Dutch Bros vs. Starbucks: A Growth Stock Investment Opportunity?

Is Dutch Bros the Next Big Growth Opportunity in the Coffee Market?

Investors often find themselves with an extra $1,000 to invest, and they frequently allocate that capital to purchase shares in established consumer businesses. In the coffee market, Starbucks often attracts investors due to its strong brand recognition and increasingly large global presence.

However, considering Starbucks' maturity as a company, it might be too large to be considered a high-growth stock. Consumers also have diverse choices in this market. Given its rapid expansion and increasing regional and national footprint, Dutch Bros (BROS) could be better positioned to deliver superior returns on a $1,000 investment.

The Current State of Dutch Bros

Dutch Bros has been in operation since 1992, when it opened its first coffee shop in Grants Pass, Oregon. It gradually expanded as a privately held company. However, its expansion has accelerated since its 2021 initial public offering (IPO), roughly doubling in size since then.

As of the end of the second quarter of 2025, the company reported 1,043 locations, spanning from Oregon to Florida. Their expansion plans include reaching 2,029 shops by 2029, nearly doubling their current footprint. In comparison, Starbucks has over 41,000 locations globally, making it unlikely to double in size anytime soon, if at all.

While Starbucks is known for its featured and seasonal beverages, Dutch Bros distinguishes itself with its breve coffee drinks, based on espresso and half-and-half. Furthermore, unlike chains like Starbucks, Dutch Bros primarily operates drive-thru locations. This strategy reduces overhead costs associated with indoor seating.

Conversely, with the absence of indoor seating, Dutch Bros may need to place a stronger emphasis on beverage quality compared to Starbucks. However, this allows Dutch Bros to differentiate itself by focusing on philanthropy, sustainability, and inclusion, potentially attracting both customers and employees, thus fostering a competitive advantage.

Dutch Bros by the Numbers

These factors have contributed to impressive financial results. In the first half of 2025, Dutch Bros generated $771 million in revenue, a 29% year-over-year increase. This included a 14% increase in the number of shops and a 5% increase in same-store sales.

During the same period, operating expenses increased by 26%. However, even with higher expense growth, Dutch Bros reported $41 million in net income for the first half of the year, a 116% year-over-year increase.

Driven by strong financial performance, Dutch Bros raised its full-year revenue guidance, projecting between $1.59 billion and $1.6 billion in total revenue, representing a 25% increase if the forecast holds. While this represents a slight deceleration in growth, it's unlikely to deter investors significantly.

This sentiment is further supported by the stock's performance this year. Although it has experienced limited growth recently, it's important to remember the significant surge of almost 60% over the last year.

Investors should consider Dutch Bros' valuation. Its price-to-earnings (P/E) ratio of 154 reflects its recent shift to profitability. Some investors might be hesitant given the forward P/E ratio of 82. However, the company's profit growth could justify taking a position, even at these levels. The price-to-earnings growth (PEG) ratio, which takes earnings growth into account, might offer a more complete picture.

Investing $1,000 in Dutch Bros

With its regional-to-national expansion underway, a $1,000 investment in Dutch Bros stock could potentially generate significant returns.

However, the relatively high P/E ratio might discourage some investors, especially considering the competitive landscape of the coffee shop industry. Alternatives like investing in ETFs that track the consumer discretionary sector could also be considered.

Nevertheless, Dutch Bros' unique beverage offerings and community-focused business model have resonated with investors. Its ability to successfully replicate its strategy in diverse markets like Oregon and Florida suggests potential for successful nationwide expansion.

The current stabilization in the stock's price could represent a compelling opportunity to invest $1,000 in Dutch Bros as it continues toward its goal of 2,029 stores. Investors should always conduct thorough research and consider their own risk tolerance before making any investment decisions.