BRCC Q4 2024: Energy ACV tops 17%, aims for 20–30% by year-end
- Robust Energy Distribution Ramp: Management highlighted that Energy is already exceeding 17% ACV and is on track toward a 20%-30% ACV target for the year, indicating strong initial traction and significant growth potential in a fast-developing category.
- Aggressive, Timed Marketing Strategy for Energy: The firm plans to ramp up marketing spend starting in March with a heavy push during the summer season. This strategic focus, coupled with a partnership with Keurig Dr Pepper to leverage convenience store channels, is designed to efficiently drive consumer trial and accelerate adoption of the Energy product.
- Stabilization and Strategic Focus in DTC: The discussion noted a balancing of subscriber gains and losses, signaling stabilization in the DTC segment. This approach, combined with ongoing strong performance from their largest customer (which grew 8% YoY), supports a solid foundation and diverse revenue channels contributing to a bullish outlook.
- DTC Business Challenges: The direct-to-consumer segment experienced a 14% revenue decline in 2024 and management emphasized that while they are now seeing subscriber stabilization, there remains uncertainty around fully reversing the downward trend and rebalancing resource allocation away from DTC.
- Energy Launch Execution Risk: The new Energy product, although off to an early start with 17% ACV and ambitions of reaching 20%–30% ACV, faces execution risks. Challenges include achieving a smooth distribution ramp in priority markets and reliance on partner performance, which could delay expected revenue contributions.
- Margin Pressure from Cost Inflation and Trade Investments: Despite efforts to lock in pricing, the company is contending with significant green coffee inflation and increased trade/marketing spending for new initiatives, which could continue to pressure margins.
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Energy Distribution
Q: Expected energy drink ACV at year-end?
A: Management forecasts an exit between 20–30% ACV, already exceeding 17%, driven by a steady weekly ramp-up in distribution. -
Price Outlook
Q: Plan price hikes for bagged coffee?
A: They have no increases in current guidance, though potential price adjustments could add upside amid rising commodity costs. -
Largest Customer
Q: Trends in largest customer's orders?
A: Revenue from the largest customer grew 8% YoY despite some flattening, underscoring its role as a key revenue driver. -
DTC Stability
Q: How is the DTC channel stabilizing?
A: Management is focusing on subscriptions rather than one-time buyers, with subscriber counts now stable. -
Energy Channel Ramp
Q: How will energy distribution roll out across channels?
A: The ramp will target convenience stores in priority markets initially, then expand into mass channels as summer accelerates growth. -
Energy Marketing
Q: When will energy marketing spend ramp up?
A: Marketing efforts will start in March and intensify during the peak summer period. -
Barter Impact
Q: How will barter transactions affect P&L?
A: Media credits from barter reduce cash marketing outlays, making expenditure more efficient while affecting noncash P&L lines. -
Aluminum Exposure
Q: Are you hedging aluminum cost exposure?
A: No hedging programs are in place since aluminum accounts for a small, low double-digit portion of total COGS. -
Expense Jump
Q: What explains the expense line jump?
A: A one-time noncash impairment of underperforming coffee shop CapEx caused the increase, with no expected ongoing impact. -
Product Innovation
Q: Any new innovations for coffee and RTD?
A: They are actively developing new product offerings in both coffee and RTD segments to further drive growth.
Research analysts covering BRC.