Black Rifle Coffee (BRCC) Q3 2025: Wholesale Sales Up 9% as Distribution Expansion Powers Share Gains
Black Rifle Coffee’s Q3 performance underscores its pivot to wholesale-led growth, with distribution and velocity gains driving outperformance in a pressured coffee market. The company is leveraging disciplined retail expansion and cost controls to offset commodity and tariff headwinds, while digital stabilization and new product innovation set the stage for 2026. Management’s tone signals confidence in long-term guidance, but near-term caution around margin recovery and the energy drink rollout remains prudent as macro pressures persist.
Summary
- Wholesale-Led Growth Surpasses Category: Distribution and unit gains fueled retail sales outpacing the broader coffee market.
- Margin Recovery Faces Inflation and Tariffs: Cost pressures persist, but productivity initiatives and pricing partially offset gross margin headwinds.
- Disciplined Energy Expansion and Omnichannel Focus: Energy drink rollout remains targeted, while digital and outpost channels stabilize the brand’s omnichannel reach.
Performance Analysis
Black Rifle Coffee’s Q3 results highlight a decisive shift toward wholesale as the primary growth engine, with the segment delivering a 9% year-over-year increase after adjusting for prior period non-recurring items. This outpaces the total U.S. coffee category’s 13.2% growth, as the company’s retail sales surged 36.7% according to Nielsen data. Notably, growth was driven by unit gains rather than price increases, signaling genuine consumer demand rather than inflation-driven revenue.
The direct-to-consumer (DTC) segment declined 4% year-over-year, but underlying trends were stable when adjusting for loyalty reserve shifts and promotion timing. Outpost locations grew 6%, buoyed by higher franchise fees and improved merchandising. Gross margin fell 520 basis points to 36.9%, pressured by increased trade investment, green coffee inflation, and tariffs, but partially offset by productivity gains and favorable mix. Operating expenses declined 9% year-over-year, with headcount down 19% and marketing spend shifting toward higher-return tactics.
- Wholesale Velocity and Distribution: Grocery ACV (all commodity volume, a measure of shelf presence) rose six points to 48%, with total ACV across tracked channels at 54%.
- Ready-to-Drink (RTD) Resilience: RTD coffee sales grew 18% in grocery despite a 3.1% category decline; Black Rifle remains the #3 RTD brand in the U.S.
- Energy Drink Early Traction: Black Rifle Energy reached nearly 20,000 retail locations and 22% ACV, with disciplined expansion and targeted innovation.
Adjusted EBITDA margin improved 115 basis points to 8.4% of sales, as cost discipline and efficiency gains offset some margin pressure. The company generated $5.6 million in free cash flow and strengthened its balance sheet with a $40 million equity raise, retiring its revolver and improving liquidity.
Executive Commentary
"Our land and expand strategy continues to prove effective. We start with a focused set of SKUs to demonstrate performance and earn additional shelf space as we build retailer confidence... This combination of faster turns and expanding distribution is translating into stronger partnerships and continued shelf gains."
Chris Monzelewski, Chief Executive Officer
"Despite the gross margin pressure we faced, scale benefits from revenue growth and efficiency gains drove a 19% increase in adjusted EBITDA to 8.4% of sales, representing a 115 basis point improvement compared to the same quarter last year."
Matt Ami, Chief Financial Officer
Strategic Positioning
1. Wholesale and Retail Distribution as the Growth Engine
BRCC’s core business model now centers on wholesale packaged coffee and RTD beverages, leveraging shelf execution and expanded ACV to drive growth. The company’s “land and expand” approach—starting with limited SKUs and scaling as performance earns retailer trust—has resulted in both increased shelf presence and improved velocity, a critical metric for retail success. With total ACV at 54% and grocery velocity up 7%, BRCC is building a scalable retail platform that supports long-term share gains.
2. Omnichannel Strategy and DTC Stabilization
While DTC sales have softened, the segment remains a strategic lever for brand loyalty and product innovation, providing a testing ground for new offerings and deepening customer engagement. Digital improvements—website upgrades, enhanced subscription flexibility, and third-party marketplace growth—support the broader omnichannel strategy and ensure the brand remains accessible and relevant.
3. Margin Management and Cost Discipline
Gross margin remains under pressure from green coffee inflation and new tariffs, with commodity costs at multi-year highs and import duties expected to impact margins by at least 100 basis points for the full year. BRCC is combating these headwinds with productivity initiatives, pricing actions, and a focus on higher-margin products. Operating expenses fell 9%, reflecting both structural cost reductions (headcount down 19%) and a shift in marketing spend toward higher-ROI channels.
4. Energy Drink and RTD Category Expansion
Black Rifle Energy is being rolled out in a measured fashion, focusing on targeted markets and disciplined distribution rather than rapid overextension. Early results are promising, but management is clear that energy will remain a secondary focus to the core coffee business in 2026, with innovation (e.g., new flavors like grape and limited editions) used to both deepen existing relationships and win new shelf space.
5. Brand Mission and Community Engagement
The company’s veteran-focused mission continues to underpin its brand identity and marketing, with notable initiatives such as partnerships to forgive $25 million in medical debt for veterans. This mission-driven approach helps differentiate BRCC in a crowded market, supporting both consumer loyalty and retailer enthusiasm.
Key Considerations
BRCC’s Q3 highlights the company’s ability to gain share in a competitive and inflationary environment, but the path to margin recovery and energy category scale will require disciplined execution and continued investment.
Key Considerations:
- Retail Distribution Momentum: Sustained ACV and velocity gains are critical for maintaining shelf presence and driving further unit growth.
- Commodity and Tariff Pressures: Elevated green coffee prices and new import duties pose ongoing risks to gross margins through 2026.
- Marketing ROI Shift: Reduced non-working spend and a pivot to in-store and partnership-based activations signal a more performance-driven approach.
- Energy Drink Rollout Discipline: Management’s cautious expansion in energy reflects both opportunity and risk, with focus on building regional strength before national scale.
- Digital and Outpost Stabilization: Continued investment in DTC and franchise outposts is necessary to support omnichannel brand health and customer engagement.
Risks
Gross margin recovery remains vulnerable to further green coffee inflation and tariff escalation, which management does not expect to abate in 2026. Energy drink expansion, while promising, carries execution risk if consumer adoption or distribution gains stall. Retailers’ shelf reset cycles and competitive intensity in both RTD and energy could also pressure velocity and ACV growth, while DTC stabilization may be tested by broader ecommerce headwinds.
Forward Outlook
For Q4 2025, Black Rifle Coffee guided to:
- At least $395 million in full-year revenue
- At least 35% gross margin and $20 million in adjusted EBITDA
Management expects:
- Q4 revenue step-up slightly above the $5 million sequential increases seen earlier in the year, aided by seasonality and pricing
- Gross margins in Q4 to return to around 35%, reflecting higher tariffs and promotional intensity
Long-term, leadership reiterated 10–15% annual revenue growth and margin expansion toward 40% by 2027, with margin recovery dependent on productivity, mix, and further pricing actions as commodity costs remain elevated.
Takeaways
BRCC’s execution in wholesale and retail distribution is driving real share gains, with velocity and unit growth outpacing a category still reliant on price inflation. Margin pressures are being managed through cost discipline and productivity, but commodity and tariff risks will linger into 2026. Disciplined energy drink expansion and omnichannel investments are prudent, with management signaling confidence in long-term growth but cautioning on near-term volatility.
- Wholesale Outperformance: Distribution-led growth is translating into share gains and retailer confidence, but requires continued investment in shelf execution and innovation.
- Margin Volatility: Cost pressures from coffee and tariffs are only partially offset by pricing and productivity, with further recovery dependent on external market dynamics.
- 2026 Watchpoints: Investors should monitor energy drink category traction, the pace of retail distribution gains, and the sustainability of margin improvement as cost headwinds persist.
Conclusion
Black Rifle Coffee’s Q3 underscores its successful pivot to wholesale-led growth and disciplined cost management, but margin recovery and energy category scale remain works in progress. The company’s brand strength and mission-driven approach provide a durable competitive moat, but execution against cost and distribution challenges will determine the pace of long-term value creation.
Industry Read-Through
BRCC’s results reflect a broader trend in beverage and consumer packaged goods (CPG), where real unit growth and velocity gains are increasingly rare amid inflation-driven top-line expansion. Disciplined retail execution and targeted innovation are essential for brands to gain and hold shelf space, especially as retailers reset categories and prioritize high-velocity, differentiated products. Margin pressure from commodities and tariffs is sector-wide, suggesting that only those with strong productivity levers and pricing power will sustain profitability. The measured approach to energy drink expansion also signals a shift away from blitz-scaling in favor of regional strength—a lesson for emerging brands in crowded beverage categories.