It’s been a while since the coffee industry has had any excitement.
The rise of Dutch Bros. as a formidable competitor to Starbucks highlights the inherent power of capitalism. Since going public in 1992 (with only 140 locations), Starbucks has been the frontrunner of coffee with its relaxed vibe and playful offerings, even taking over America’s signature coffee: Dunkin. Starbucks has nearly 40,000 locations worldwide, and its net worth is $100 billion.
Clearly, they have nothing to worry about. Right?
Maybe.
Capitalism thrives on competition and innovation, and Dutch Bros personifies this principle.
Even with less than 1,000 locations, Dutch Bros. could prove a worthy competitor at half the price of a Starbucks coffee but with similar commitments to sustainability and quality beans. They could disrupt the industry by identifying and capitalizing on Starbucks' weaknesses, such as pricing, and potentially saturating the market with too many locations.
And who benefits from the competition? Customers. More choices mean both companies must step up with product offerings and experience. Considering the new kid hired Christine Barone as the new President (previously with Starbucks), One thing is certain: they plan to learn from others' mistakes.
But how will Dutch Bros reach 10,000 locations? And is their goal to be worldwide?
Both remain to be seen. However, Dutch Bros' immediate opportunity is to leverage diversity as a competitive advantage. Instead of merely paying lip service to DEI initiatives, they can capture the nomad coffee drinker by embracing diversity as more than an HR metric and aligning it with business goals and a diverse customer base (the one without a home coffee brand).
Companies like Dutch Bros. remind us that it’s never too late to carve out a space despite unbelievable market saturation as long as you have a product people want. And based on their rapid growth, people want their coffee. I see CPGs (kcups, beans, creamers, RTD), brand partnerships, and other offerings.
Ultimately, the success of Dutch Bros lies in its ability to recruit and retain top talent, market research and strategically place its future locations in areas open to new offerings.
At FIG, we love a good underdog story.
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