Why Is Dutch Bros Stock Up Today?

Black Rifle Coffee Investors Should Consider These 2 Stocks Instead

With an injection of cash after the closure of its SPAC deal, we take a look at two competitors to the Black Rifle Coffee Company.

Black Rifle Coffee Company (BRCC) (NYSE: BRCC) is a coffee company co-founded in 2014 by army veterans, and its mission is to serve “premium coffee and content to active military veterans and those that love America”. It roasts and sells coffee online and through a growing number of retail stores. The company also has a large social media following and loyal customer base of 1.9 million cumulative customers with a high net promoter score of 78. 

After the recent closure of its SPAC deal with SilverBox Engaged Merger Corp I, we look at two competitors to Black Rifle Coffee company vying for market share. 

Starbucks:

Starbucks (NASDAQ: SBUX) is the largest coffee chain globally with approximately 34,000 stores and is arguably the biggest competitor to any coffee company. 

The company has continued to re-invent itself and dominate the coffee space in the U.S. and overseas, leading to record Q1 revenue in fiscal 2022 of $8.1 billion representing 19% growth year-over-year. It is also hugely profitable and reported a net income of $815.9 million. 

Starbucks’ sheer size provides an advantage that is arguably unrivaled amongst other players as it can impact trends in the space with seasonal drinks. It also has considerable pricing power due to its brand strength and customer loyalty. It now has 26.4 million Starbucks Rewards members, which drives customer engagement. 

Despite China being a nation that has predominantly consumed more tea than coffee, it is a significant part of Starbucks’ international growth plans. It is now Starbucks’ second-largest market and has opened 1,200 new stores in the region in the last two years, which should continue to fuel growth.

However, it continues to face disruptions due to COVID-19, which is likely to subside. Staffing challenges and inflation are likely to be greater challenges going forward that will impact Starbucks’ bottom line in particular. 

Dutch Bros:

Dutch Bros (NYSE: BROS) is a drive-through coffee company that began as a coffee machine on a pushcart and is relatively new to the public markets, having gone public in 2021.

Dutch Bros appeals to a younger audience and has a loyal customer base coined as the ‘Dutch Mafia’. It has 3.2 million registered users for its reward programme, and its brand arguably has greater appeal than BRCC. 

While BRCC and other coffee companies are expanding into cold brews, Dutch Bros generates a large portion of revenue from this segment. This has proven successful as it reported an 8.4% growth in same shop sales in 2021 and a 50% increase in revenue in Q3, reaching $130 million. 

The company is relatively small, with 538 locations across 12 states, and during the pandemic, the company thrived due to its business model, which was suited to social distancing and convenience. In 2022 it aims to open 125 new stores and intends to expand to the East coast in the coming years, likely encroaching on BRCC’s retail locations. 

Dutch Bros reported a significant net loss of $117 million in Q3. It faces intense competition from other players, and its expansion plans also create an execution risk.

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