Dutch Bros is generally considered a coffee chain, though it doesn’t sell drip coffee, only espresso drinks, and a good portion of its business is in energy beverages. And yet, when CEO Christine Barone presented at the ICR Conference this week, she noted one of the company’s biggest goals this year is to get more business in the morning.
“There’s probably a beverage occasion that we’re missing in the morning,” Barone said. “We’re a beverage company. We will always be a beverage company.”
The Grants Pass, Oregon-based chain, which is just about to open its 1,000th shop, is unusual in that much of its business comes in the afternoon and evenings, periods many of its competitors yearn for more sales.
“Our business is a little bit unique, in that a third of the business is in the morning, a third of the business is in midday, and a third of the business is in the afternoon,” Barone said.
In some respects, that is an envious problem to have. Yet she said, many of its beverage competitors generate nearly half of their business in the morning, where consumers are more habitual and can visit more frequently.
There’s some real potential for sales if Dutch Bros were to match its competitors’ frequency. Dutch Bros generates strong average unit volumes, just under $2 million, similar to that of Starbucks. Lifting sales in the morning could generate substantial revenue for the company and its locations.
Assuming, that is, the company doesn’t lose some business the rest of the day in the process.
Still, morning customers have expectations and Barone is intent on meeting them. “The biggest reason is they want more shops,” Barone said.
Dutch Bros has certainly been working on that. The company has opened well over 150 shops since the end of 2023, making it one of the country’s fastest growing chains. One reason it has opened so many locations: To build frequency in core markets. Much of that frequency could come in the morning.
Mobile order is another factor that could drive more sales in the morning, Barone said. The company only added mobile order and pay last quarter. The company has already found that customers visit 5% more often after they start using mobile order. The program has also generated considerable membership in Dutch Bros’ already popular Dutch Rewards program.
“We believe we’re bringing in new customers with mobile order who really wanted that functionality to be part of the brand,” Barone said.
That could also change Dutch Bros in a more practical manner, by leading more customers to skip the drive-thru and use the walk-up window.
Only about 10% of the company’s customers use that window. That is expected to change as more customers use mobile order. “More customers choose to pick up their order at that walk-up window,” Barone said. “It’s really shifting that production to the walk-up window, and then taking some cars out of the line, which gives other customers confidence to join the line.”
Some customers also want food in the mornings. Dutch Bros has traditionally had a limited amount of food on its menu, with a trio of muffin tops and a granola bar. The company started testing an expanded menu last year with eight different items.
That’s because some customers who might come by in the morning want breakfast to go with their latte. “There’s probably a beverage occasion we’re missing in the morning,” Barone said. “We will always be a beverage company. The goal of food is really to capture that extra beverage occasion, because in the morning a lot of us don’t want to go to two places as we’re on our way to work.”
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