Recently, with the remaining uncertainty in the market due to stock-market crash and tariffs, multiple growth stocks can now be purchased at much lower prices than a few months ago. An attractive name that is about 35% below its high level as this writing Dutch bros (Bros 1.23%,,
As a purification of coffee-based drinks, the company is not immune from tariffs. Since Hawaii is grown only in small amounts of green coffee in Puerto Rico, and to some extent in California, the US should import almost all coffee. Meanwhile, supplies such as cups and paper products generally come from countries like China. It means StarbucksCompanies need to increase prices, this may eventually motivate consumers to cut back on their drinks.
However, Dutch Bros is not necessarily in a bad place. Its drinks are already cheaper than Starbucks, making it a good option. It is larger than local coffee shops, which means that it can absorb the increasing costs inspired by recent tariffs.
Historically, coffee is exempted from tariffs, especially since there is no real possible way to bring collective cultivation of coffee beans in the US, there is still a possibility that a discount may eventually be carved when the tariff is released. Meanwhile, if there is no major decline in traffic, restaurants and coffee-shop operators perform well in inflation environment.
Sales figures grow with high prices, and if chains can determine prices, they do not lose too much gross margin, they can take advantage. For example, $ 6 drinks with 18% gross margin ($ 1.08 gross profit) are 8% more profitable than $ 5 drinks with 20% gross margin ($ 1 gross profit).
Long term remains intact
Despite the uncertainty of the near-medium period with tariffs, the long-term story with Dutch Bros is intact. The company can promote the same-store with rising prices. Even more importantly, the introduction of more food options and mobile orders should also increase to increase in comparable-store sales.
Unlike rival Starbucks, Dutch Bros does not have a large classification of food options. The company has admitted that this possibility affects its traffic, especially around breakfast time when consumers do not want to make two stops – one for coffee and the other to eat something. Dutch broses are offering more food items at select shops, which can be a major opportunity when it rolls out for more places. It currently receives only 2% of its sales from food, while the food had 19% of Starbucks’ sales last year.
In addition, the company recently rolled out mobile ordering. This is a while in the game, but it is a proven way to help in running the traffic. Dutch bros is generally lacking seating with places and has a tech -ude business, it also helps in the sale of drives.
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The biggest opportunity for the company, however, is still expansion, as it tries to grow from a regional to a national coffee-shop operator. At the end of last year, Dutch Bros was operated with 982 places in only 18 states, of which 670 were owned by the company. It has opportunities to expand new markets, as well as to infect existing markets.
Its biggest markets are Oregon, where it was established, and neighboring California. However, its home state has only several places as Starbucks and California has a fraction of the number compared to its large rival. And its total number of American places is dwarfed from more than 17,000 places, Starbucks alone in the US.
So Dutch bros has a large, constant store expansion opportunity that can last for decades. If it has increased by 15% per year in its store base for the next 20 years, there are still less space than Starbucks, which is now in the US, its store has a small format that depends on two drive-up windows and walk-up windows, which means that despite their strong sales, the locations to manufacture are very cheap.
The Dutch bros generates solid -free cash flow that allows it to expand without taking it to any loan. It plans to open at least 160 new places in 2025 for a 16%unit increase.
Given the same-store drivers and the opportunity for expansion, Dutch Bros looks like a solid stock for investors, which are for themselves in the long term.
There is no situation in any stock mentioned by Geoffree Cereper. The micle flower has a position and recommends Starbucks. The micle flowers recommend the Dutch Brothers. There is a disclosure policy of micle flowers.
