Rising Coffee Costs Pressure Margins: Is Dutch Bros Well Positioned?

Dutch Bros Inc. BROS is navigating a mixed operating environment, with solid growth trends offset by rising coffee-related cost pressures. The company remains focused on traffic-led growth, digital engagement and disciplined expansion. These levers have helped sustain demand and support profitability, despite cost inflation across key commodities. The current challenge centers on coffee prices, which are creating near-term margin headwinds and testing cost resilience.

Beverage, food and packaging costs were 25.9% of company-operated shop revenues in the third quarter of 2025, which is 60 basis points (bps) unfavorable year over year. The increase was primarily driven by a 70 bps rise in coffee costs, partly offset by pricing actions across the comparable shop base. The company indicated that coffee cost inflation is expected to accelerate into the fourth quarter and remain elevated into 2026, implying that margin pressure may persist in the near term.

Despite these pressures, underlying business performance remained solid. In the third quarter of 2025, revenues reached $424 million, reflecting 25% year-over-year growth. System same-shop sales increased 5.7%, driven by strong transaction growth of 4.7%. The quarter marked the fifth consecutive period of transaction growth, positioning the company as an outlier in a challenging consumer environment. This consistency highlights the effectiveness of transaction-driving initiatives, including digital ordering, loyalty engagement and menu innovation.

The company also benefited from operating leverage in labor, supported by higher sales volumes and improved deployment, which helped partially balance cost pressures elsewhere. Strong new shop productivity and record average unit volumes further reinforced the earnings base.

While elevated coffee costs remain a key risk, sustained traffic growth, pricing discipline and a scalable operating model suggest Dutch Bros is reasonably positioned to manage margin pressure while continuing to invest in long-term growth.

BROS Stock’s Price Performance, Valuation & Estimates

Shares of Dutch Bros have gained 10.8% in the past three months compared with the 3.7% rise in the industry. In the same time frame, shares of other industry players like Starbucks Corporation SBUX and Sweetgreen, Inc. SG have gained 10% and 7.3%, respectively, while Chipotle Mexican Grill, Inc. CMG has declined 4%.

From a valuation standpoint, BROS trades at a forward price-to-sales (P/S) multiple of 4.99, above the industry’s average of 3.64. Conversely, industry players, such as Starbucks, Sweetgreen and Chipotle, have P/S multiples of 2.7, 1.25 and 4.04, respectively.

P/S (F12M)

The Zacks Consensus Estimate for BROS’ 2026 earnings per share has increased to 88 cents in the past 60 days. The company is likely to report strong earnings, with projections indicating a 29.8% rise in 2026.

BROS currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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