Protein coffee, boba and customer awareness did wonders for Dutch Bros last quarter, sending the company’s sales and profitability soaring.
The Grants Pass, Oregon-based drive-thru beverage chain said on Tuesday that same-store sales rose 10% in the first quarter, building on momentum the chain had at the end of 2023. It was also the strongest result since 2021, when Dutch Bros’ sales took off following its initial public offering.
Christine Barone, Dutch Bros’ CEO, said that traffic improved in the quarter despite weakness in January due to bad weather in many of the chain’s West Coast markets.
She said the chain’s introduction of protein coffee in the quarter, followed by boba, both drove sales in the morning and afternoon.
Some customers are drinking the protein coffee as part of their morning workout routine as a meal replacement, Barone said.
Boba was so popular, meanwhile, that the company ran out of supplies in some locations by the end of April, an issue that has since been remedied. “Boba is something really fun, straight down the middle with our customer,” she added. “Both of these things we felt like they really, really work with our target customer.”
The company’s Dutch Rewards loyalty program accounted for two-thirds of all transactions in the period.
And Barone said that the company is building awareness of its brand in some of its newer markets where the chain added locations. The company late last year began experimenting with its messaging and the channels it uses to target new customers.
Those efforts paid off in the first quarter, to the point that Dutch Bros plans to accelerate that effort. “We’re incredibly encouraged by the results,” Barone said, noting that the company is focusing its paid ad spending on new customers while it relies on its loyalty program for existing customers.
Stronger sales also generated stronger profits. Net income was $16.2 million in the period, compared with a $9.4 million loss in the same period a year ago. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, increased 120% to $52.5 million.
Gross profit margin at the chain’s stores was 21.9% of sales in the period, an increase of 520 basis points compared with the same period a year ago.
The results sent the company’s shares soaring 8% in after-hours trading on Tuesday.
Dutch Bros increased its expectations for revenues and profitability in the period, though it kept same-store sales projections, expected to be in the low single digits, which executives explained is due to tougher comparisons later in the year.
The chain’s sales came despite weakness at some other restaurant brands, notably its rival Starbucks, which saw a sizable slowdown at the end of last year and into 2023.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.