as a driver of DTC revenue growth.
The company had 4 ready-to-drink products at the time. It estimated the potential market size for ready-to-drink products at $4 billion and expected RTD distribution to cover more than 100,000 stores by 2023.
For wholesale, Black Rifle Coffee had 10 partners and covered 2,200 stores at the end of 2020. It saw a potential market of 7,200 stores, implying roughly 3x room for expansion. By 2023, it expected wholesale distribution to reach more than 3,600 stores.
The company's financial forecast summary showed gross margin broadly between 40% and 43.5%. Operating profit was expected to remain negative in 2021 and 2022, before reaching $2.5 million in 2023. Net profit was forecast at $1.2 million in 2023.
The article also noted that Tims China's business was expected to complete a SPAC listing in the first quarter of that year.
Note: SPAC, valuation, revenue, store-count, and forward-looking figures above are historical figures from the February 7, 2022 source article.