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Dutch Bros retreats after post-IPO surge; CEO aims for 'disciplined growth'

·Reporter, Booking Producer
·4 min read
In this article:
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Oregon-based coffee chain Dutch Bros (BROS) tumbled sharply on Friday, taking a breather after a breathtaking post-initial public offering (IPO) that saw the stock post double-digit gains two days in a row.

After pricing earlier this week at $23 per share, Dutch Bros came to market on Wednesday at a higher-than-expected $32.50 and soared as high as 71% intraday. 

The stock continued its surge Thursday, but dropped by over 11% in Friday's trade, but hovered near $43 per share, suggesting investors have faith the brand can go toe-to-toe with competitors like Starbucks (SBUX), Dunkin' and Tim Hortons (QSR).

President and CEO Joth Ricci told Yahoo Finance Live that the IPO was "culmination of 30 years of hard work by thousands and thousands of employees and people across the western half of the U.S. that have really built Dutch Bros." 

The company was founded 1992 by brothers Dane and Travis Boersma as a single pushcart with a double-head espresso machine in Grants Pass, Oregon. 

As of June 30th, 2021, it has 471 locations across 11 states including Oregon, Washington, California, Idaho, Arizona, Nevada and Colorado. CEO Joth Ricci believes discipline growth put the 30-year old company in good positioning for this public debut. 

"We've been a very disciplined growth company from the beginning," Ricci added. The company intends to make its way to the east coast in time with the intention to be "somewhere on the eastern seaboard in the next maybe three, four years." 

(Courtesy: Dutch Bros)
(Courtesy: Dutch Bros)

In 2020, Dutch Bros reported $327.4 million dollars in revenue, compared to $186.0 million in 2018. The company also saw same-stores sales up 2 percent in 2020 despite the impact of the COVID-19 pandemic on the restaurant industry.

According to the company's S-1 filing, as of June 30, there are 264 franchised shops, with 207 being company-operated. Back in 2008, the company made the decision to step selling franchises to anyone outside the existing Dutch Bros system, and grow using leaders within its franchise partners. 

Now the company plans to accelerate that decision with long-term potential of at least 4,000 Dutch Bros locations in the United States.

"Over the last three years, we really accelerated our company-owned shops, we're almost at about 45% company-owned now and 55% franchise and most of our new locations in the future are going to be company owned," Ricci noted.

However, as fast food chains and franchises get hit by labor and food shortages, Ricci believes the company is still in a good position. He said the company went from "kind of a great situation in hiring to good" amid the worker crunch.

"We haven't had the challenges that we've seen other people have and and as long as we keep our culture...we focus on our people, we focus on the chemistry that we have within our stands, and delivering that service...we feel like we're in a pretty good place on the labor end," he added. 

And Dutch Bros isn't just coffee. Unique to the brand is its Blue Rebel energy drink, which comes in an assortment of flavors like Electric Berry, Aftershock, Shark Attack, Double Rainbro and Peach. Customers can customize it themselves in a slushy type drink or as "straight up" energy. 

Ricci believes "the customization of what we do with energy" provides a "really a unique proposition" for the company. Back in 2012, the company also debuted 8.4 oz cans that are currently available at drive-thrus. 

However, the brand may have eyes on competing energy drinks like Red Bull and Monster, according to Ricci, as it weighs seeking shelf space in stores. 

"When you think about you know what happens in convenience stores and grocery stores and how broad the Red Bull, Monster and the category that those companies have created...I think there continues to be a great opportunity for us in energy," Ricci added. 

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.