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March 1, 2023A once chummy relationship between an Ohio-based beverage consultancy and Black Rifle Coffee Company (BRCC) appears to have soured, with the former suggesting in court that the latter has not met a “multi-million-dollar financial obligation.”
Lawyers on behalf of the Dayton-based and Michigan-registered RTD (“ready to drink”) beverage consulting firm Strategy and Execution, Inc. (SEI), filed a lawsuit in Western Texas U.S. District Court earlier this month.
In court documents obtained by DCN, the plaintiffs allege that BRCC has failed to pay potentially millions of dollars worth of royalties and fees, as dictated by a four-year consulting agreement that took effect Jan. 1, 2020.
Black Rifle Coffee Company did not immediately reply to DCN’s request for comment.
According to the lawsuit, SEI executives and packaged beverage industry veterans Bryon Evans and Pete Popovich were instrumental in bringing Black Rifle RTD products to market in early 2020 by leveraging existing industry relationships and engaging specific co-packers, including New York-based O-AT-KA Milk Products and Dairy Farmers of America (DFA).
The suit describes O-AT-KA and DFA as “the largest manufacturers of RTD coffee beverages in the United States.”
Since that time, BRCC went public through the New York Stock Exchange and has grown exponentially through direct-to-consumer sales, retail distribution, and franchise-based and company-owned retail expansion. The veteran-owned, devoutly pro-gun company said in its Q3 2022 investor statement that its RTD coffee continued to be its fastest-growing line among all trade channels, despite an RTD “production issue” that cut into quarterly profits.
In the lawsuit, SEI alleges that BRCC has failed to deliver certain monthly fees and royalties as outlined in the original consulting agreement, including costs to cover additional sales agents that were managed by SEI and a 2-cents-per-unit royalty on specific products.
“In simple terms, Plaintiff has become a victim of its own success,” SEI’s lawyers wrote in the complaint summary. “Once Plaintiff’s royalties, for example, became a multi-million-dollar financial obligation for Defendant, Defendant began taking steps to distance itself from Plaintiff and its financial obligations under the parties’ Consulting Agreement.”
In addition to seeking past and future royalty payments for RTD beverages manufactured by O-AT-KA, SEI is seeking per-unit royalties on BRCC’s RTD drinks made by other manufacturers, including Bev-Hub and Trilliant.
The suit depicts an increasingly chilly relationship between SEI and BRCC following apparently fruitful beginnings. In an April 2020 story in BRCC’s in-house magazine called “Coffee or Die”, the coffee company noted SEI’s role in the successful launch of the RTD line, while quoting Evans directly.
“When we initially met the [BRCC] team, we were so incredibly impressed with their genuine nature,” Evans said in the story. “They are not only motivated to provide great quality coffee — which is obviously critically important to the mission — but also laser-focused on supporting the veteran community and first responders.”
