Shares of Dutch Bros jump 70% after IPO, as Wall Street claims a piece of the southern Oregon coffee chain

Dutch Bros president Travis Boersma showed up Wednesday at his company’s Wall Street debut with flip-flops, a ball back 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 valued on paper at $ 2.7 billion. But Boersma didn’t mind watching the part on Wednesday as he hoped to ring the closing bell on the New York Stock Exchange after a spectacular first day of trading.

Shares of the Grants Pass company soared nearly 70%, while investors claimed a piece of Boersma’s exclusive coffee chain.

“This concert has always been about being true to yourself,” he said in a Zoom call from New York. “Our culture is everything in our company. I think that is what differentiates our biggest factor ”.

Shares of Dutch Bros. went from its offer price of $ 23 to nearly $ 39 in the first transaction, 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 valuable company in the state, with a market capitalization almost equal to Columbia Sportswear. In the eyes of Wall Street, Dutch Bros. is worth more than NW Natural, Greenbrier and Schnitzer Steel, combined.

Dutch Bros (pronounced “bros,” not “brothers”) has created a rabid following with eager “broists” greeting customers in their cars outside their cafes. The Southern Oregon chain offers a menu of sparkling, caffeinated beverages that extend far beyond basic American.

Enthusiastic customers who call themselves the “Dutch mafia” use their cars, bicycles and skateboards with stickers with the firm’s blue mill. In the process, the Oregon chain is turning the tired image of the small town cafe into something fun and entertaining.

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

Nearly a quarter of Dutch Bros.’s sales come from its Blue Rebel line of energy drinks, according to regulatory filings associated with its IPO. Nolfi said Dutch Bros. is very much related to its customers and has adapted its menu to meet their demands.

“There has been a shift in consumer demand for more diversity in coffee and beverage related products,” he said.

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

They opened their first unit a year later.

Dane Boersma who died in 2009 due to amyotrophic lateral sclerosis, Lou Gehrig’s disease. At the time, Dutch Bros. had only 150 locations.

Still based in the small town of Douglas County, where it began, Dutch Bros. has grown to more than 470 locations ranging from Washington state to Texas.

Sales rose 27% last year to $ 327 million. But its profits fell sharply, from $ 28 million to $ 5.7 million, as the company spent aggressively to meet its growth goals.

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

That’s an ambitious goal, but think about it: Dutch Bros. has 153 stores in Oregon, one for every 28,000 residents. If it achieved the same proportion nationwide, it would have more than 12,000 stores.

The key to achieving Dutch Bros.’s goals, Boersma said, is how it promotes leaders to form crews in new markets as the company expands and leads “group hiring” to recruit staff who adopt the original culture of the chain. He said that’s how Dutch Bros exports its brand and image to cities that have never heard of a “Unicorn Blood blended Rebel” (it’s a Blue Rebel energy drink flavored with strawberry, white chocolate and almond).

“We’ve had our Blue Rebel energy drink for almost 15 years,” Boersma said. “There is nothing to indicate that it is a fad. It is something that continues to increase, year after year, as the volume grows.

Like Les Schwab Tire Centers, another small Oregon chain with a reputation for outstanding customer service, Boersma said his company promotes through the ranks, offering top artists the opportunity to take on leadership roles in new markets.

“The Schwab has been nothing more than a (classy) example of an organization in the state of Oregon,” Boersma said. “We have absolutely studied Les Schwab’s practices and their performance.”

Like Schwab, Dutch Bros. has maintained its headquarters in its hometown as it grew (although shortly after Les Schwab’s death, the tire chain moved its corporate office down Bend Road. Boersma said on Wednesday he can’t say what the future Dutch Bros. Corporate Office is for, but he pledged the company will always have a large presence at Grants Pass.

As it grows, Dutch Bros. will face new competitive pressures from regional chains, small-town coffee stalls and established brands such as Starbucks. And it will have to grow the company beyond its humble roots to accommodate the demands of public markets.

In his financial presentations this summer, Dutch Bros acknowledged that he has struggled to manage his accounting because he lacks the staff with the experience to manage his increasingly complex business.

Earlier this week, no Oregon company had raised more than $ 100 million in a IPO since 2004. Dutch Bros. raised $ 484 million, which the company says it will use to pay $ 200 million in debts and finance operations. It will allocate 1% of the proceeds of the IPO to charity, which will be paid for ten years.

Investment firm TSG Consumer Partners, which bought a stake in Dutch Bros. three years ago, owns about a third of the business.

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

But Boersma retains a controlling stake. Dutch Bros. established an unusual corporate structure along with its IPO, which grants Boersma 74% of the voting shares. This privileged control can disable investors, who worry that their interests are not aligned with those who control the shares.

On Wednesday, however, Boersma said it was important for him to retain a controlling stake to ensure the business continued to operate as it has been.

“If I can make sure, day in, day out, week in, month out, year after year, that we do the right thing and take care of everyone the way we should be, that’s critical,” Boersma said Wednesday. “Having control, being able to steer the boat still, is worth its weight in gold.”

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