Black Riffle Coffee Company
Aharon Cohen-Mohliver ©, London Business School*
*The case is intended for the final exam for CD02 SPR 2023 and is not to be shared or reproduced
Former Green Beret Evan Hafer's passion for coffee led him to start roasting and selling small batches of
"Freedom Roast" through a friend's apparel website. As demand grew, he launched Black Rifle Coffee
Company, which now owns two roasting facilities and sells primarily in-house roasted coffee beans with
a high 83-point rating. Hafer distinguished his brand by catering to consumers with conservative and
libertarian values, as well as pro-gun and pro-military. The company's mission is to serve coffee and
culture to people who love America, with core values centered around supporting military servers,
veterans, and first responders. The brand has attracted a large community of supporters through
creative and controversial marketing campaigns, such as a 2017 ad campaign promising to "hire 10,000
veterans" in response to Starbucks' promise to "hire 10,000 refugees."
By the end of 2022, BRCC opened dozens of branches, accumulated 278,000 active subscribers (65% of
which report buying only from BRCC), and sold its products in over 4,400 Walmart stores.1
Its revenues
grew from $82m in 2019 to $164m in 2020 and $233m in 2021.2
Hafer, who was very excited about the
high rate of growth and the brand’s success decided to take advantage of the phenomenal market
conditions of 2021 and take the company public via SPAC. In November 2021, the company merged with
a Special-purpose acquisition company with a valuation of $1.7b. Hafer, who saw the company reaching
a market valuation of ~$5b but then plummeting down by 80% to ~$1b, started worrying that the
company's fast growth impeded its profits. While he was able to generate net profits of $4m in 2020, the
company lost $14m in 2021 and $78m in the first 3 quarters of 2022, leaving him and many of the
investors worried that the company would not be able to translate its popularity into profits.
The coffee Industry in the United States:
The coffee industry in the United States is a vast and intricate market, encompassing numerous players
involved in the production, distribution, and sale of coffee products. The US is one of the largest
coffee-consuming countries globally, with Americans consuming over 400 million cups of coffee per day.
The US retail coffee market can be divided into two main segments. Firstly, there are coffee shops and
restaurants that sell coffee beverages to consumers, and secondly, there are companies that sell coffee
products for home consumption. While only 21% of coffee is consumed outside of the home,
out-of-home coffee accounts for 89% of the spending on coffee in the US. The out-of-home segment of
the market is dominated by well-known companies such as Starbucks, Dunkin' Donuts, and Peet's Coffee,
while new players such as Blue Bottle Coffee have entered the market with significant success. On the
2
https://www.macrotrends.net/stocks/charts/BRCC/brc/revenue
1
Latest 10Q,
https://ir.blackriflecoffee.com/sec-filings/all-sec-filings/content/0001104659-23-002093/0001104659-23-00
2093.pdf
https://ir.blackriflecoffee.com/news-events/press-releases/detail/44/new-black-rifle-coffee-company-outpo
st-opens-in-spanish-fork#:~:text=The%20company%20serves%20nearly%20300%2C000,visit%20www.bl
ackriflecoffee.com.

other hand, the at-home coffee market includes brands such as Folgers, Green Mountain Coffee Roasters
(Keurig), and Lavazza.
In recent years, there has been a growing trend towards specialty coffee in the US, with consumers
willing to pay a premium for high-quality and ethically sourced beans. According to the National Coffee
Association, in 2021, specialty coffee accounted for 71% of all coffee consumed in the US. Many
consumers seek to buy from smaller, independent coffee roasters, who offer unique and exclusive blends
and flavors, and are willing to pay a premium for this. This trend has led to the emergence of a new
generation of specialty coffee roasters that are using the direct-to-consumer model to reach customers
directly and develop a loyal customer base. According to a survey conducted by Square, a financial
services company, 77% of specialty coffee consumers in the US prefer to buy coffee directly from the
roaster.
BRCC’s Business Model
As a digital-native brand, Black Rifle Coffee Company's business model is primarily based on
omnichannel sales, reaching customers through three channels: DTC, Wholesale, and Outposts. The DTC
channel includes the company’s website and third-party digital marketplaces. The wholesale channel
includes convenience, grocery, drug, and mass merchandise stores, as well as outdoor, do-it-yourself
("DIY"), and lifestyle stores. BRCC's product mix includes three lines of products with the primary one
being specialty coffee products such as coffee beans, ground coffee, coffee pods (called “rounds”), and
ready-to-drink coffee cans. The two other lines of products include BRCC apparel and coffee-related
equipment such as mugs and coffee grinders.
To support its DTC business model, BRCC has developed a strong branding and marketing strategy, which
emphasizes its conservative and pro-military values. As part of this strategy, the company focuses on
community and veteran support. For example, it has a program called "9 Line" that allows veterans to
get a portion of the company’s revenue. This helps to create a sense of community and loyalty among
customers, which can drive repeat business and word-of-mouth marketing.

Exhibit 1. BRCC Balance Sheet
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands Dec. 31, 2021 Dec. 31, 2020
Current assets:
Cash and cash equivalents $18,334 $35,232
Accounts receivable, net 7,442 3,629
Inventories 20,872 16,041
Prepaid expenses and other current assets 6,377 2,186
Total current assets 53,025 57,088
Property and equipment, net 31,114 14,714
Identifiable intangibles, net 167 191
Restricted cash 400
Other 2,776 149
Total assets 87,082 72,542
Current liabilities:
Accounts payable 17,387 11,527
Accrued liabilities 22,233 16,063
Deferred revenue and gift card liability 7,334 4,615
Current maturities of long-term debt, net 11,979 866
Current maturities of capital lease obligations 85 469
Total current liabilities 59,018 33,540
Non-current liabilities:
Long-term debt, net 22,712 12,170
Capital lease obligations, net of current maturities 228 727
Other non-current liabilities 334
Total non-current liabilities 23,274 12,897
Total liabilities 82,292 46,437
Commitments and Contingencies:
Series A preferred equity, less issuance costs 154,281 128,983

Members' deficit -149,491 -102,878
Total liabilities, Series A preferred units and members'
deficit
$87,082 $72,542
Exhibit 2. BRCC Income Statement
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in
Thousands
12 Months Ended
Dec. 31,
2021
Dec. 31,
2020
Dec. 31,
2019
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue, net $233,101 $163,909 $82,128
% YoY growth 42.2% 99.6%
Cost of goods sold 143,414 94,500 46,423
% COGS margin 61.5% 57.7% 56.5%
Gross profit 89,687 69,409 35,705
% gross margin 38.5% 42.3% 43.5%
Operating expenses
Marketing and advertising 36,358 25,513 13,349
Salaries, wages and benefits 38,746 24,194 13,129
General and administrative 26,162 13,922 9,343
Total operating expenses 101,266 63,629 35,821
Income (loss) from operations -11,579 5,780 -116
% Operating Margin -5.0% 3.5% -0.1%
Other income (expense):
Interest expense -2,033 -1,047 -733
Other income (expense), net -55 -227 91
Total other expense, net -2,088 -1,274 -642
Earnings (loss) before income taxes -13,667 4,506 -758
State income tax expense 178 185 14
Net income (loss) -$13,845 $4,321 -$772

Exhibit 3. BRCC Revenue By Sales Channel
Three Months Ended September
30
Nine Months Ended September
30
2022 2021 2022 2021
Direct to Consumer
("DTC") 38,082 37,512 113,376 115,656
% of sales 50.44% 62.41% 54.59% 71.72%
Wholesale 32,247 19,459 78,173 38,608
% of sales 42.71% 32.37% 37.64% 23.94%
Outpost 5,165 3,135 16,146 6,989
% of sales 6.84% 5.22% 7.77% 4.33%
Total net sales 75,494 60,106 207,695 161,253
Source: 10-Q - 11/10/2022 - Black Rifle Coffee Company
Exhibit 4. BRCC COGS and Operating Expenses
Three Months Ended September 30, ($ in thousands)
2022 2021 $ Change % Change
Revenue, net 75,494 60,106 15,388 26%
Cost of goods sold 51,549 36,043 15,506 43%
Total operating expenses 39,563 27,209 12,354 45%
Source: 10-Q - 11/10/2022 - Black Rifle Coffee Company