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Dutch Bros sales improve despite 'headwinds,' thanks to loyalty

The company’s new rewards app has already proven popular among customers and it is looking for new capabilities to improve it further.
Dutch Bros Coffee sales
Photograph: Shutterstock

Sales at Dutch Bros Coffee soared last quarter even with one hand tied behind the drive-thru chain’s back.

The Grants Pass, Ore., based chain said this week that its same-store sales rose 7.3% in the third quarter, and 10.7% on a two-year basis, despite headwinds from new locations and fewer discounts than normal last year.

The coffee chain’s loyalty program had a surprising amount to do with that. Introduced early in the year, the app already has 2.8 million members—not bad for a chain with just over 500 total shops.

Those members are apparently using the app frequently. Dutch Bros said that 60% of its business is coming from loyalty members. In other words, its customers are more likely to use the loyalty app than are Starbucks customers.

“I wish I had the magic answer to that,” CEO Joth Ricci said in an interview Thursday, when asked how the app became so popular, so quickly. “It’s just another testament to our customer base and our employees. If you would have asked me a year ago, if we would have gotten to 1 million members by the end of the year, I’d have been happy.”

Loyalty apps have become table stakes in the industry, both for their ability to drive customer frequency through one-to-one marketing as well as the data companies get from those diners.

It’s even more important for a chain like Dutch Bros. The coffee business is dominated by Starbucks and Dunkin’, both of which have about 10 times the number of members as Dutch Bros, not to mention giant McDonald’s, which has a massive coffee business of its own and launched its own program this year.

The company launched its app as part of a strategy to upgrade its technology without distracting from the service on which the chain was based.

Dutch Bros hopes that the app can be a launch pad for additional efforts that improve service.

Ricci said Thursday that the company is planning to test a “last order” capability that will remember customers’ most recent order. “Newer customers will come in, they won’t remember what they had last time,” Ricci said. “If we can help with the app, they basically push a button and put the order straight to the runner.”

Dutch Bros is competing with bigger chains that have had a longer head start on technology. Yet Ricci said the company has no interest in “playing catch-up,” that it wants technology that will enhance the experience at its drive-thrus. “We want to stay away from playing catchup, getting to where everybody else is already in,” he said. ‘We’re going to evaluate what’s coming and look at things we can adapt into our drive-thru experience.

“We want to enhance speed, remove friction, improve customer experience, those types of things.”

That was the point of the company’s loyalty program. Ricci said the program was initially created to replace a card-based program. But it also viewed it as the foundation for a more tech-friendly company that improved the experience for its customers.

“Now we think we have technology in place to bolt onto it,” Ricci said. “We have lots of great ideas.”

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