- Black Rifle Coffee (BRCC) has an NPS score that rivals Starbucks (SBUX).
- Its other social media metrics show good engagement as well.
- The company is leveraging its brand to expand its RTD business.
When I last wrote about Black Rifle Coffee (NYSE:BRCC) company, I was concerned. I liked Black Rifle as a business. In my opinion, it was a compelling investment thesis as it carved out a specific niche in the massive coffee drinking market. However, I expressed concerns that the macro environment may not be conducive for high-growth plays like BRCC stock.
Just my luck, BRCC went on a massive run-up since my last article. Turns out $17 was the dip I had been waiting for. BRCC stock rallied to a high of $32 – close to doubling its stock price.
In this article, I examine why BRCC stock could rally despite the negative sentiment toward high growth stocks.
| BRCC | BRC Inc. | $18.33 |
Black Rifle Coffee’s Brand Is Unrivaled
As alluded to in my previous article, Black Rifle’s strength isn’t in its coffee but in its brand. Now, this is true to an extent for all consumer-facing products. Starbucks (NASDAQ:SBUX) is one of the most well-recognized brands in the world. However, I think the brand engagement Black Rifle enjoys puts it at par with some of the largest consumer brands.
In fact, Black Rifle has a Net Promoter Score (NPS) of 78. This score is slightly higher than Starbucks’ Net Promoter score of 77 and blows Dunkin’s score of 36 out of the water. In simple terms, NPS is a customer loyalty metric that captures a customer’s willingness to recommend a product or service to their social circle. It’s a good measure of engagement and enthusiasm in a brand as only exceptional brands tend to be recommended.
Black Rifle’s other metrics of customer satisfaction are also telling a similar story. The company had more than 3.4 billion Social Media impressions. Its coffee club had a monthly churn of only 3-4%. A number that would put a lot of SaaS companies to shame.
Ready-to-Drink Business Can Expand Rapidly
The company’s high NPS score means that its brand is strong enough to grab significant market share from incumbents. The company estimates that it has a total addressable market of $28 billion. This is more than half of the total U.S. coffee market.
A strong brand allows the company to scale and expand. This is because there wouldn’t be as much difficulty in attracting or retaining customers. Now with the infusion of capital from the special purpose acquisition company (SPAC) deal, this rapid growth could be closer to reality.
The demand for its products is so great that the company has had difficulty meeting it. The company saw huge unanticipated demand for its ready-to-drink (RTD) coffee. Black Rifle is now looking at partnering with several co-manufacturers to further expand its capacity.
According to the latest earnings call, the company’s ready-to-drink business has grown to be a top-four brand in convenience stores. The RTD segment currently has four coffee products and is available at 42,000 locations across the US. This translates to about 25% penetration in convenience stores. Black Rifle plans to further expand its product offering and be available at 75,000 locations by 2022.
Final Verdict on BRCC Stock
I mentioned previously that while I liked BRCC stock, I did not think the environment is suitable for high-growth names. Maybe investors rushing into BRCC stock think it could buck the trend.
After all, it is a coffee company and not a tech play. Coffee is a tangible product and companies with strong brands can withstand inflationary pressures. Of course, Black Rifle is still in the early stages. Execution of these growth plans will be key. However, I think investors looking for a high-growth consumer investment should consider BRCC stock.
On the date of publication, Joseph Nograles 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.
