Yahoo Finance Westrock Coffee is the Perfect Blend of Profit and ESG
Westrock Coffee Holdings LLC is going public via SPAC Riverview Acquisition Corp. (Nasdaq: RVAC)
Purpose-driven company that serves global brands like McDonald’s Corp. and Walmart Inc.
Uses sustainable sourcing, digitally traceable supply chain management
Operations account for more than 20 million cups of coffee daily
Westrock is financially strong with expected $75 million Ebitda, $960 million sales in ‘22
Profits to grow quickly after going public, with Ebitda expected at $123 million in ‘24
At 12.3 times 2023 Ebitda, trades well below Nestlé S.A., Keurig Dr Pepper Inc., Dutch Bros Inc.
Members of Westrock senior management and private equity partners to remain largest equity owners
By Jarrett Banks and John Jannarone
The cappuccino first popped up in Viennese coffee houses in the 1700s—the perfect blend of coffee and frothed milk. Now Westrock Coffee Holdings LLC is showing a different kind of blend—that you can be profitable and do good.
Westrock is leading the industry through sustainable sourcing, digitally traceable supply chain management, and the improvement of the lives of 1.5 million smallholder farmers around the world. The company accounts for more than 20 million cups of coffee daily.
The Little Rock, Ark.-based coffee company behind the offerings of McDonald’s Corp. and Walmart Inc. is combining with a special-purpose acquisition company called Riverview Acquisition Corp. (Nasdaq: RVAC) to go public with a valuation of roughly $1.2 billion. The deal is expected to close by the end of the third quarter, according to an S-4 filing. The combined company will be named Westrock Coffee Co. and is expected to be listed on the Nasdaq under the ticker symbol “WEST.”
Westrock works with small-scale farmers around the world and supplies coffee, tea and other beverage ingredients for large companies. It packages custom drinks and develops new coffee products such as cold brews—which have been in high demand in recent years, particularly from Gen-Z and Millennials.
Indeed, younger consumers in the Millennial and Gen-Z cohorts increasingly shun hot brewed coffee in favor of cold brew and other ready to drink choices. Cold brew sales are expected to grow at an annualized 42% between 2018 and 2023, according to Technomic.
The $318 billion wholesale coffee and tea market is set to grow at 6% CAGR, while Westrock Coffee’s traditional core business has a total addressable market of $37 billion.
The company is the largest custom/private label coffee and tea provider to restaurants in the U.S. by volume, and the second largest coffee extract provider in ready-to-drink coffee. Today it is vertically integrated company with offices in 10 countries, sourcing coffee and tea from 35 origin countries.
Westrock’s financial strength is clear from its historical performance. Already profitable, the company expects to generate $75 million in Ebitda in 2022 on net sales of $960 million. Looking ahead, revenue and profits should keep expanding swiftly, with Ebitda reaching $123 million in 2024. That also reflects steady margin expansion as the company benefits from operating leverage.
The deal is also priced right for investors who want to get a taste of Westrock now. The SPAC, trading at about $10 a share, implies an enterprise value of 12.3 times 2023 Ebitda. By comparison, Nestlé S.A. trades at 18.2 times, Keurig Dr Pepper Inc. at 15 times, and recent IPO Dutch Bros Inc. at a whopping 49.8 times, according to Sentieo, and AI-enabled research platform.
In an important vote of confidence, members of Westrock’s senior management team represent the largest equity owners in the company. And after the deal closes, current Westrock investors and private equity partners who roll their equity will account for more than half of the company’s total ownership.
Westrock boasts impressive leadership. The company’s Co-Founder and CEO Scott Ford was previously President and CEO of Alltel Corp. He founded Westrock in 2009 to work with coffee farmers in Rwanda. Ford began his career as an investment banker and subsequently served as the Assistant to the Chairman at Stephens Group. He’s also on the Board of Directors of AT&T Inc.
The SPAC team is equally impressive. RVAC’s CEO R. Brad Martin is the former Chairman and CEO of Saks Incorporated. He’s also on the board of FedEx Corp. and Pilot/Flying J and has put $60 million of his own money in the private investment in public equity, or PIPE.
Westrock’s PIPE comprises $250 million from investors including Southeastern Asset Management and the family investment office of the Haslams — part owners of truck-stop operator Pilot Co. and owners of the National Football League’s Cleveland Browns.
Proceeds from the transaction will create a clean balance sheet to not only enable organic growth but also M&A—there are already more than 50 targets, according to Westrock’s investor presentation. It will also accelerate the build-out of the largest roasting to ready-to-drink facility in the US, as well as expansion into Europe, Asia Pacific, and the Middle East.
The purpose-driven mission of the company provides smallholder farmers and their families in developing countries the ability to advance their quality of life and economic well-being. And the sustainable and digitally traceable supply chain from crop to cup is how Westrock differentiates itself.
Sometimes you can blend purpose with profit. Westrock is a delicious example of this that investors will want to drink in.
Contact:
Jarrett Banks, Editor-at-Large
Twitter: @IPOEdge
Instagram: @IPOEdge
