Dutch Bros. shares jump 70% after IPO as Wall Street claims piece of southern Oregon drive-through coffeehouse chain

Dutch Bros. President Travis Boersma showed up at his company’s Wall Street debut on Wednesday, wearing flip-flops, an inside-out cap and a Rage Against the Machine t-shirt.

His company’s initial public offering instantly made him one of Oregon’s richest men, with a fortune estimated on paper at $ 2.7 billion. But Boersma didn’t mind watching the role on Wednesday as he waited to ring the New York Stock Exchange closing bell after a spectacular first day of trading.

Shares of Grants Pass soared nearly 70% as investors demanded a piece of Boersma’s quirky drive-thru chain.

“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 business. I think that’s the thing that is our biggest differentiator.

Trading under the ticker symbol “BROS”, shares of Dutch Bros. fell from its offer price of $ 23 to nearly $ 39 at the start of trading, giving the company a market value of $ 6.4 billion.

It is the largest IPO in Oregon history and instantly makes Dutch Bros. the fifth-most valued company in the state, with a market capitalization almost equal to that of Columbia Sportswear. To Wall Street, Dutch Bros is worth more than NW Natural, Greenbrier and Schnitzer Steel combined.

Dutch Bros (pronounced “bros”, not “brothers”) have built a rabid following with enthusiastic “broistas” who greet customers in their cars in front of their coffee stalls. The southern Oregon chain has a menu of frothy and caffeinated drinks that go way beyond the basic Americano.

Enthusiastic customers who call themselves the ‘Dutch Mafia’ cover their cars, bikes and skateboards with stickers depicting the company’s iconic blue windmill. In the process, the Oregon chain turns the tired image of a small town coffee shack into something hip and fun.

“They are really focused on connecting to the local community and being local wherever they are. I think this will help them expand into other markets, ”said Jennifer Nolfi, director of the Center for Retail Leadership at Portland State University.

Almost a quarter of Dutch Bros. sales come from its Blue Rebel line of energy drinks, according to regulatory documents associated with its IPO. Nolfi said Dutch Bros listens closely to their customers and has tailored their menu to meet their demands.

“There has been a shift in consumer demand for more diversity in items related to coffee and beverages,” she said.

Dutch Bros’ has its roots in the late 1980s, when Travis and Dane were working to plan for the future of their family’s third-generation daily farm. Faced with stricter environmental rules on manure management, the couple opened a small coffee cart in 1992 and were delighted to sell $ 65 worth of drinks on the first day.

They opened their first drive a year later.

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

Still based in the small town of Douglas County where it started, Dutch Bros. has expanded to over 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 aggressively spent to meet its growth targets.

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

It’s a lofty goal, but think of it this way: Dutch Bros. has 153 stores in Oregon, one for every 28,000 people. If he could achieve the same ratio across the country, he would have over 12,000 stores.

The key to achieving the goals of Dutch Bros, said Boersma, is the way it encourages leaders to form teams in new markets as the company grows and organizes “hiring teams” to recruit staff. which adheres to the offbeat culture of the chain. He said this is how Dutch Bros exports their brand and image to cities that have never heard of a ‘Licorn Blood blended Rebel’ (it’s a Blue Rebel energy drink with strawberry aromas. , white chocolate and almond.)

“We have had our Blue Rebel energy drink for almost 15 years,” said Boersma. “There is no indication that this is a fad. This is something that continues to increase year after year as the volume increases.

Like Schwab Tire Centers, another small-town Oregon chain known for its exceptional customer service, Boersma said his company is rising through the ranks, giving exceptional artists the opportunity to take on leadership roles on new markets.

“The Schwabs were just one (classic) example of an organization in the state of Oregon,” said Boersma. “We absolutely studied Les Schwab’s practices and their performance.”

Like Schwab, Dutch Bros. kept its headquarters in its hometown as it grew (although shortly after Les Schwab’s death, the tire chain moved its headquarters to Bend Road. Boersma said on Wednesday he couldn’t say what the future had in store for him at Dutch Bros. headquarters, but he pledged that the company will still have a strong presence in Grants Pass.

As it grows, Dutch Bros. will face new competitive pressures from regional chains, small town cafes and established brands like Starbucks. And he will have to grow the business beyond its humble roots to meet the demands of public procurement.

In its financial documents this summer, Dutch Bros. admitted that it was struggling to manage its accounting because it lacked staff with the expertise to run its increasingly complex affairs.

Prior to this week, no Oregon company had raised more than $ 100 million in an IPO since 2004. Dutch Bros. has raised $ 484 million, which the company says it will use to repay 200 millions of dollars in debt and finance its operations. It will reserve 1% of the proceeds of the IPO for charities, to be paid over 10 years.

Investment firm TSG Consumer Partners, which took a stake in Dutch Bros. three years ago, owns around a third of the company.

Boersma owns a 43% stake in the company. He is no longer a CEO – the former president of Stumptown Coffee Roasters, Joth Ricci, now runs the company.

But Boersma retains a majority stake. Dutch Bros. has established an unusual corporate structure in conjunction with its IPO which gives Boersma 74% of the voting shares. Such insider control can discourage investors, who fear that their interests are not aligned with those who control the stock.

On Wednesday, however, Boersma said it was important to him that he retain a controlling stake to ensure the company continues to operate as it has.

“If I can make sure, day after day, week after week, month after month, year after year, that we are doing the right thing and that we take care of everyone the right way, that is paramount. . said Wednesday. “To be in control, to be able to steer the ship again, is worth its weight in gold to me.”

– Mike Rogoway | [email protected] | Twitter: @rogoway |