As Westrock Coffee Holdings LLC prepares to become publicly traded, it’s also gearing up for growth across the country and overseas.
With $698 million in revenue, the Little Rock coffee company ranks No. 24 on this year’s list of Arkansas’ largest private companies, but this year will be the last time it makes an appearance on the list.
In April, Westrock announced that it was going public through a merger with a special purpose acquisition company, Riverview Acquisition Corp. of Memphis, that placed the coffee, tea and extract company’s value at $1.086 billion.
Westrock will be listed on the Nasdaq under the ticker symbol “WEST” and have an initial price of $10 per share. The company will be called Westrock Coffee Co. The transaction is expected to close in the third quarter of this year, said Chris Pledger, Westrock’s chief financial officer, who spoke to Arkansas Business in a Zoom meeting last week.
Westrock projects revenue will swell to $960 million this year, followed by $1.06 billion in 2023 and $1.25 billion in 2024.
Westrock isn’t alone in its growth. The coffee market is expected to grow 4.32% annually between 2022 and 2025, according to Statista Inc. of New York, a provider of market and consumer data.
Westrock touts itself as a leading North American private brand provider of custom coffee, tea, flavors, extracts and ingredients to retailers and those in the food service and hospitality industries.
While Westrock reported a net loss of $128.9 million in 2020, its adjusted earnings before interest, taxes, depreciation and amortization were $33.6 million that year.
In 2021, Westrock posted a net loss of $21.3 million and an adjusted EBITDA of $47.2 million.
In the first quarter of this year, Westrock’s loss was $4.7 million, compared with $6.1 million loss in the first quarter of 2021.
Pledger said the losses are tied to the cost of its growth. In February 2020, Westrock bought S&D Coffee & Tea of Concord, North Carolina, in a deal worth $405 million.
A key part of Westrock’s growth will be linked to capturing the consumer shift to cold-brew coffee.
While the largest customer segment for the industry is people 60 or older, they typically drink traditional coffee instead of gourmet-style coffee, according to a May report from IBISWorld, which provides industry research.
“Cold brew and nitrogen-infused coffee have both made a big splash in the industry over the past five years,” IBISWorld said in the report, “Coffee Production in the US.” Consumers’ lifestyles create “a need for quick options, especially in the morning; a trend that is being driven largely by millennials, who make up the largest consumer group for cold brew and ready-to-drink coffee products.”
IBISWorld said those drinks have become popular partly because of their convenience.
And while people in their teens, 20s and 30s are drinking more coffee than those consumers who are middle-aged and older, the younger generation of coffee drinkers is gulping it cold.
“And that’s the generational shift that we’re trying to capture,” Pledger said. “And that shift has accelerated the at-home consumption of coffee during COVID.”
To meet that changing consumer demand, Westrock will rely on its $100 million investment in the 524,000-SF former Kimberly-Clark plant in Conway. Westrock announced the acquisition in December.
Westrock remains in the planning, design and engineering phase to determine what equipment is needed in the plant, which is expected to be one of the largest roast-to-ready-to-drink facilities in North America.
“It’ll be a big growth driver for the business,” Pledger said. The facility is expected to start producing in 2024.
Growth over the next year and a half will be driven by Westrock’s coffee and tea business, he said. “And then as you get into 2024, the growth, the lion’s share of the growth of the business long term, will be in flavors, extracts and ingredients, which will be delivered through our Conway facility,” Pledger said. That segment includes providing a full range of beverage concentrate and flavors for branded and private-label items, such as ice creams, sauces and baked goods.
Westrock recently opened its facility in Malaysia, for which its largest quick-serve restaurant customer is an anchor tenant, Pledger said. The company expects more growth overseas. Westrock serves fewer than 1% of its customers at international locations.
“Our customers have asked us to expand with them globally as we have done in Malaysia,” according to Westrock’s investor presentation filed recently with the U.S. Securities & Exchange Commission.
To fuel its growth, Westrock is looking to acquire companies in the United Kingdom and to continue to expand in the Asia-Pacific region, Pledger said. Westrock has offices in 10 countries and sources coffee and tea from 35 countries.
IBISWorld said a key to expanding over the next five years will be the ability of coffee companies to adapt to swings in consumer preferences, reporting that “ethical consumerism, the growing awareness of fair trade and organic coffee production methods, will likely be vital to industry performance.”
That consumer focus benefits Westrock, which has a dual-purpose business. “We are for our customers and selling products to our customers, and we’re for providing a benefit on the other end of the supply chain to the farmers from whom we source,” Pledger said. “Our customers are very interested in that and captivated by the benefits that we’re able to provide.”