RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q1 2023 Earnings Call Transcript

Mark Moran : Fantastic. Thank you so much for the question. Now in that same vein, Eric, I’m going to ask you a question that was submitted to me anonymously. This individual was curious about the plans of the brewery. And is it similar to Robust in terms of vision, Robust for those who don’t know is the energy drink. Also actually let’s answer that one first and then we’ll move into the second question.

Eric Langan : Yes. No the brewery is nothing like Robust. Robust is basically a generic product that has a flavor profile very similar to the leading brand, which Mark is drinking right now. That’s a no, no in RCI world, now just joking. But seriously it saved us about $20 a case off of the major brand product. We were using about 25,000 cases a year at the time. I think now. I don’t even know what the numbers are. It’s much higher than that today, because we’ve grown so much. And so it was more of a cost saving deal. We just bought the product at first, but then they were trying to expand the brand. And so we bought into it. Probably shouldn’t have done that. I probably wouldn’t do it under our capital allocation strategy today the numbers wouldn’t make sense, and we probably wouldn’t have moved in that direction.

But we did. And then we ended up loaning them money that they couldn’t pay back and so that we ended up basically buying them out and taken over the brand. Since then we’ve done very well with it. We’ve expanded some of our distributors, but the main thing is slice our own clubs. And we’re working with others to say, look, you’re paying all this money you could be saving, especially big operators in this energy market that sell by thousands of cases could save so much money with this product. And from a chemical standpoint, it’s one molecule different. It’s not — it’s very, very, very — when it’s mixed with any type of alcohol whatsoever you can’t really tell the tale. I call it the Pepsi Coke challenge. If you remember the old days of the Pepsi and Coke challenges of exactly the same thing.

I can pour on two different glasses. You can drink them, tell me which ones which is very difficult to do. I will say that the hardcore drinkers can tell the difference. But the casual drinkers, especially if you put vodka you can’t tell the difference. So that’s kind of that. But with the breweries more this was kind of a one-off thing where we were buying this building and it was a great property. We’re going to close it down turn it into a Bombshells. And as we did more site inspection, we started looking at how it operated and we thought — and when we look at they’re actually making money and not much, but they’re profitable. When we started going through the financials — we asked for the financials, right? Well wait a we just keep this business open give us the financials.