While many of the best growth stocks can be found in the tech space, not all of them are. Let's take a look at two of my favorite growth names in the consumer space.
Dutch Bros
NYSE: BROS
Key Data Points
If you're looking for the next big restaurant stock, Dutch Bros (BROS +0.07%) has all the right ingredients. First, you want a company with a big expansion runway ahead. That is certainly the case with Dutch Bros, which has just over 1,000 locations in 24 U.S. states.
It's a regional to national expansion story that has plenty of legs. The company started out in the Pacific Northwest and has been expanding eastward. Texas and California are now its biggest markets, and it has expanded in the southern U.S. into Florida. The company plans to have over 2,000 coffee shops by 2029, with an ultimate goal of having 7,000 nationwide in the U.S. eventually.
The great thing about Dutch Bros' expansion is that its coffee shops have very small footprints, with most of its traffic drive-thru and most locations not having indoor seating. This is less costly to build out, and the company tends to see a quick payback on its investments.
What makes the Dutch Bros story even more exciting, though, is that it also has a big same-store sales driver over the next few years. The company has already been posting good comparable store results, with same-shop revenue up 6.1% in the second quarter. This is mostly due to product innovation and the introduction of mobile ordering.
However, the company is just now piloting hot food items. Food currently makes up less than 2% of Dutch Bros' sales, compared to rival Starbucks, where food is nearly 20% of sales. The company has seen good traction in its early pilots, and has admitted to missing out on sales by not having hot breakfast items.
Between its expansion and food opportunity, Dutch Bros is one of my favorite consumer growth stories.
Image source: Getty Images.
e.l.f. Beauty
NYSE: ELF
Key Data Points
When it comes to consumer products, one of the most powerful growth engines is distribution increases. With its recent acquisition of Rhode, e.l.f. Beauty (ELF 0.79%) finds itself with a huge opportunity to increase retail distribution of one of the hottest skincare brands on the market. The Hailey Bieber brand has seen its sales skyrocket over the past few years, despite being just an e-commerce brand. However, the brand just entered Sephora with huge fanfare and sales.
But Sephora is likely just the start. E.l.f. has strong relationships with Ulta Beauty and Target, making them logical stores to expand to next. Rhode also had a pretty limited product assortment, which is something e.l.f. will also likely look to grow. The company has strong manufacturing ties, and would likely be able to get new products to market quickly. Rhode has also done very little marketing outside of Bieber herself, while e.l.f. has a huge influencer and marketing machine that it can now plug Rhode into.
Rhode products also come at higher price points and better gross margins, which should help lift overall e.l.f. sales and profits. Also not to be overlooked is e.l.f.'s earlier acquisition of skincare brand Naturium. That brand is also expanding into new stores, including recently launching at Sephora in Australia and New Zealand.
E.l.f's namesake brand is no slouch either, having taken huge market share over the years in the mass-market cosmetic space. The company is still increasing shelf space in the U.S. for its namesake products, and it has been quickly gaining traction internationally. While there could be some near-term tariff-related issues, e.l.f. is still a strong growth brand.
The big story for now, though, is Rhode. Between increasing e.l.f.'s product assortment and its distribution, it should be a huge growth driver in the years to come.
