Wall Street clamors for a piece of southern Oregon drive-thru coffee chain

Dutch Bros stock jumps 60% after IPO

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Published: Sep. 15, 2021, 9:58 a.m.

Dutch Bros Chairman Travis Boersma showed up at his company’s Wall Street debut Wednesday wearing flip-flops, a backwards ballcap and a Rage Against the Machine T-shirt.

His company’s initial public offering instantly made him one of Oregon’s wealthiest men, with a fortune valued on paper at $2.6 billion. But Boersma didn’t care about looking the part Wednesday as he waited to ring the closing bell on the New York Stock Exchange after a spectacular first day of trading.

“This gig has always been about being true to yourself,” he said on a Zoom call from New York. “Our culture is everything in our company. I think it’s the thing that’s our biggest differentiator.”

The Grants Pass company’s shares soared by nearly 60% as investors clamored for a piece of Boersma’s chain of offbeat, drive-thru coffee stands.

Trading under the ticker symbol “BROS,” Dutch Bros’ shares surged from its $23 offering price to close at $36.68 Wednesday, giving the company a market value of $6.1 billion. Shares traded as high as $40.10 earlier in the day.

Dutch Bros IPO

Dutch Bros Chairman Travis Boersma rings the ceremonial first trade bell on the floor of the New York Stock Exchange, as his company’s IPO opened Wednesday. Dutch Bros photo

It’s the biggest IPO in Oregon history and instantly makes Dutch Bros the state’s fifth-most-valuable company, with a market capitalization approaching Columbia Sportswear’s. In Wall Street’s eyes, Dutch Bros is worth more than NW Natural, Greenbrier and Schnitzer Steel, combined.

Dutch Bros (pronounced “bros,” not “brothers”) has built a rabid following with eager “broistas” who greet customers at their cars outside its coffee stands. The southern Oregon chain features a menu of frothy, caffeinated drinks that extend far beyond the basic Americano.

Enthusiastic customers who call themselves the “Dutch Mafia” slather their cars, bikes and skateboards with stickers featuring the company’s signature blue windmill. In the process, the Oregon chain is turning the tired image of the small-town coffee shack into something hip and fun.

“They’re really focused on connecting to the local community and being local wherever they are. I think that will help their expansion into other markets,” said Jennifer Nolfi, director of Portland State University’s Center for Retail Leadership.

Nearly a quarter of Dutch Bros’ sales are from its Blue Rebel line of energy drinks, according to regulatory filings associated with its IPO. Nolfi said Dutch Bros is closely attuned to its customers and has adapted its menu to meet their demands.

“There’s been a shift in consumer demand for more diversity in coffee and beverage-related items,” she said.

Dutch Bros
Founded: 1992
Headquarters: Grants Pass
Locations: 471 as of June 30, including 153 in Oregon
Menu: Standard mochas, lattes and Americanos, plus signature cold brews, frozen espressos, energy drinks, milkshakes, teas, lemonade, Italian sodas and smoothies
Employees: 13,000
Financial results: $327 million in revenue last year, up 27% from 2019; profits of $5.7 million in 2020, down from $28.4 million the prior year

Dutch Bros traces its roots to the late 1980s, when Travis and Dane were working to plan the future of their family’s third-generation dairy farm. Facing stricter environmental rules over manure management, the pair opened a little coffee pushcart in 1992 and were stoked to sell $65 in beverages on their first day.

They opened their first drive thru a year later.

Dane Boersma died in 2009 of amyotrophic lateral sclerosis, Lou Gehrig’s disease. At that time, Dutch Bros had just 150 locations.

Still based in the small, Josephine County town where it started, Dutch Bros has grown to more than 470 locations stretching from Washington state to Texas.

Sales climbed 27% last year, to $327 million. But its profits fell sharply, from $28 million to $5.7 million, as the company spent aggressively to hit its growth targets.

The chain now says it hopes to have 4,000 stores someday and it’s preparing to open a new roaster in the Midwest to accommodate future growth.

That’s an ambitious target, but think of it this way: Dutch Bros has 153 shops in Oregon, one for every 28,000 residents. If it could achieve the same ratio across the country it would have more than 12,000 shops.

The key to meeting Dutch Bros’ objectives, Boersma said, is how it promotes leaders to train crews in new markets as the company expands and run “hiring parties” to recruit personnel who embrace the chain’s offbeat culture. He said that’s how Dutch Bros exports its brand and image to towns that have never heard of a “Unicorn Blood blended Rebel” (that’s a Blue Rebel energy drink with strawberry, white chocolate and almond flavoring).

“We’ve had our Blue Rebel energy drink for close to 15 years,” Boersma said. “There’s nothing to indicate it’s a fad. It’s something that continues to increase, year after year, as the volume grows.”

Like Les Schwab Tire Centers, another small-town Oregon chain with a reputation for standout customer service, Boersma said his company promotes through the ranks, giving outstanding performers the opportunity to take leadership roles in new markets.

“Les Schwab has been nothing but a (classy) example of an organization in the state of Oregon,” Boersma said. “We’ve absolutely studied Les Schwab’s practices and how they perform.”

Like Schwab, Dutch Bros has kept its headquarters in its hometown as it grew (though shortly after Les Schwab died, the tire chain moved its corporate office down the road to Bend). Boersma said Wednesday that he can’t say what the future holds for Dutch Bros’ corporate office, but he pledged that the company will always have a big presence in Grants Pass.

As it grows, though, Dutch Bros will face new competitive pressures from regional chains, small-town coffee shacks and established brands like Starbucks. And it will have to grow the company beyond its humble roots to accommodate the demands of the public markets.

In its financial filings this summer, Dutch Bros acknowledged that it has struggled to manage its accounting because it lacks personnel with the necessary expertise to handle its increasingly complex business.

Before this week, no Oregon company had raised more than $100 million in an IPO since 2004. Dutch Bros raised $484 million, which the company says it will use to pay down $200 million in debt and to fund operations. It will set aside 1% of the IPO proceeds for charity, to be paid out over 10 years.

The investment firm TSG Consumer Partners, which bought a stake in Dutch Bros three years ago, owns about a third of the business.

Boersma owns a 43% stake in the business. He’s not CEO anymore – former Stumptown Coffee Roasters President Joth Ricci now runs the company.

But Boersma retains a controlling stake. Dutch Bros established an unusual corporate structure in conjunction with its IPO that gives Boersma 74% of the voting shares. Such insider control can turn off investors, who worry their interests may not be aligned with those who control the stock.

On Wednesday, though, Boersma said it was important to him that he retained a controlling stake to ensure the business continues running as it has.

“If I can ensure, day by day, week by week, month by month, year by year, that we’re doing the right thing and we’re taking care of everybody the way that we should be, that’s paramount,” Boersma said Wednesday. “Having control, being able to steer the ship still, that’s worth its weight in gold to me”.