Could Buying Dutch Bros Stock Today Set You Up for Life?

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When it comes to coffee stocks, Starbucks (NASDAQ: SBUX) has set the bar. Even if you bought the stock early in 1995 (a couple of years after its initial public offering), you could have a gain of more than 10,000% if you still owned the stock. That's the type of return that can set you up for life.

The next coffee stock trying to emulate Starbucks' success is Dutch Bros (NYSE: BROS), which is just a few years removed from its September 2021 IPO. Let's see if this stock has the same potential to set investors up for life.

Is Dutch Bros the next Starbucks?

While both companies are coffeehouse operators, their concepts are quite different. Starbucks has always aimed to be a high-end coffee establishment with a local coffeehouse feel and the aesthetics, service, and prices to match.

In that regard, Dutch Bros is not trying to be the next Starbucks. Its locations generally don't have places to come inside and sit down. Instead, the company largely focuses on delivering its beverages through drive-thrus, and not surprisingly its prices are generally cheaper.

Today, most newer Dutch Bros stores are 800 to 1,000 square feet in size, offering a walk-up window and multiple drive-thru lanes served by one window. Older legacy stores are only about 500 square feet with two drive-thru lanes on each side. The company also has a few larger end-cap locations that are about 1,200 square feet; these locations often include a lobby, but typically don't have indoor seating.

One thing the two companies do share in common, though, is that the traditional cup of coffee is not their biggest seller. In recent years, cold drinks have made up about 75% of Starbucks beverage sales. For Dutch Bros, about 50% of sales are coffee-based, but that includes fancy cold-coffee beverages. About 25% are its proprietary Blue Rebel energy drinks; the rest is a mix of "teas, lemonades, sodas, and smoothies." Hot coffee accounts for only about 16% of beverage sales.

Now Dutch Bros also has a few growth opportunities where it can follow in Starbucks' footsteps. One is food, which currently brings in about 2% of Dutch Bros sales, though the company has recently been piloting more items at a select few locations. Starbucks, meanwhile, derived 23% of its sales from food items in its last fiscal year (ended Sept. 29).

Online ordering is another area. While Starbucks has admittedly had some issues with its online ordering platform, digital orders have been a growth driver across the quick-service restaurant (QSR) industry. As such, this should be another nice growth opportunity for Dutch Bros.