Can Dutch Bros Navigate Front-Loaded Cost Pressure in 2026?

Dutch Bros Inc. BROS reported beverage, food and packaging costs of 27% of company-operated shop revenues in the fourth quarter of 2025, representing an increase of 160 basis point year over year. The company stated that coffee costs remained elevated throughout 2025 and increased as the year progressed. It also noted that, based on its inventory turnover cycle, changes in coffee prices typically take two to three quarters to appear in reported financial metrics.

For 2026, guidance specifies the expected timing of cost pressures. At the midpoint of its outlook, BROS projects approximately 80 basis points of total cost-of-goods-sold pressure for the full year. Within that total, roughly 200 basis points of COGS pressure is expected in the first quarter, with the impact stepping down over the remainder of the year. The company attributed this pattern to the lag between commodity price movements and when those costs are reflected in results.

Other expense categories moved in a different direction during the fourth quarter. Labor costs were 26.2% of company-operated shop revenues, which was 90 basis points favorable year over year. Occupancy and related costs were 17.2%, reflecting 30 basis points of year-over-year favorability. Preopening expenses were 2% of company-operated shop revenues, representing 90 basis points of year-over-year increase.

Dutch Bros indicated that occupancy and related costs as a percentage of revenues are expected to increase in 2026 as more leases shift to build-to-suit structures. Approximately 45% of leases in 2025 were build-to-suit, and continued progress toward the targeted mix is expected. In addition, after generating 140 basis points of adjusted SG&A leverage in 2025, the 2026 outlook incorporates an additional 70 basis points of adjusted SG&A leverage.

Looking ahead, BROS indicated that coffee-cost-related pressure is expected to be highest in the first quarter and decline through the remainder of the year. Occupancy costs as a percentage of revenues are projected to increase as the lease mix shifts toward build-to-suit locations.

Competitor Landscape: Starbucks & McDonald's

In assessing Dutch Bros’ ability to manage front-loaded cost pressure, two relevant competitors are Starbucks Corporation SBUX and McDonald's Corporation MCD.

Starbucks has acknowledged elevated coffee pricing and tariff-related product and distribution cost inflation as contributors to margin pressure in fiscal 2026. Management expects these pressures to peak in the second quarter and ease in the back half of the year. Starbucks is pairing that outlook with procurement initiatives and a multiyear plan to track approximately $2 billion in costs, alongside expectations for modest full-year operating margin improvement.

McDonald’s, while more diversified across food categories, operates in a similarly inflation-aware environment. The company has emphasized value leadership, menu innovation and marketing execution to drive guest counts while targeting operating margin expansion in 2026. With a predominantly franchised model and significant global procurement scale, McDonald’s benefits from broad system leverage and disciplined cost management. At the same time, management continues to balance affordability messaging with profitability objectives in a competitive quick-service landscape.

Against Starbucks’ global coffee exposure and McDonald’s procurement scale, Dutch Bros faces a more concentrated coffee-cost impact in the near term. With COGS pressure expected in the first quarter, execution around pricing, throughput and cost discipline will likely be central. As commodity pressures moderate, the company’s unit growth, SG&A leverage and shop-level productivity initiatives will likely determine how effectively it converts top-line momentum into margin stability in 2026.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research