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Dutch Bros’ public debut: ‘We’ve been a very disciplined growth company from the beginning’, CEO says

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Joth Ricci, Dutch Bros’ President & CEO, joins Yahoo Finance to discuss going public on the NYSE, outlook on the coffee and energy drink market, business expansion plans, and Dutch Bros’ philanthropic efforts.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to turn to a company that is giving Wall Street a pretty big caffeine jolt today in its market debut. We've got shares of the Oregon-based coffee chain Dutch Bros up a whopping 60%, 6-0, in their first day of trading on the New York Stock Exchange. Now, the stock was initially priced at $23 a share. And that was at the high end of expectations, by the way.

Joining me now is Joth Ricci, president and CEO of Dutch Bros. And we're also joined by Yahoo Finance's Brooke di Palma. Thanks so much, guys, for joining us. So first off, congratulations, Joth. You started at humble beginnings. This company started out selling coffee from a pushcart in a small town in Oregon to going public on the largest exchange in the world. Just tell us what that journey has been like and what today means to you and the company.

JOTH RICCI: Well, what a-- I mean, what an amazing day, right? I mean, just the culmination of 30 years of hard work by thousands and thousands of employees and people across the western half of the US that have really built Dutch Bros and really put all of us in this spot that we're at today to get the response that we got, to be able to tell a great story. And it's not just our employees, but also our customers that have been with us all the way through the years.

BROOKE DI PALMA: And right now, Dutch Bros is in 11 states. I'm on the East Coast, and I'm just waiting for it to come here. So with this extra capital in hand, do you intend to make your way to the East Coast?

JOTH RICCI: You know, we'll continue to grow. We've been a very disciplined growth company from the beginning. And I think the disciplined strategy we put in place for growth, I see us somewhere on the Eastern seaboard in the next maybe three or four years. And we'll see how far north that gets.

ALEXIS CHRISTOFOROUS: Joth, I know I was looking at some of your numbers, pretty impressive. Sales up 27% last year to over $325 million. But profits are thin, just about $5.7 million. I guess that's a reflection of just how much you're pouring back into the business. But what kind of insight can you give us on that profit number?

JOTH RICCI: Well, a lot of just clean-up overall related to some debt and some-- there were some employee compensation in there as well. But really, that's really more looking to the past than we are really looking to the future on where profitability is headed for the long-term.

BROOKE DI PALMA: And Joth, right now, there are about 471 shops across the US. A majority of those are franchise-owned. Now, we've seen staff shortages hit, as well as wages, hit all fast food chains across the US. How are you strategically working with your franchise owners to make sure that it doesn't hit hard?

JOTH RICCI: So, really, our franchisees have been an important part of our business from day one. Over the last three years, we've really accelerated our company-owned shops. So we're almost at about 45% company-owned now and 55% franchised. And most of our new locations in the future are going to be company-owned.

We certainly aren't immune to some of the market challenges related to hiring. However, I think we've gone from what I tell people kind of a great situation in hiring to good. I think a Dutch Bros position in any market is a badge of honor for somebody in the part-time labor pool and, really, probably the best job you can have in a market.

So, we've done really well on that end. We haven't had the challenges that we've seen other people have. And as long as we keep our culture right, we focus on our people, we focus on the chemistry that we have within our stands and delivering that service, you know, we feel like we're in a pretty good place on the labor end.

ALEXIS CHRISTOFOROUS: So Joth, I know you have a pretty devoted fan base. Your loyal customers refer to themselves as Dutch Mafia. How do you plan to build on that momentum and take on the established chains, you know, as you move across the country, chains like Starbucks, like Tim Hortons, and Dunkin?

JOTH RICCI: Yeah, a couple of ways. I mean, one is remember, I mean, we're 30 years old and really have been in-- with Starbucks all along the way. I mean, two Pacific Northwest brands really growing. And I think in most markets that we're in, we're probably a half a mile to a mile away from any trading area that's been developed by Starbucks.

As we continue to grow, I think one is that our rewards app. We've had over 2.7 million people sign up for our app since February 1st. And I think that's a really good indication of, as we've gone into new markets and have people sign up and be part of the loyalty that is Dutch Bros, they get to experience the brand and some of the ways that we reward them for their continued support.

Two is that we have to continue with our service model. I think the big difference for Dutch Bros is that we're a beverage company. But we're really built on the backs of our people and the service that we provide every day in our stand. So we maintain our culture, we maintain our service, we maintain the great people program that we have, our people systems. I think we're going to do really well. That's been the case for this company for 30 years. And we believe it's the case that we'll take forward for the next 30.

BROOKE DI PALMA: And one aspect that's also unique to Dutch Brod is that Blue Rebel energy drink. There's not many energy drinks at other major coffee chains across the US. I know that those account for about 24% of your sales, actually more than the hot coffee and cold coffee individually. So how exactly do you do see the energy market moving forward, that energy drink? Will it be continued to be a big piece of your portfolio?

JOTH RICCI: I believe so. I think, you know, energy has been a big part of our program for the last 15 plus years. And what Blue Rebel has done is it continues to grow at double digits every year. I think that energy market is a big market when you think about what happens in convenience stores and grocery stores and how broad the Red Bull and Monster and the category that those companies have created and the brands that have been created. I think there continues to be a great opportunity for us in energy.

We also serve it the way you want it. So you can flavor your energy. You can put it in a slushy type drink. You can put it in an ice drink. Or you can just drink it straight up. And I think what's fun is the customization of what we do with energy is, I think, really a unique proposition for us.

ALEXIS CHRISTOFOROUS: I'm anxious to try it, Joth. You've got to make your way over--

JOTH RICCI: Oh, good.

ALEXIS CHRISTOFOROUS: --to the East Coast. I wanted to ask you about--

JOTH RICCI: I'll send you some.

ALEXIS CHRISTOFOROUS: Sounds good. We're happy to try it. I want to ask you, though, about the unusual stock structure with this IPO, because I know that your co-founder and chairman, Travis Boersma-- I hope I'm saying his name right-- Travis Boersma--

JOTH RICCI: You said it great. Yep.

ALEXIS CHRISTOFOROUS: Great. He controls 74% of the voting shares. And that gives his shares a much larger voice than, I guess, common shareholders. Why did you guys decide to structure it that way?

JOTH RICCI: Well, I think Trav and the family and the Boersma family have been such an important part of the growth and the-- and what this company is all about. I mean, it's been built on their backs. And we really felt like it was a great indicator. If I'm a shareholder and I know that Trav has control and you know what this company has been built on and what's important to this business, I feel really good about Trav having that level of voting ability and know that having him and his discipline and his feeling about people and culture and community and what he does for people, I like our chances with him in the position that he's in.

BROOKE DI PALMA: And Joth, I do want to note very quickly, Dutch Bros is also very mission oriented, very focused through your Dutch Luv Day in February. As you make this public debut on a larger landscape, how do you hope that mission moves forward?

JOTH RICCI: I hope we can continue to share our philanthropic efforts, as we've done for 30 years, continue to grow that and expand that. I think that Dutch Luv, our Drink One for Dane, which supports ALS, and then we just did our Buck for Kids Program on Friday of last week to support local children's programs in every market that we're in, one of the pieces we're after is to make a difference in our community and for our customers. And we think the philanthropy that we have is one of the cornerstones of what we're about.

ALEXIS CHRISTOFOROUS: I'm taking a look at the stock here, and it just keeps going up, Joth. I mean, now it is up 66%, almost 67% here in its Wall Street--

JOTH RICCI: Amazing.

ALEXIS CHRISTOFOROUS: --debut. I mean, I know hindsight's 20-20, but do you think-- I don't know-- maybe we could have priced this thing a little bit higher?

JOTH RICCI: Oh, I think you can always say that. I think everybody who's lucky enough to be in this position can say that. But I think honestly, we're lucky and just privileged to be in the position that we're in and just super excited and going to enjoy the day. I mean, we know people have high expectations on what we're going to do. And maybe this is an indicator of the excitement around the brand. And we're excited to deliver that for people.

ALEXIS CHRISTOFOROUS: Well, you're certainly off to a pretty good start. Joth Ricci, president and CEO of Dutch Bros, and of course, our own Brooke di Palma, thanks so much for being with us.