Dutch Bros Inc. Presentation at Baird Global Consumer, Technology & Services Conference 2025: Growth Strategy, Financial Targets, and Market Expansion Plans

Key Takeaways

TL;DR: Dutch Bros is leveraging its unique drive‐thru model, strong culture, and innovative initiatives like Mobile Order & Pay and a food pilot to drive robust unit and rev. growth. Mgmt. is confident in expanding towards a 7,000-shop TAM w/ disciplined market planning, margin leveraging, and strategic capital allocation amid competitive pressures and cost headwinds, such as elevated coffee prices and tariff impacts.

• Biz Model & Brand Differentiation
  • Operates just over 1,000 beverage-focused, drive‐thru shops emphasizing hospitality and culture (“Radiate Kindness”).
  • Unique svc elements, including a generous 24oz cup and a customer-centric Dutch Rewards program, reinforce brand loyalty and differentiation from competitors like 7 Brew and Scooter’s.
• Growth Strategy & Recent Performance
  • Q1 and early Q2 performance has been “spectacular,” driven by transaction growth and the recent launch of Mobile Order & Pay.
  • Mgmt. highlighted multiyear layers of sales growth, expecting 28%+ rev. growth long-term, w/ EBITDA growing north of 20%.
• Unit Growth & Market Planning
  • Targets growing to 2,029 shops by 2029 and has built a bottoms-up analysis to justify a 7,000-shop TAM in the U.S.
  • Operators w/ an avg. tenure of 7 years drive the brand’s growth, emphasizing a “grow from within” philosophy.
  • Revised market planning over the last 18 months has improved new shop productivity by spacing out openings to build brand awareness effectively.
• Mobile Order & Pay Impact
  • Launched nationwide in Q4 '24, Mobile Order & Pay increased share of transactions from 8% to 11% by Q1 '25.
  • The channel is incremental: 72% of Q1 transactions occurred through Dutch Rewards, and there was a 500-basis point increase in rewards program penetration.
  • Mobile ordering strategically reallocates order flow, shifting more than 50% of mobile-driven volume to the walk-up window to balance throughput.
• Food Program Pilot
  • Expanded from an 8-store to a 32-shop pilot, testing an augmented offering from 4 to 8 SKUs (e.g., sliders, chorizo wrap, Dutch waffle) to capture morning daypart demand.
  • The pilot is being evaluated on its impact on throughput and cycle time, focusing on maintaining speed and quality.
• Throughput & Operational Efficiency
  • Ongoing initiatives aim to enhance peak-hour speed by deploying pilot tests on team roles and bottlenecks.
  • A newly introduced speed dashboard is helping shops monitor and improve transaction throughput during peak periods, a critical driver for achieving high avg. unit volumes ($1.8M Year 2 AUV target).
• Margins, Cost Pressures & G&A Leverage
  • Targeting shop-level margins around 30% and expects to leverage G&A expenses; about 90 basis points of leverage is expected this year.
  • Facing 110 basis points of COGS margin pressure due to elevated coffee costs and tariffs, mgmt. noted that any transitory cost headwinds will likely benefit future margins once they recede.
  • Long-term, as competitive pricing and operational enhancements drive sales, margin improvements will also be reinvested in people and svc excellence.
• Capital Allocation & Future Investment
  • With expectations to turn FCF positive next year, excess cash will primarily fuel new shop growth, manage debt, and address tax obligations.
  • Maintains flexibility w/ its capital allocation while focusing on scaling its operating model for sustained growth.

This comprehensive discussion provides investors w/ clear insights into Dutch Bros’ differentiated approach, strong unit economics, disciplined market planning, and strategic initiatives designed to boost long-term growth and margin expansion in a competitive beverage market.

Call Q&A

• David Tarantino: Can you frame up the Dutch Bros story and what makes the brand special?
  • Christine Barone: Dutch Bros is a drive-thru-only beverage concept w/ over 1,000 shops, known for customization and exceptional svc. Our culture, core values, and philanthropic efforts are key to our success. We aim to grow to 2,029 shops by 2029 and have a TAM of 7,000 shops in the U.S. We're focusing on people, transactions, margins, and sales growth initiatives like Mobile Order and Pay.
• David Tarantino: Could you talk about how some of this translates to annual financial targets?
  • Joshua Guenser: We target 28%+ rev. growth, 30% shop level margins, low SD comp growth, mid-teens unit growth, and EBITDA growth north of 20%.
• David Tarantino: How has the biz been faring recently and how do you view the current consumer environment?
  • Christine Barone: We had a strong Q1 driven by transaction growth and mobile order. Our value proposition, svc, drink sizing, and rewards program provide strength. We're in a unique position w/ idiosyncratic growth drivers like mobile order and expanded food program.