Over the years, Starbucks (NASDAQ:SBUX) has provided outstanding returns to its long-term shareholders. Knowing this, some folks might try to replicate those gains with SilverBox Engaged Merger (NASDAQ:SBEA) as SBEA stock is still relatively inexpensive.
On Nov. 2, 2021, SilverBox Engaged Merger, announced that it was merging with Black Rifle Coffee. Around that time, a New York Times article asked, “Can the Black Rifle Coffee Company Become the Starbucks of the Right?”
Think about it: Starbucks doesn’t just offer a cup of coffee. It also provides a brand and an attitude. The same thing could be said about Black Rifle Coffee – though the brand and attitude of that company are decidedly different from those of Starbucks.
Admittedly, SilverBox Engaged Merger’s investors haven’t enjoyed Starbucks-like returns yet. However, this might represent a ground-floor opportunity as Black Rifle is a truly unique business.
A Closer Look at SBEA Stock
Like many special purpose acquisition company (SPAC) stocks, SBEA stock clung to the $10 area before jumping after the shell company’s merger announcement.
When the stock shot up to $15 in November of 2021, the sentiment was bullish and $20 seemed like a done deal. There are no done deals on Wall Street, however, and the share price quickly pulled back to $10.
Since that time, SBEA stock has stayed near $10, which is undoubtedly frustrating for some long-term investors. Wasn’t this supposed to be the “next Starbucks”?
Patience is definitely required here. On Jan. 13, 2022, SilverBox Engaged Merger announced a meeting date of Feb. 3 to approve the proposed business combination with Black Rifle’s parent company, Authentic Brands.
That event might catalyze SBEA stock and push it closer to $15. Beyond that, the investors should consider Black Rifle’s long-term value proposition as a business with a strong focus in a niche market.
A Different Kind of Coffee Shop
Founded in 2014 by Green Beret Evan Hafer, Black Rifle Coffee can be described as a conservative-leaning, patriotic company. It is committed to supporting America’s veterans, active-duty military and first responders.
There’s also a focus on guns, as the company’s name would suggest. As a Wall Street Journal article explains, Black Rifle Coffee “sells pricier coffee and firearms-themed products such as its AK-47 Espresso Blend.” The company also sells branded apparel.
Along with all of that, Black Rifle is committed to giving back to the community. The company estimated that in 2021, over $1.2 million would be given back to charitable organizations, and more than $3 million worth of coffee would be donated to military and first-responder units.
Since 18.5 million veterans comprise 7% of U.S. adult population, SBEA stockholders can envision a loyal niche following for Black Rifle.
Building the Brand
It won’t be easy to compete against Starbucks, but Black Rifle is taking steps to carve out its share of the U.S. coffee-chain market.
For instance, Black Rifle recently signed an exclusive sponsorship agreement with action-sports icon Travis Pastrana.
Like Black Rife Coffee, Pastrana is all about attitude, patriotism and community service.
“They truly are America’s Coffee. Doing great things for local communities while pushing the envelope of entertainment. Sleep when you’re dead, drink coffee now…this is going to be an amazing ride!” he declared.
The company’s long-term goal is to hire 10,000 veterans. Over time, it’s conceivable that Black Rifle will be America’s conservative alternative to Starbucks, which has become mainstream.
Moreover, Black Rifle’s estimated 2021 revenues of $230 million indicate 40% growth compared to 2020’s revenues. Hence, it seems that the company’s brand-building efforts are working, so far.
The Bottom Line
You probably won’t get to buy shares of Starbucks at $10, but maybe you’ll be able to own an early stake in the “next Starbucks” at that price.
It’s a speculative wager, I’ll admit. There’s no guarantee that Black Rifle Coffee will continue to build its brand and customer base.
Still, it’s interesting to consider the future prospects of a conservative answer to Starbucks. If you’re on board with this concept, then feel free to consider a small position in SBEA stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
