Perhaps a recent post on its “Coffee or Die” blog offering information about how foreign volunteers can join the Ukrainian resistance effort against the Russian invasion perfectly sums up Black Rifle Coffee Company (NYSE:BRCC). The concept — helping others in need — is inspiring. But the execution is where BRCC stock may have trouble.
Don’t get me wrong. In an ecosystem where unpopular speech is shunned and where a mistake 10 years ago can cost someone their job, the underlying business of BRCC stock attracts a large contrarian crowd. Just like volunteering for the cause of freedom in a foreign country, the principle resonates deeply regarding core attributes like courage and brotherhood.
Still, if volunteers don’t have military experience, a high possibility exists that they could be liabilities rather than assets. Hence, the clash between the idea of BRCC stock and the prospect of the business’ execution.
To me, Black Rifle Coffee Company faces the risk of adopting the challenges of Pinterest (NYSE:PINS) and Beyond Meat (NASDAQ:BYND), all in one stock. Therefore, investors should approach it with caution.
Ideology Could Pose a Problem for BRCC Stock
To provide a quick recap, Black Rifle Coffee Company is a premium coffee producer specializing in a distinct blend of quality products, conservative values and good ole fashioned patriotism, American style. In addition, the enterprise sells some nifty swag that this author might have to purchase.
I’ll say this much: the branding on this bad boy is top notch.
However, what is going to undoubtedly slow down some interested buyers of BRCC stock is the Pinterest problem. While the idea of Pinterest is intriguing, the platform caters overwhelmingly to women. That brings along some positives, such as female users being less prone to divisive and vitriolic talking points that could quickly derail an affected brand.
But on the other hand, catering to one demographic — it could be any cohort — may inhibit a company’s ability to expand its reach. It may be even worse with political or social ideologies.
Yes, according to a Gallup poll, most Americans (overwhelmingly so) are either conservative or moderate. Only 25% actually identify as liberal. However, the trend toward liberalism (17% in 1992 to 25% in 2020) is robustly positive. In contrast, moderate views have declined from 43% to 35% and conservative views have stayed the same at 36% over the aforementioned timeframe.
In other words, the core consumer base for Black Rifle Coffee may be waning while the ranks of those who probably don’t want anything to do with the brand are rising. Is that a viable business case for BRCC stock? I’m not sure, but you can see why some folks may be concerned.
Conservative Coffee Priced at Premium
Another company that has a great idea but questionable execution is Beyond Meat. On paper, it should be one of the great market ideas of our time. Millennials — basically the biggest consumer group in the U.S. — prefer healthier eating and sustainability principles. Nothing could be better for left-leaning young folks than plant-based meat.
I was a skeptic of the product at first. Having tried it, though, I can say that these plant-based protein products (I’ve tried Beyond and other brands) are surprisingly tasty. It’s just my opinion, everybody has one. But I can see why the proponents of BYND are passionate about the company.
But here’s the problem. Beyond products are crazy expensive on a percentage basis relative to the real thing. Fundamentally, that doesn’t quite make sense. Sustainable products should also be economically sustainable.
Well, BRCC stock may run into the same problem down the line (BYND is down 40% year-to-date, by the way). When you compare Black Rifle pricing to say competitor pricing from Starbucks (NASDAQ:SBUX), pound for pound, the former is much more expensive than the latter.
Now, I get the argument that drinking “liberal” coffee makes you less of a man and leads you to doing crazy things like voting for Democrats. But if the Democrats are offering coffee at 79 cents an ounce and Republicans (conservatives) are offering coffee at $1.25 an ounce, I don’t know if I can overlook the 58% pricing discrepancy, especially during a period of soaring consumer inflation.
Again, I like BRCC’s branding. I don’t know if I like it 58% more, though.
Great Brand, Not Sure About the Execution
To be sure, Black Rifle Coffee Company appeals strongly to conservative values. But it’s not all about politics, the coffee purveyor needs to deliver solid results. A cautionary take on BRCC stock is warranted once the infatuation period fades
Now trading at around $17 a share, it’s one of the few securities that went public via a reverse merger with a special purpose acquisition company that isn’t making people sick following the business combination.
But perhaps we should give it some time. SPACs are exciting at first but then their realities start to hit the wallet, just like the realities of BRCC stock may impose red ink on investors’ portfolios.
I see two major challenges moving forward. Frankly, conservative or conservative-friendly ideologies are waning based on actual polls, not anecdotal tales on the internet.
That’s a big concern for BRCC. And the other is the pricing. Under an inflationary environment, being the higher-priced competitor can be a real drag.
On the date of publication, Josh Enomoto 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.