Dutch Bros (BROS -1.04%) may not yet be a nationally known household name, but give it time.
This small chain of drive-thru coffee shops is growing fast, adding 38 locales just last quarter to bring its store count up to 754. It's still looking to open at least 150 sites for the full year ending in December, too. For perspective, rival Starbucks (SBUX 0.47%) operates around 15,000 coffee houses in the United States alone.
But is Starbucks' existing dominance a problem for Dutch Bros' expansion plans? Not necessarily.
While Starbucks has undeniably mainstreamed the idea of cookie-cutter coffee houses, it's also established a corporate and customer culture it can't easily shake off -- or even adapt. Dutch Bros is being built from the ground up to thrive on nuances that make today's consumerism so different than what it looked like just a few years ago.
And that's just one of three key reasons you'll want to consider investing in the young company's stock, particularly if a new bull market is underway.
1. Dutch Bros appeals to consumers' growing sense of community
One of Dutch Bros' core corporate beliefs is that the company and its workers "can make a massive difference through a shared commitment to each community we serve."
The company holds annual fundraising events to support the Muscular Dystrophy Association, for instance, while its Buck for Kids days raise money for youth-focused programs operating in each store's market. It's also not uncommon to hear stories of store employees setting up their own impromptu charitable efforts, including for co-workers in need.
At first blush these initiatives may look like commendable measures that do nothing for the company's bottom line. In fact, they may even reduce Dutch Bros' net profits.
The fiscal benefit materializes on the front end though, by driving sales that may not have occurred without these giving-minded measures.
See, consumers increasingly expect the organizations they buy goods and services from to do this kind of work. Data from corporate communications company Porter Novelli indicates that more than two-thirds of U.S. consumers are less likely to support a business that's only interested in turning a profit. Conversely, nearly three-fourths of these same consumers say that for a company to win their business that company should support their local community. Dutch Bros clearly delivers on the corporate/community citizenship front.
2. Incoming CEO Christine Barone's got the chops
Beginning in January, current Dutch Bros president Christine Barone will take the helm as the company's chief executive officer.
That's not to suggest outgoing CEO Joth Ricci didn't do a great job during his winding-down career as head of the company. In fact, much of Dutch Bros' growth has happened since and because he stepped into the role back in 2019. As former chief of Jones Soda and president of Stumptown Coffee Roasters, he clearly had his finger on the pulse of the beverage business.
Nevertheless, Barone's the right person for the next chapter of Dutch Bros' story. She's the former chief executive of restaurant chain True Food Kitchen, as well as a former executive with Starbucks. Namely, she served as Starbucks' senior vice president of food, evenings, and licensed stores between 2011 and 2016, helping the company extend its overall reach.
Just as important, she's embraced Dutch Bros' unique culture of giving something back to the world in exchange for its customers' patronage.
3. Dutch Bros is growing -- a lot
Last but not least, Dutch Bros is growing.
Chief among these growth measures is its top-line growth. Sales were up 34% year over year during the second quarter, reaching $250 million and extending a long-lived streak of double-digit revenue increases. Same-store sales were also up 3.8% during the three-month stretch ending in June despite the challenging economic environment.
The bottom line's growing, too. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) more than doubled year over year, and the company swung from a net loss of nearly $1.8 million in the second quarter of 2022 to a net profit of more than $9.7 million in Q2 of this year.
BROS Revenue (Quarterly) data by YCharts
As for its stores, it was noted above the addition of 38 locations last quarter brings the count up to 754 shops. That's still only a fraction of what management's got in mind though. Barone's overarching goal is getting the company's total store count to 4,000 units within 15 years. That's fivefold growth that will ultimately create scale, which in turn drives per-unit operating costs and per-drink supply costs down. Look for profit margins to widen accordingly.
Of course, the reestablishment of a bull market will set the stage for refreshed looks at Dutch Bros. Investors may be pessimistic right now, but if the tide is rising, a compelling story stock like this one will be one of the first to benefit from it, and possibly benefit the most.
