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:
SilverBox Engaged Merger Corp I (NASDAQ: SBEA) is a special purpose acquisition company (SPAC) set to merge with Black Rifle Coffee Company. The company roasts coffee in the U.S. and sells it online, through its chain, and in retail outlets nationally.
Black Rifle Coffee Company 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 1.9 million cumulative customers, and its subscription business has 270,000 subscribers. On top of this, it has 9 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 seven coffee stores. It reported 67% revenue growth in 2020, reaching $163 million, and is forecasting 40% growth in 2021. BRCC will also get a cash injection from the SPAC deal, which it will use to grow its store count to 78 by 2023. It will also use this cash to focus on its ready to drink segment,
BRCC is operating at a loss which is forecast to be $12.1 million in 2021. The company has performed 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 500 shops across 11 states.
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 49.8% to $129.8 million in Q3 2021.
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 112 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 future.
Dutch Bros reported a loss in Q3 of $117.1 million compared to a profit the year prior, and this is 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?
Dutch Bros appears to be a better buy today due to its proven business model, and as it continues to scale can provide colossal upside potential for investors.
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Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.