Will Dutch Bros Brew Up Enough Success To Surpass Starbucks?

With Starbucks almost everywhere you look, success might seem daunting for smaller coffee chains. Dutch Bros is going against the grain and creating buzz with its approachable service, unique drinks, and fast growth. Even after seeing its stock take a hit following its 2021 initial public offering, the company is starting to bounce back. With Dutch Bros's latest press release, the retailer has explained its plans moving into 2024.

“We are designing our executive leadership team to support the Dutch Bros mission and vision as we scale and grow to 4,000 shops. I’m excited to welcome best in class leaders who understand the industry and have effectively scaled operations while maintaining and valuing company culture.”

Christine Barone, CEO of Dutch Bros, via World Coffee Portal

Dutch Bros has been expanding rapidly, opening 37 new shops in Q4 of 2023 alone. Now, with 831 stores in total as of Dec. 31, 2023, and a 33% yearly revenue increase up to $265 million, this coffee brand shows us how to grow successfully. Thanks to its unique vibe and deep customer connections, it even saw a 4% rise in same-store sales.

Its staff, fondly called "Broistas," ranked second in the people subcategory of Forbes' first-ever list of Best Customer Service. They were praised for being friendly and engaging, even handing out monthly stickers to customers. This word-of-mouth branding is helping Dutch Bros carve out a name in an industry dominated by Starbucks.

Being a community-oriented chain, Dutch Bros is involved in numerous initiatives. It has raised money for local communities, ALS treatment and research, and local youth organizations. This has helped create a strong local presence.

The financial results are nothing to scoff at, either. With a significant 31% margin for company-operated stores and an almost 20% increase in average revenue for each store since 2019, Dutch Bros shows that a people-first approach can yield substantial financial gains.

As it aims for a total of 4,000 coffee shops, Dutch Bros is facing a challenge. The company needs to grow while preserving the distinctive qualities that have made it successful so far. However, extra funds from recent equity offerings and credit increases should help support this expansion.

Comparing Dutch Bros to Starbucks might seem unfair, as Starbucks boasts over 38,000 stores globally. However, the smaller coffee company is showcasing its own success. With a 23.9% yearly increase in the number of shops and a significant uptick in net income, Dutch Bros is already a strong contender.

Furthermore, the Oregon-based coffee chain has brought former Starbucks executives Sumitro Ghosh and Joshua Guenser on board for its ongoing expansion in the U.S. In 2023, the company opened 159 new stores (146 are company-operated), raising the total to 831 outlets across 16 states (542 company-operated and 289 franchised), with plans for about 160 more in 2024.

Ghosh will join Dutch Bros as the incoming president of operations, engaging with staff and regional leaders. Upon board approval, he will become the president of operations in June 2024, managing store operations, real estate, and supply chains. Ghosh has 12 years of experience at Starbucks and was recently the global VP of Nike Stores. Guenser will come on board in February 2024 as the chief financial officer, succeeding Charley Jemley. He held the same role at MOD Pizza and has had several financial leadership roles at Starbucks. Dutch Bros has also appointed Jess Elmquist as the chief people officer, responsible for human resources across the store network and its 16,500+ workers.

Founded in 1992, Dutch Bros is projected to have reached full-year profitability for 2023, having posted profits for the first three quarters of the year. The company earned $13.4 million in net income in the third quarter, a 38% increase from the previous quarter, and sales reached a record $264.5 million.