BRC (NYSE:BRCC), the parent company of Black Rifle Coffee, said third-quarter revenue increased 7.3% year over year to $108 million as growth in wholesale and direct-to-consumer channels helped offset continuing pressure in ready-to-drink coffee.
Chief Executive Officer Chris Mondzelewski said the company’s packaged coffee business continued to gain market share, driven by wider distribution and retail sales growth that exceeded the broader category. He also introduced “Project Core,” a multiyear initiative designed to focus resources on the company’s core coffee business, simplify operations and improve profitability, cash flow and capital efficiency.
Packaged Coffee Gains Share as Distribution Expands
According to Nielsen data cited by management, Black Rifle packaged coffee sales rose 19.4% during the third quarter, compared with 2% growth for the category. Over the trailing 52 weeks, the company’s packaged coffee retail sales increased 28.9%, versus category growth of 9.7%.
The company’s bagged coffee share in Nielsen’s total U.S. multi-outlet universe rose about 65 basis points from the prior year to 3.4%, while pod share increased nearly 30 basis points to 2.2%. Packaged coffee distribution reached 58.7% ACV, up more than 4.5 percentage points from a year earlier and about 2 points from the second quarter.
In grocery, distribution increased more than 6 percentage points year over year to 54%. Stores carrying Black Rifle products stocked roughly six items on average, compared with just over five items a year earlier, reflecting the company’s “land-and-expand” retail strategy.
Mondzelewski said packaged coffee unit sales increased 12.8% over the latest 52 weeks despite pressure on broader category volumes. He said the growth reflects consumers buying more of the company’s products rather than only higher pricing.
Wholesale revenue rose 8.1% in the quarter, aided by the company’s entry into the dollar channel, where pack-size innovation expanded distribution across 19,000 locations. Grocery revenue increased more than 50%, including chainwide distribution at a large Texas-based regional grocer.
Direct-to-consumer revenue increased 8.5%, led by about 65% growth in third-party marketplaces. Subscription revenue declined, while the company’s divestiture of a non-core brand also affected reported results. Excluding the divested brand, DTC revenue increased 12.3%.
Profitability Improves, Though Tariff Refund Lifted Margin
Third-quarter gross margin was 37.1%, up 25 basis points from the prior year. The result included a 325-basis-point, or $3.5 million, benefit from a refund of previously paid tariffs. Pricing and green coffee cost inflation had a neutral impact during the quarter, according to Chief Financial Officer Matt Amigh.
Productivity gains, including lower fulfillment costs following a logistics transition, partly offset the mix effect from faster growth in lower-margin channels such as third-party marketplaces. However, increased trade spending and higher freight and fuel costs reduced margin by 80 basis points.
The company said its 2026 green coffee requirements are fully covered and that it has secured more than 90% of expected 2027 volume at prices below its 2026 contracted levels.
Operating expenses increased to $47.6 million from $36.6 million a year earlier, primarily because of $11.7 million in non-cash impairment charges tied to Project Core. Excluding depreciation, amortization and items included in the adjusted EBITDA reconciliation, operating expenses rose 4.1% to $31 million, a slower rate than revenue growth.
Marketing expense increased 18% to $10.3 million as the company invested in performance media, content, influencers and programming related to America’s 250th anniversary. Adjusted EBITDA rose 12.3% to $9.5 million, while adjusted EBITDA margin expanded 40 basis points to 8.8%.
Year-to-date free cash flow was $8.8 million, compared with a $4.1 million use of cash in the previous-year period. The company ended the quarter with $9.2 million in cash, $35 million in debt and approximately $50 million of available revolving-credit capacity.
Project Core Includes Facility Sale, Outpost Closures
Under Project Core, BRC is emphasizing bags and pods while applying greater discipline to trade spending, product costs, overhead and investment in non-core operations. Mondzelewski said the company will continue to participate in ready-to-drink coffee but will focus investment on areas with the highest expected returns as the RTD category remains challenged.
The company signed a definitive agreement to sell its Manchester, Tennessee roasting facility to manufacturing partner Cascade Coffee for $10 million in cash at closing and a $7 million seller note due in 12 months. BRC plans to use $8.6 million of the upfront proceeds to reduce its term loan.
Cascade will retain the facility’s employees and operate the plant under a long-term supply agreement with BRC. Amigh said the arrangement is expected to reduce production costs and improve working capital beginning in 2027.
- BRC is closing 12 company-operated Outpost locations and retaining five, with future expansion expected to rely primarily on franchising.
- The company divested Grounds & Hounds, a non-core direct-to-consumer brand that generated about $6.5 million in trailing-12-month revenue.
- The divestiture and Outpost closures are expected to create a roughly $3 million fourth-quarter revenue headwind compared with the prior year.
- Once completed, the Outpost closures are expected to reduce annualized revenue by about $8 million to $10 million while improving profitability by eliminating losses at underperforming locations.
BRC exited the quarter with approximately 425 employees and expects to have about 260 employees by early 2027, largely reflecting the Manchester employee transition to Cascade and the Outpost closures.
Company Reaffirms Full-Year Outlook
BRC reaffirmed its 2026 outlook for at least 8% revenue growth, or approximately $430 million, and at least 35% adjusted EBITDA growth, or about $29 million. Revenue increased 14% through the first nine months of the year, while adjusted EBITDA nearly doubled, management said.
For the fourth quarter, the company expects gross margin of about 34%, down from its approximately 36% expectation in August. The revised quarterly margin outlook reflects increased holiday trade investment and higher transportation costs, partly offset by fulfillment efficiencies. The tariff refund was not included in the company’s prior outlook and helps support its unchanged full-year guidance.
Management said it expects to provide 2027 guidance when it reports fourth-quarter results. Amigh said the company’s objective is for earnings, margins and free cash flow to grow faster than revenue as Project Core advances.
About BRC (NYSE:BRCC)
Black Rifle Coffee Company (NYSE: BRCC) is a veteran-founded coffee and lifestyle company focused on producing, marketing and selling premium coffee products. Its offerings include whole-bean and ground coffee, single-serve options, ready-to-drink beverages, tea, brewing equipment, apparel and other branded merchandise.
The company distributes its products through direct-to-consumer channels, including its online store and coffee subscription programs, as well as wholesale and retail partners.
