Is This New Stock the Chick-fil-A of Coffee?

Chick-fil-A is a fast food brand and a private company. Famously closed on Sunday, the company still has higher sales volume than its peers despite the disadvantage of being open one less day.

Not all consumers are fans of the brand. But those who are fans are extremely loyal. And this loyalty and fanaticism has made Chick-fil-A extremely successful. 

Black Rifle Coffee Company is going public via a special purpose acquisition company (SPAC) called SilverBox Engaged Merger Corp I (NASDAQ:SBEA). In this video from Motley Fool Backstage Pass, recorded on Dec. 6, Fool contributor Jon Quast explains to fellow contributors Danny Vena and Jason Hall why this coffee newcomer reminds him a lot of the successful Chick-fil-A brand.

Jon Quast: Black Rifle Coffee Company. Now, before the show, I believe Danny, if I’m not mistaken, you said that you hadn’t heard of this company before, is that correct?

Danny Vena: I hadn’t heard that they were going public. I might have heard of the company sometime over the last couple of months, but certainly it wasn’t before it was announced that it was going to be a SPAC target.

Quast: Yeah, that was interesting to me. I think this is going to highlight some of the, perhaps, demographic differences where this company is right now and where I’m located and where you’re located and why maybe I’ve heard a bit before and you hadn’t.

But this is a company that is going public via a special purpose acquisition company called SilverBox Engaged Merger Corp, ticker SBEA. Once the merger is complete, I believe that the proposed ticker symbol is going to be BRCC, Black Rifle Coffee Company.

This is a new coffee company founded in 2014 by a Green Beret, Evan Hafer, who was a veteran of the Afghanistan conflict. He got into this whole roasting his own coffee beans, was very popular, wound up launch in the coffee company from it. I’m going to say something pretty bold here right at the outset and say that I think that this company can be the Chick-fil-A of coffee. I’m going to explain what I mean in time, but when you think Chick-fil-A, this is a company that has higher unit volumes than any other fast food restaurant in the United States, and it’s open one less day than its competitors. The reason for that is it has extremely loyal customers. There are people who are just fanatical about Chick-fil-A. From a food perspective, yeah, it’s good. Do other fast food restaurants have stuff that is on par with Chick-fil-A? I know it is heresy to stay, but I will say that from a food standard perspective, I think that it’s comparable, but there are people who are extremely loyal to Chick-fil-A. Chick-fil-A on top of that is extremely…

Jason Hall: You might want to check your Twitter after this show, Jon, you might…

Quast: Exactly, I’m going to get at-ed. [laughs] There are going to be people coming after me. I like Chick-fil-A, I’m not saying I don’t, but anyway. Operationally, they’re also incredible. The drive-thru Chick-fil-A, it’s ridiculous.

Hall: Everything we know about it as a private company, it is incredible what they do.

Quast: Exactly, but they do have that incredible loyalty from their customers. Their top loyal customers are fanatical about the brand, and I think that Black Rifle Coffee Company can be that as well.

Real quick, the mission is, says this, “Black Rifle Coffee serves premium coffee in content to active military, veterans, first-responders and those who love America.” What is interesting about this to me is that according here to the labor statistics that the company shares, 18.5 million people are veterans, comprised 7% of the U.S. adult population. As I thought about my own family, my nuclear family, and my wife’s nuclear family, we have six veterans. When you think about that, everybody knows a veteran and everybody has veterans in their family pretty much in this country. That is something that can engender a lot of brand loyalty. Their survey says that 84% of customers say they support Black Rifle Coffee Company because of their support of veterans. Black Rifle Coffee Company donates to charitable causes that have a veteran focus, they’re also planning to hire around 10,000 veterans as employees long term.

I’m going to stop here for a second. I just want to say, 84% of revenue currently comes from a direct-to-consumer business. You can subscribe and get coffee delivered to your home. That’s 84% of the business right now, 270,000 active subscriptions. That’s up 2020. Sixteen percent comes from Texas. Anyway, I don’t know if either of you have any thoughts here before I jump into growth.

Hall: Yeah. I’m throwing the ticker right now in Jon, correct me if I’m wrong, but it’s going public via SPAC with the ticker that it will trade under after the merger is BRCC, but right now, the ticker of the blank check company is S, B is in Bravo, E as in Edgar, A as in Apple, right?

Quast: One hundred percent.

Hall: Okay, I’m dropping that in right now.

Quast: Awesome.

Hall: Yeah, it’s really interesting. I just wanted to just weigh in quickly that, the thing is that for years, Starbucks is like the dominant brand in this category more broadly. For years, the thing that people have said, you can go back and look at Dunkin’, and then McDonald’s, etc. Then in China, with, I can’t remember the name of the Chinese, Luckin Coffee, which we should be call it Un-luckin Coffee now. The idea was that it was going to get undercut on prices. Always the story, and what we found is that that brand loyalty with Starbucks is incredibly high and repeat customers are key, and building that loyalty and establishing the people that come in and they order their drink. The people that work there no then when they come in, and they start making the drink because they know that’s what that person is going to get.

To me, everything you’ve said, Jon, it sounds like this is the same thing. This is a brand that engenders loyalty from its customers.

Jon Quast: That’s really important when you’re a direct-to-consumer business, those customers better be loyal.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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