Biotech and sports companies dominate the public listings this week, but Oregon-based coffee chain Dutch Bros stands out. The firm was started by two brothers who quit the dairy industry to sell coffee from a pushcart (equipped with a single espresso machine and a stereo) in the small city of Grants Pass in 1992. It has now grown to more than 470 shops—known for their drive-through only format—spread across 11 states. Still led by one of the brothers, executive chairman Travis Boersma, the family-run business went public on the New York Stock Exchange on Wednesday in an IPO that raised nearly $500 million and turned Boesma into a billionaire.
“This is an incredible day for Dutch Bros, a total mind blow,” Boersma, 50, told Forbes on Wednesday. “When my brother and I started this company almost 30 years ago, we never imagined we’d be here today. Right now, I’m focused on providing more opportunities for our people—that’s the heart of why we went public.” The company has nearly 17,000 employees.
The blockbuster IPO makes it the largest in Oregon’s history: Dutch Bros raised about $484 million, far more than the $146 million and $169 million raised by Oregon heavyweights Nike and Columbia Sportswear in 1980 and 1998, respectively, adjusted for inflation. Boersma owns about 41% of the newly public company, a stake worth $2.5 billion. Shares in Dutch Bros closed at $36.92 on its first day of trading, 61% higher than the opening price of $23. The cofounder also purchased a plane from Dutch Bros for $900,000 in July and sold a chunk of shares in the IPO that raked in about $69 million after accounting for capital gains taxes, bringing his estimated net worth to $2.6 billion. Thanks to several “anti-takeover” provisions and a multi-tiered share structure, Boersma will retain 74% of the firm’s voting shares.
Dutch Bros is a relative pipsqueak compared to coffee chains like Starbucks and Peet’s. The firm recorded a net loss of nearly $62 million on $327 million in sales last year, with sales growing by 60% in 2020 as the chain added 71 new locations, all company-owned. Dutch Bros stopped franchising in 2017, but 56% of Dutch Bros locations are still owned by franchisees—many of them with long-standing ties to the company thanks to a 2008 decision to sell franchises only to people within the “Dutch Bros system.” All of the 179 new stores opened since 2018 are operated by shop managers promoted from within.
Publicly traded coffee companies have been a mixed bag since the onset of the Covid-19 pandemic: JDE Peet’s, which owns the coffee retailer Peet’s Coffee, went public on the Amsterdam stock exchange in June 2020 and has seen its shares slide by 12% since it started trading.. On the other hand, formerly public Dunkin’ Brands was acquired by restaurant investment firm Inspire Brands for $11.3 billion in October 2020 at $106.50 per share, a 7% premium to the firm’s stock price at the time the deal was announced. In comparison, Starbucks, purchased when it was a tiny regional outfit by Howard Schultz, who later became a billionaire, is still far ahead of the pack: The giant pulled in $23.5 billion in sales from more than 32,000 stores in its 2020 fiscal year running through September, and its shares are up by 15% since the beginning of 2021.
Still, Dutch Bros is counting on an aggressive expansion strategy and brand loyalty among its customers to ensure steady growth as a public company. The chain continued its eastward expansion with new shops in Texas and Oklahoma this year, with the aim of eventually reaching 4,000 locations across the U.S. All of its stores are drive-throughs, a model the firm says helped keep its locations accessible throughout pandemic lockdowns and the wildfires that ravaged Oregon in 2020. Dutch Bros has also developed a unique culture since its founding—touted as “Dutch Luv”—calling its baristas “broistas” and offering a secret menu of signature drinks ranging from the “Hot Annihilator” (an espresso and chocolate-macadamia-nut syrup concoction) to “Blue Rebel” energy drinks.
Travis and Dane Boersma started Dutch Bros with a pushcart by the railroad tracks in Grants Pass, Oregon in 1992, after leaving the dairy industry, which had employed two generations of their Dutch-origin family before them. “Changes to the [dairy] industry were making our prospects pretty grim. So we used that reality as motivation to branch out and try something new,” Boersma said in a statement in the firm’s offering prospectus. “Dane and I shared a desire to do something extraordinary together. We bought a double-head espresso machine, cranked up the stereo, threw open the barn doors and started experimenting with coffee beans.”
The brothers added four more carts over the years and by 1994 they had purchased their first drive-through location, setting the stage for their expansion beyond Grants Pass and into neighboring towns (and later, states) with the opening of their first franchise location in 2000. Tragedy struck in 2004 when Dane was diagnosed with ALS, a deadly neurodegenerative condition also known as Lou Gehrig’s disease. The diagnosis sparked a charitable campaign called “Drink One For Dane” to help raise funds for the Muscular Dystrophy Association, which supports ALS research. While Dane died as a result of ALS in 2009, the company says that the campaign has raised more than $10.3 million for ALS patients and research to date.
Dutch Bros kept growing under Travis’ helm and the firm took on outside investment for the first time in September 2018, receiving an undisclosed amount from San Francisco-based private equity firm TSG Consumer Partners. TSG is the second-largest shareholder in Dutch Bros, with a roughly 31% stake worth nearly $1.9 billion. Boersma stepped down as CEO to serve as executive chairman in February and was replaced at the top by Joth Ricci, who joined Dutch Bros in 2019 and previously served as president of Portland-based artisanal coffee brand Stumptown Coffee Roasters from 2013 to 2017. In May, four months ahead of the IPO, Dutch Bros took out a $200 million loan from JPMorgan Chase, which it plans to repay using proceeds from the public listing.
The memories of that first cart with his brother still drive Travis Boersma’s vision for the company today, nearly three decades and hundreds of new coffee shops later. “[Dane’s death] did not diminish the incredible inspiration I draw from my brother, to carry on and fulfill the dream we had in 1992.” he said in the prospectus. “We’re on a rocket ship and I wouldn’t have it any other way.”