Dutch Bros Inc.
Summary
Brief Company Overview
Dutch Bros Inc. (NYSE:BROS) is an American beverage company that operates coffee-shop chains on its own and through franchisor drive-thru shops. The company was established in 1992 by brothers Dane and Travis Boersma. Dutch Bros is currently headquartered in Grants Pass, Oregon, United States. It belongs to the foodservice and restaurant industry and is one of the fastest-growing brands in the U.S. by location count.
As of December 31, 2022, Dutch Bros had 671 shops, of which 396 were company-operated and 275 were franchise, across 14 states in the U.S. The company has coffee, energy drink and other beverages in its menu. Of the total menu mix, 50% come from coffee-based beverages, 25% come from their proprietary Blue Rebel energy drink and the rest come from a wide variety of teas, lemonades, sodas, and smoothies. As of December 31, 2022, Dutch Bros and their franchise partners have approximately 22,000 employees. The company has two reportable operating segments: Company-operated shops, and Franchising and other.
Travis Boersma is current Executive Chairman and Jonathan J. Ricci is the CEO & Director of the company. As of June, 2023, the company share had a 52-week price range of $25.45 to $54.18. As on that date, forward price to earning ratio of the company is 136.99 times, price to sales ratio is 1.79 times, profit margin is negative 0.47%, operating margin is 1.83%, return on assets (ttm) is 0.84%, return on equity (ttm) is negative 5.35%, diluted earnings per share (EPS) is -$0.06. Total number of shares of Class A and Class D common stock outstanding as of March 31 is 56,664 thousand.
Recent Developments
- Dutch Bros has broken ground to build a second state-of-the-are coffee roasting facility in Texas. The facility is expected to come live by 2024.
Recent Financing Activities
Financial Performance Highlights
Annual Performance Highlights
Business Overview
Dutch Bros both operates and franchises drive-thru beverage shops. The company had 671 shops as of December 31, 2022, of which 396 were company-operated and 275 were franchise, across 14 states in the United States. The company sells a range of customizable hot, iced, and blended beverages that can be classified into three categories - coffee, energy, and other.
Coffee: Based on the number of drinks sold across the system of Dutch Bros in 2022, Coffee-based beverages make up ~50% of the menu mix. Coffee-based beverages include espresso-based custom drinks, cold brew, and the company's proprietary “Freeze” blended beverages. Private Reserve coffee of the company is a 100% Arabica three-bean blend, roasted in the Grant’s Pass facility of the company. In the shops, the company utilizes premium La Marzocco machines to extract the coffee and deliver shots of smooth, full-bodied espresso.
Energy: About ~25% of the menu mix is based upon Dutch Bros' proprietary Blue Rebel energy drink, which is highly customizable with flavors and modifiers and can be served blended or over ice.
Other: The remaining ~25% of the menu mix is a wide variety of teas, lemonades, sodas, and smoothies.
Over 90% of the business of Dutch Bros is conducted through drive-thru. The shops of the company typically have a size of 865 to 950 square feet - thus, it has a relatively smaller footprint than other drive-thru formats. Except for a few, almost all of the shops of Dutch Bros deploy either a single or double drive-thru window with multiple feeder lanes for traffic flow. Most of the shops also have walk-up ordering windows and “escape lanes” that enable customers to exit the line after a runner delivers their drink before reaching the window, helping increase throughput and reducing congestion.
To facilitate large scale expansion, the company has started giving out franchisee operated shops. In 2008, it has stopped selling franchises to the people outside their system. From that time, only the people who come from within their system are allowed to open a franchise shop. By 2017, the company has shifted to the strategy such that all operators are recruited from within their system. Now the company anticipates that approximately 90% of new shops that are opened each year will be company operated ones.
Dutch Bros continuously engages itself in sourcing, roasting, packaging and distributing coffee beans to all of its shops, own-operated or franchisee-operated. The company partners with third-party importers and exporters to purchase and import green coffee beans. Through this relationship, high-quality coffee beans are sourced from across Central and South America. Typically coffee contracts are purchased 18-24 months in advance of when the physical delivery of the beans is taken, allowing the company to lock in pricing and to manage the input costs. This practice also allows to be a good partner to the coffee producers, providing security of future business. Currently, all of the coffee beans are roasted in the roasting facility at Grants Pass, Oregon. The beans are roasted according to variety of specific profiles designed to highlight each of the coffee bean’s unique flavors and aromas. After the coffee beans are roasted, they are blended to create the signature Private Reserve espresso. Then the Private Reserve, Decaf and White Coffee espresso are shipped to 14 distribution centers that supply the beans to all shop locations. On average, the company typically has approximately four months of green coffee bean inventory stored at the two ports of entry in the United States or at the roasting facility in Grants Pass, Oregon.
The proprietary Dutch Bros Blue Rebel Energy Drink is manufactured through co-bottling and co-packaging relationship.
The company usually experiences higher nominal system sales in the summer months.
Company History
Dutch Bros started its journey in 1992 as a pushcart by the railroad tracks in downtown Grants Pass, Oregon. Dane and Travis Boersma left the dairy business to serve up espresso, rock their favorite music and make connections with their community. Initial investment in establishing the first pushcart was $12,000. By 1994, the entrepreneurs were able to establish their first drive-through location. In 1996, the company began roasting its own coffee, sourcing beans from El Salvador, Colombia, and Brazil.1
In 1994, Dane and Travis Boersma had struck a deal with Marty McKenna, a customer, which allowed him to open his own Dutch Bros in Medford, some 30 miles away from Grants Pass. McKenna's first stand performed so well that he soon opened up a second one across town. In 1997, the Boersmas brought McKenna on as partner, hoping he would continue to expand the Medford operations. Two years later, they bought out McKenna's stake in the company.
In the period of expansion, the first franchise store of Dutch Bros opened in 2000. By 2004, 50 drive-thru franchised locations of the company opened. By the end of that same year, the company was operating 61 coffee shops spanning from Northern California to Oregon's Willamette Valley. By 2009, Dutch Bros was running approximately 135 coffee stands in seven states and generating $50 million in gross annual revenue.
Dutch Bros filed for its IPO in August 2021. The company stated in its filing that it hoped to raise $100 million, which it would use toward paying down $192 million in long-term debt. Dutch Bros held its IPO and began trading on the New York Stock Exchange with the ticker symbol "BROS" on September 15, 2021. The IPO raised $484 million, selling about 21 million shares for $23 each.
