Dutch coffee brothers It remains the only restaurant going public in 2021 that is keeping stock prices above its initial offering, which is currently hovering around $38 versus the opening price of $23. Last year was a remarkable season for restaurant IPOs, with five new options hitting the public market, including Crispy Cream.
With the growing fears of an economic recession and the continuation of the bear market, it seems that everyone can use the recovery. Warren Buffett, the legendary oracle of Omaha, said, “Only when the tide goes out do you discover who has been swimming naked.” Small businesses may struggle to keep up with “bro-istas,” and even the biggest names in quick, personal coffee service may feel the crunch.
Talk of Dutch Bros killing the current giant in its market might be a bit premature, but this Oregon-based company makes headlines as much as it doesn’t own it.
The power of caffeine to fight stagnation
Managed by Dutch Bros. Coffee locations are throughout the western United States, and continue to grow, with more than 500 locations already serving Rebel energy drinks and freshly brewed coffee, tea, and frozen beverages. Basic consumer goods, including food and beverages, are largely seen as recession-proof. The possibility of quick stops to drive-through locations (and lower overhead costs versus traditional baristas) may give the Dutch Brothers an advantage in a prolonged economic downturn.
Larger and older companies have demonstrated the enduring potential of coffee. A leader in the industry Starbucks It fell to around $4 during the height of the Great Recession from previous highs near $20. It quickly recovered, doubling from that low by July 2009 and continuing to an all-time high of $126.32 last year. This represents a massive gain from recessionary lows, proving just how much the West Coast coffee company can do.
A culture and plan for continued success
The Dutch brothers tout their “bro-ista” culture as one of their biggest advantages in the market. “There’s great chemistry in the stands,” CEO Guth Ritchie said in an interview with Restaurant Business. “It’s a great place to work. People enjoy it. It’s a different work environment than you might get in other leadership positions.” As organizations, especially in the service and hospitality industries, continue to struggle with staff levels and business problems, this culture may be more important than ever.
A company culture viewed favorably stands in stark contrast to Starbucks, which may be losing a pitched battle against unions as workers seek to improve working conditions and negotiate for higher salaries and benefits at a time when consumer spending may soon drop significantly. Without this internal conflict, Dutch Bros. of sales volume, and could, along with outreach and community service programs, begin to claim serious market share from competitors of all sizes.
Bears can still hit the brothers
Starbucks remains the king of the retail coffee department, and Dutch Bros. With a much smaller footprint, with only 538 sites versus 34,000 Starbucks sites. The Dutch brothers continue to grow, though, and they expect to create up to 4,000 new sites within 15 years in their May earnings report.
Consumers could put the brakes on spending if an increase in federal interest rates slows a raging labor market and starts hitting workers in the wallet. The historic success of this storied Seattle coffee company includes cautionary tales; It closed more than 300 stores to stay afloat during the Great Recession, which could easily cripple a smaller competitor and take many out of business altogether.
The future looks strong
Buffett also advises foolish investors to “be afraid when others are greedy and greedy when others are afraid.” The thirst for success appears to be within reach of the Dutch brethren, as investors speak of its still impressive staying power as the company resists the current downturn in the market, showing great potential that it will be able to withstand conditions that could severely impact many competitors.
With strong employee support, a focus on philanthropy and community engagement, and a caffeine offering at a time when workers need a serious boost, Dutch Bros. A recipe for success that resists stagnation and comes out strong from the other side. In doing so, he will follow in the footsteps of the current industry giant, and those are very big shoes indeed.
Nicholas Robbins has no position in any of the stocks mentioned. Motley Fool has and recommends positions at Starbucks. Motley Fool recommends the following options: Short July 2022 calls at $85 on Starbucks. Motley Fool has a disclosure policy.