What Is A Better Investment: Black Rifle Coffee Company or Dutch Bros?
In the crowded coffee market, we examine two unique and newly public companies with loyal customer bases and ask which is a better buy?
May 12, 2022

Coffee consumption has increased globally over the past decade, and in the U.S., roughly two-thirds of adults consume coffee daily. However, due to the pandemic, there have been changes in people's coffee consumption habits, and we ask which stock is a better investment today? 

Black Rifle Coffee Company: Bull v.s. Bear arguments:

Black Rifle Coffee Company (NYSE: BRCC) was co-founded in 2014 by army veterans and remains founder-led with Evan Hafer as the CEO. The army influence permeates throughout the business with a mission to serve premium coffee to "Active Military, Veterans, First Responders, and Those Who Love America". It also has a goal of hiring 10,000 veterans in the coming years.

The company has a loyal customer base with its subscription business having 285,000 subscribers. On top of this, it has 11.1 million followers on social media and high customer satisfaction rates with a net promoter score of 78, which is above the industry average.

The company has been "digital-first" but also sells wholesale and through its brick-and-mortar coffee stores known as 'Outposts.' It reported 35% year-over-year revenue growth in Q1 2022, reaching $65.8 million, and is forecasting total revenue of $315 million for 2022. BRCC has recently been expanding both is Outpost and ready-to-drink segments in an attempt to diversify its revenue streams.

BRCC is currently operating at a loss of $4.6 million for the most recent quarter. The company has performed relatively well to date, but increasing its store count creates an execution risk. Its military branding may also limit its potential internationally as it may not resonate with consumers in other markets.

Dutch Bros: Bull v.s. Bear arguments: 

Dutch Bros (NYSE: BROS) is an operator and franchise of coffee stores and, since its founding in 1992, has grown from one coffee cart to 538 shops across 12 states as of the beginning of 2022.

The company has had 14 years of positive same-store sales, and despite many coffee chains struggling in 2020, it benefitted from its drive-thru stores and efficient service. Its latest quarter was no different and revenue grew by 54% year-over-year to $152.2 million in Q1 2022.

Dutch Bros warm and friendly atmosphere is a crucial differentiator Co-founder Travis Boersma stated that "the most important thing for us was building customer loyalty". It has gained 1.6 million members on its rewards app in the first two months, demonstrating the loyalty of its customers who have called themselves the "Dutch Mafia". 

The company is expanding aggressively with 130 new stores expected to open in 2022 and is expected to be on the east coast of the U.S. in the next "three or four years". There is enormous upside potential as it expands with ambitions of hitting 4,000 stores in the next 10 to 15 years.

Dutch Bros reported a net loss in Q1 of $16.3 -- largely due to the increase in stock-based compensation due to its public offering but is something investors should keep an eye on. Dutch Bros also faces fierce competition from dominant players such as Starbucks and Dunkin'.

So, which stock is a better buy right now? 

Right now, Dutch Bros appears to be a better buy due to its proven business model, and as it continues to scale can provide colossal upside potential for investors. BRCC is certainly a company to keep your eye on though as it continues to diversify its revenue streams and expand rapidly.

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