Black Rifle Coffee Company Stock Is Backed by Values But Maybe Not Scale


  • Black Rifle Coffee Company (BRCC) stock may be an ideological favorite for contrarians.
  • While enticing, Black Rifle Coffee must face the same realities as its industry.
  • Black Rifle has values but might be lacking in scale.
Exterior of Black Rifle Coffee Company Store. BRCC stock.

Source: YuniqueB / Shutterstock

The folks behind Black Rifle Coffee Company (NYSE:BRCC) have opinions and while that’s part of the company’s charm, it also needs scale to meet the challenges both of the moment and the future. Therefore, however you feel about BRCC stock on a personal level, you’ve got to be willing to assess the investment objectively to determine how you want to proceed.

I’ll tell you this much right off the bat. If you have similar belief systems with Black Rifle Coffee CEO Evan Hafer, BRCC stock might be an easy acquisition. Much of the bullish sentiment for the underlying business is its contrarian value system. BRCC proudly supports veterans, active-duty service members and first responders. Additionally, Hafer and his team aren’t afraid to get political.

As my colleague Faizan Farooque pointed out, Hafer “told The New York Times he has voted for Trump in the past. The company has positioned itself as pro-law enforcement. These are strong stances at a time when companies generally want to play it safe, or go with a more millennial-friendly marketing strategy.”

Also, BRCC stock has become somewhat of an ideological rival to Starbucks (NASDAQ:SBUX). Black Rifle “gained national attention when it pledged to hire 10,000 veterans after Starbucks promised to hire 10,000 refugees over five years.”

A political aura surrounds BRCC stock — and that can be a very powerful catalyst. But the question is, is it powerful enough?

Ticker Company Current Price
BRCC Black Rifle Coffee Company $23.14

BRCC Stock Must Meet Tough Market Conditions

Black Rifle recently announced “the opening of a new coffee shop in Woodstock, Georgia.” Per the company’s press release, it’s BRCC’s third brick-and-mortar store in the state.

“The success of our physical locations is a direct result of our brand,” said BRCC CEO Evan Hafer. “People are making choices—whether it’s a coffee shop, a place to meet, or somewhere to stop for a treat—based on where their values are reflected. We are dedicated to serving premium coffee and culture at this Woodstock location, and every Black Rifle Coffee coffee shop across the country.”

At a time when wider social forces incentivize playing it safe regarding ideological beliefs, I can appreciate the shock to the system that Hafer and his company provides. It’s impactful and undoubtedly reaches the firm’s core audience well.

At the end of the day, however, if the economics don’t work, the business will come under pressure.

As I’ve mentioned before across various platforms, consumer prices are rising sharply. Americans were already under the gun (no pun intended) before the Russian invasion of Ukraine. They’re much deeper into it now, with the rise in energy costs negatively impacting supply chains.

Since discretionary purchases are the easiest to jettison from the household budget, BRCC stock seems rather risky.

Competing Against the Scaling Monster

If you take a look at Black Rifle’s coffee bags and compare them to Starbucks or other well-known labels, you’ll notice that the upstart is, on a pound-for-pound basis, more expensive than their rivals. Of course, that’s a major no-no when you’re faced with rising inflation.

At the same time, I’m not going to blast BRCC stock for it because it’s completely understandable. The underlying company is new to the business (at least relatively new). Thus, it doesn’t have the scale to compete with the alpha dogs, at least not yet.

However, it’s not just inflation that’s making the decision to buy BRCC stock difficult. It’s also mother nature. According to a CNN report last year, atrocious weather impacting coffee bean growers has devastated production. Over the long run, if conditions don’t dramatically improve, businesses in the coffee supply chain will have to raise prices.

So far, Starbucks and its ilk have been able to avoid passing costs down to the consumer, in part because of their superior economies of scale and greater financial resources. But combined with inflationary forces, climate change may force even these mainstream labels into jacking up prices.

If Starbucks succumbs to that, you know that the situation will impact BRCC stock severely.

Be Objective About BRCC Stock

At the end of the day, you can choose to support BRCC stock because its underlying values matches yours. That’s perfectly fine. However, if inflationary and climate-change-related disruptions hurt the coffee industry, you’ve got to imagine it will hurt the lesser-capitalized businesses first before the pain really hits the top dogs.

While Black Rifle may be an alpha in the ideological realm, its math doesn’t quite match that of its mainstream competitors. Therefore, a cautious approach is warranted.

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 Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC