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Black Rifle Coffee Company (BRCC) is a veteran-founded coffee company. The company was founded in 2014 by Evan Hafer, a Green Beret. BRCC is a mission-focused company committed to supporting veterans, active-duty military, and first responders. BRCC has targeted the $28B coffee category as its serviceable addressable market. Our military is the most respected institution in the country according to Gallup polls. Veterans are 7% of the population while the active-duty military is less than 0.5%. Half of the company’s employees are veterans. BRCC also gives preference to veteran-owned businesses as vendors and suppliers. The company's three-pronged growth strategy is driving 30%+ top-line growth.
BRCC is merging with Silver Box Engaged Merger Corp. (SBEA), a SPAC. The merger is expected to be completed in the first half of Q1. With $300M of commitments from investors, there is good visibility of SBEA de-SPACing in Q1.
The investment themes for our call are as follows:
Financials – We see asymmetric risk/reward with the shares trading near $10. We assign a high probability to the de-SPAC of SBEA due to the financial commitments of investors. Between the PIPE/backstop and $100M committed by Engaged Capital, BRCC will have $225M on its balance sheet when the transaction is closed. The founders of Black Rifle Coffee Company, existing shareholders, SPAC sponsors, and new investors’ interests are aligned with earnouts and shares subject to cancellation based upon share price performance. At $10 per share, the market capitalization is $1.9B. SBEA shareholders will own up to 18% of the company as seen in the following chart. The projected 2023 EV/Sales of 4.0x is high relative to most mature consumer brands but below most high growth consumer brands that have gone public recently, including BROS, OTLY, SG, CELH, YETI, WRBY, PTLO, BYND, ZVIA, NAPA, TOST, and DASH.
