Westrock Coffee CEO explains ‘two opportunities’ in SPAC deal

Westrock Coffee CEO Scott Ford joins Yahoo Finance Live to discuss why the company sought a SPAC deal, international brand growth, and recent coffee crop harvests.

Video transcript

- Westrock Coffee is braving the poor market conditions with the closing of a SPAC merger with Riverview Acquisition Corp. The company now trades under the ticker symbol WEST on the NASDAQ. This comes as the SPAC reached the lowest point since early 2020 last quarter, at least the SPAC market, with only 78 listings, and the median deal size cut in half compared to last year according to PitchBook.

Joining us now to discuss we've got Westrock Coffee CEO Scott Ford. Great to have you here with us on the day. Why was now, with the market environment that we just described, the right time for you to tap the public market via a SPAC opportunity?

SCOTT FORD: Right. Well, the reason that we needed to go public right now is we have two opportunities that we didn't have the capital structure capacity for. And the reason that we went with a SPAC-- and SPACs, I understand, have been kind of beaten up for lots of understandable reasons. But the reason we went with a SPAC is because we partnered with a group of individuals who went and raised, in the private market, $250 million in a PIPE. So that money was coming in $10 common stock no matter whether anybody in the SPAC wanted to contribute and roll over or not.

That money, with anything that came in from the SPAC being treated as kind of icing on the cake, allowed us to get a credit facility of $350 million from Wells Fargo, which allows us to refinance our business and finish out-- start building the largest roasted ready to drink plant in the United States and go internationally with our customers. So it was the right thing for us in this moment. And I realize that's a little different than most SPAC transactions.

- Yeah. Also most different, I would argue, Scott, you have a real business. And that's making-- it's making a lot of money. I'll get to that in a second. But because you went the route of a SPAC, when you're out there talking to prospective institutional investors or any investors, what has their feedback been? Are they just labeling you as a SPAC, or do you sense that they're actually digging into what you do?

SCOTT FORD: Oh, it kind of depends. Some of them do the work and really understand the business, and realize that we make $70-something-million in EBIT this year, that we're the largest provider of coffee, tea, and extracts to the restaurant community in the United States, that our customers are global and have been asking us to go global. Some of them have done that work. A number of them, they hear the word SPAC, and they're out.

And we just tell them, look, we went and raised all the money that was potentially in the SPAC, which was $250 million. We went and raised that privately if the SPAC money comes in, it's icing on the cake, and we'll go faster. And if it doesn't, frankly, we assumed it wasn't.

So the word we've been hearing after begging people for four months to not redeem their shares was, why didn't you tell us not to redeem our shares? We didn't know it was going up. And we're like, I mean, at some point, you just have to say, do your own work. Good luck.

- You know, and to that end, since we last spoke with you, we've seen a weakening in the economy. Not just in the US-- around the world. Are you still on target with your 2023 sales goals, a little over, I guess, a billion and adjusted operating profits of about 88 million?

SCOTT FORD: Yeah, it's a little under a billion this year. Yeah, so, we are back half centric anyway. We make-- 55% to 60% of our EBITDA comes in the back half in a normal year. And this year, we have the largest single-serve cup manufacturing-- the little K-Cups. We're a private label manufacturer. We had the largest contract we've ever signed, and it started producing in June and July.

So we'll see how the coffee season goes, which is the time of season that we're coming into right now. But so far, everything looks to be on track.

- Scott, we just teased moments ago just higher prices for the new Starbucks pumpkin spice latte. Now, coffee prices, they have gone up. Are you anticipating more price increases on consumers in coming months?

SCOTT FORD: Well, the C price, which is the underlying futures price of arabica coffee, really is determined by how things go in Brazil and Colombia. And Brazil and Colombia have been having their production challenges the last year or two. And coffee, at a base level, has gone from about $1.40 a pound to $2.40 a pound. Now, what's it going to do in the next six months or a year will largely be dependent upon how the Brazilian and Colombian crops come in.

- And so, with that in mind, how has that also added to the input costs on your operational expenses?

SCOTT FORD: Yeah, that's the right question because coffee for us is our largest expense. And it's also the largest component of our revenue because we just pass it through. Unlike retail brands where we buy coffee and then have to set pricing for our customers based on our cost, we simply just pass the coffee costs through. And our customers carry the risk of what happens in the coffee price because they're the ones in the position to reprice it to the end consumer. We're not.

- You know, as a lot of people-- and this is a question purely for the folks that are making their way back to the offices, looking for that best cup of coffee that they can get, whether that's on the way in, or whether that's perhaps at the office. I think about Brian Sozzi, quite frankly, here because this man drinks a lot of coffee or other caffeine beverages. I need to know when the ideal time for him to have that first morning coffee might be for our morning show.

- Here we go.

SCOTT FORD: It's as soon as his head comes off the pillow.

- That's what I'm at.

- That's where he's at.

- Thank you for validating the past 15 years of my life.

- Bye-bye, Scott.

- Thank you, Scott. You're the man.

- Bye-bye, Scott. I was looking for some help there. Westrock Coffee CEO Scott Ford. Thanks so much for joining us, and thanks for the fun. We appreciate it.