Dutch Bros Goes Public With 471 Stores and a $6.2 Billion Market Value

This is an English adaptation of a FoodBud historical article originally published on September 16, 2021.

Dutch Bros listed on the New York Stock Exchange on September 15, 2021. The U.S. drive-thru coffee chain issued about 21.05 million Class A common shares at $23 per share, above its indicated $18-$20 range, raising $484 million. BofA Securities, J.P. Morgan and Jefferies were joint lead bookrunners.

During trading, the share price rose as much as 64% to $37.76, giving the company a market value of up to $6.2 billion. Dutch Bros planned to use $200 million of the proceeds to repay debt, with other funds going toward share repurchases and business development. It also planned to allocate 1% of IPO proceeds to charitable organizations over 10 years.

Co-founder and chairman Travis Boersma said at the listing that when he and his brother founded the company 30 years earlier, they had not imagined reaching this point. After the IPO, Travis Boersma held 43% of the company and about 74.4% of voting rights. CEO Joth Ricci said in media interviews that the company was not going public to expand blindly, but to grow step by step.

471 stores and first-half revenue of $228 million

Dutch Bros is a drive-thru coffee chain founded in Oregon in 1992 by brothers Dane Boersma and Travis Boersma. The brothers grew up working on the family dairy farm, but after changes in that industry forced them to sell their cows, they entered the Pacific Northwest coffee market.

They began with 100 pounds of beans, a two-head espresso machine and a pushcart beside railroad tracks, handing out as many free samples as possible.

The chain opened its first franchise location in 2000. By the time of the article, it had about 470 drive-thru coffee shops across 11 states, and its franchise partners employed more than 16,500 people. Co-founder Dane Boersma died in 2009 from Lou Gehrig's disease.

Dutch Bros expanded from 254 stores across seven states at the end of 2015 to 471 stores across 11 states as of June 30, 2021. Of those, 207 were company-operated and 264 were operated by Dutch Bros franchise partners.

From 2017, Dutch Bros gradually moved away from franchise-led growth and shifted toward company-operated stores. Regional operator roles were offered only to outstanding internal employees. Because franchise partners paid Dutch Bros franchise fees of $50,000 for each of their first two stores and $30,000 for each additional store, reducing franchising also reduced one revenue source.

In its prospectus, Dutch Bros said it hoped to one day operate 4,000 stores.

Total revenue grew from $186 million in 2018 to $238 million in 2019 and $327 million in 2020. In the first half of 2021, total revenue reached $228 million, up 51% year on year. Net income was $5.839 million, up 11%, and adjusted EBITDA was about $45.8 million.

In the first half of 2021, Dutch Bros generated $180 million from company-operated stores and $47.11 million from franchised stores.

For the year ended December 31, 2020, franchise and other revenue fell 5% to $82.9 million from $86.8 million in 2019. For the six months ended June 30, 2021, franchise and other revenue increased 13% to $47.1 million from $41.8 million in the same period of 2020.

In 2021, Dutch Bros launched its online loyalty platform, Dutch Bros Rewards. Within two months, it had 1.6 million members and became one of the most downloaded free apps in the food and beverage category on Apple's platform, behind DoorDash and McDonald's. As of June 30, 2021, Dutch Rewards had about 2.3 million activated members.

New Dutch Bros stores were typically 865-950 square feet, with target sites of at least 25,000 square feet. Total investment per store was about $1.35 million. Despite pandemic disruption in 2020, revenue grew 37% and the chain added 113 net new stores.

Positioning as a beverage company

Joth Ricci described Dutch Bros in media interviews as a beverage company. Beyond simple Americano coffee, Dutch Bros offered foam drinks, cold drinks and energy drinks. About 82% of its beverage sales in the prior year came from cold drinks.

As of December 30, 2020, coffee accounted for 32% of Dutch Bros sales. Its proprietary functional beverage, Blue Rebel, ranked second at 24%.

Ricci also highlighted ongoing supply-cost issues for key inputs, including aluminum used for Blue Rebel energy drinks. Aluminum supply-chain issues had persisted for several years.

According to financial disclosures, beverage, food and packaging costs rose 25% to $54.8 million in the year ended December 31, 2020, from $44.0 million in 2019, mainly because of new store openings. In 2020, beverage, food and packaging costs as a percentage of company-operated store revenue declined to 22.4%, from 29.0% in 2019.

For the six months ended June 30, 2021, beverage, food and packaging costs rose 79% to $43.7 million, from $24.4 million in the six months ended June 30, 2020.

Labor costs rose 53% to $71.7 million in the year ended December 31, 2020, from $46.8 million in 2019.

For the six months ended June 30, 2021, labor costs rose 70% to $55.2 million, from $32.4 million in the six months ended June 30, 2020. Labor costs as a percentage of company-operated store revenue increased to 30.5% in the six months ended June 30, 2021, from 29.7% in the same period of 2020.

Note: IPO proceeds, market value, ownership, store targets and forward-looking plans are historical figures from the 2021 article.