Dutch Bros. To Offer Mobile Ordering For The First Time Amid Profits

[Alpha8472]

This chain is finally offering mobile order and pay amid record profits and growth. Meanwhile Starbucks is falling behind and the former CEO is rebuking Starbucks.

https://www.nrn.com/quick-service/dutch ... first-time

[storewanderer]

I wonder how that will work given how little parking most of their sites have.

I guess you get to sit in your car in a line that starts out in the street (hope you don't get hit idling in the street) and create exhaust for 20 minutes to claim your mobile order.

But they're creaming Starbucks and their locations are busier than ever. I think Starbucks completely miscalculated the strength of this chain and it is expanding enough to actually impact Starbucks.

[buckguy]

This chain is finally offering mobile order and pay amid record profits and growth. Meanwhile Starbucks is falling behind and the former CEO is rebuking Starbucks.

https://www.nrn.com/quick-service/dutch ... first-time

Kinda helps to post links.....

CEO's comments (original source): https://www.linkedin.com/feed/update/ur ... 255110144/
Starbucks recent quarter: https://www.nytimes.com/2024/04/30/busi ... arter.html

Starbucks biggest problems are in China. In the US, they think it's occasional customers. Schultz's comments are rambling and seem like the sort of thing people write late at night and later regret. He wants execs to spend more time in the stores--the new CEO apparently went through barista training and has been doing this. Obviously doesn't fix the problem in China, where they're facing a weak recovery.

Dutch Bros has a minute number of stores compared with Starbucks and is unlikely to be causing their problems or even benefiting that much from them---a 2% decline in one quarter is just that, you need multiple quarters to see a real trend. Starbucks is a mature business with limited room to grow. The regionals like LaColombe and Biggby, collectively, are big problem but they emphasize different things. Some are more in the suburbs, others more in the city. There's a lot of capital behind some of their competitors like Peets & Caribou (both somewhat resurgent) which JAB seems to be trying to integrate and Blue Bottle (Nestle; which seems to be stumbling).

[pseudo3d]

I can believe Dutch Bros is hurting Starbucks in Texas as their expansion has been breathtakingly fast (about 200 stores since 2021 compared to Starbucks' 1250 since 1994) but there's no way that's putting a noticeable dent on their performance in the bigger picture.

[babs]

I wonder how that will work given how little parking most of their sites have.

I guess you get to sit in your car in a line that starts out in the street (hope you don't get hit idling in the street) and create exhaust for 20 minutes to claim your mobile order.

But they're creaming Starbucks and their locations are busier than ever. I think Starbucks completely miscalculated the strength of this chain and it is expanding enough to actually impact Starbucks.

For mobile ordering to work, they need to create a separate line. At least at Starbucks, you can go inside, grab your drink and leave. I would be ticked off ordering online and waiting behind a line of cars. This needs more thought.

[ClownLoach]

The #1 Starbucks issue in the US is that they tried going to weird extremes with their menus this year and it has not worked at all. They surely know this but won't admit it directly to investors as the top cause of the 3% decline in US sales this quarter when they had been up high single digit or low double digit.

They made expensive lavender powder based drinks the focus of the quarter. The problem is that the drinks smell like they are made of ground up soap and never look like the drink in the picture. They came out with hot spicy drinks which apparently are not made consistently by the Baristas and sometimes are extremely spicy and unpleasant. Before that, they were offering the Pistachio coffee drinks that are also very inconsistent as they use a sauce instead of a syrup for the flavor. If the Baristas do not pour the milk properly the sauce sits at the bottom of the cup and the drink is bland but then becomes unpleasantly salty.

Somehow the menu process at Starbucks has become incredibly bureaucratic and the end results are not good. Exotic flavors that are very difficult to execute correctly and nobody wants like the lavender and pistachio, then the other drinks "featured" are really just menu variations on existing drinks like the current hazelnut oatmilk. They've had hazelnut for years, they've had oatmilk for years, neither should be a "feature." This week they introduced a new "blue" refresher drink. That drink was being tested in Palm Springs almost 5 years ago and was very popular. It has taken nearly 5 years to bring this drink to the chain? If they cannot ramp up a simple berry concentrate or whatever they use for the "Refresher" drinks in five years then they need to fix their manufacturing and supply chain immediately. And their food product has become ghastly factory food that tastes like something you'd expect to find at a convenience store with a microwave. Their pastries and other baked goods are weird frozen and thawed junk jam packed with preservatives. When they do get a good product, like the potato chive bake which was like a Quiche, they don't order enough and the whole chain runs out for weeks or months. By the time the trendy new item is back in stock the customer has forgotten about it.

If you read customer comments they want the classic seasonal drinks back like salted caramel and butterscotch and mocha coconut, and there has also been a major problem with removal of sugar free flavorings. Over the past few years all the sugar free syrups have been removed from Starbucks except for vanilla and caramel. Previously most of the other flavors were also available sugar free. This has led to a loss of customers who are diabetic or otherwise have chosen to use artifical sweeteners.

The CEO has commented that they are going to make some changes and although he has not mentioned getting off the crazy train for weird drinks I strongly believe that is the route they're going to go. He did mention some new menu items (unnamed and not described) coming soon. He also directly stated that they will be adding 5 additional sugar free flavors in the next couple of months which should correct a problem that has been costing them customers for a couple of years now.

I still think they got the right CEO and Schultz needs to have his stock bought out by the company and be silenced. I cannot believe that at once point I looked up to that guy as an inspirational business person. Many of their problems besides what I mentioned above stem from forcing their restaurants to make products they weren't engineered for along with process difficulties such as too many different types of lids and such. The insane difficulty of making drinks amongst all the customizations, sometimes 10 different steps per drink which require walking all over the kitchen area, combined with labor reductions have pushed these employees to the limit and led to the union drives. In effect Starbucks became McDonald's without all the automated machinery, streamlined work flow and other efficiency. Laxman is an expert in re-engineering the stores and processes, and he has been forcing what seem like little changes but they will be tremendously meaningful for the workers which will help the customers as well. Getting all the cups redesigned so they have the same lid for example, why was that so difficult to do before? His work at Unilever should also help address the broken supply chain.

I think they will get back on the right path in the US by the end of the year but they need to address the fact that the company has become so bloated that they are not able to adjust to market trends like they used to and it has cost them dearly.

Meanwhile, I keep finding myself at Dunkin especially for their iced coffee and cold brew drinks which are delicious and available with many choices of unsweetened flavors.

[ClownLoach]

Back on topic of Dutch Bros, I do not believe they are taking share from Starbucks. They have a completely different type of menu. They are busiest at night when Starbucks is either closing or closed entirely. Their drinks have disturbing levels of caffeine with 5 and 6 shots of espresso in some. Their customer is primarily the energy drink crowd.

Despite the record growth, there is increasing awareness of the harm of energy drinks. They are leading to many health issues such as increased diabetes, weight gain, and cardiac issues. Dutch Bros makes coffee drinks that are designed to compete with these high sugar, high caffeine drinks. Their coffee itself is not very flavorful, comparable to bad diner or fast food coffee but then they use a ton of shots, add a bunch of cream and pump after pump of sugary flavoring. These drinks are similarly problematic to the Panera caffeine charged lemonade that has killed and sickened multiple customers.

I do think there is a backlash forming against energy drinks. People are asking how much caffeine is in each drink. As the energy drink business has been shrinking I believe Dutch Bros has had early success in converting many of those customers but it will not last. When people become more aware of the high fat, sugar and caffeine content of Dutch Bros they will recognize it as a very unhealthy version of Starbucks and reduce their consumption. I think Dutch Bros is over expanding already with too many weird gaps in their SoCal coverage so far. I think they're going to be closing some stores before they finish opening enough for the whole market.

[storewanderer]

Back on topic of Dutch Bros, I do not believe they are taking share from Starbucks. They have a completely different type of menu. They are busiest at night when Starbucks is either closing or closed entirely. Their drinks have disturbing levels of caffeine with 5 and 6 shots of espresso in some. Their customer is primarily the energy drink crowd.

Despite the record growth, there is increasing awareness of the harm of energy drinks. They are leading to many health issues such as increased diabetes, weight gain, and cardiac issues. Dutch Bros makes coffee drinks that are designed to compete with these high sugar, high caffeine drinks. Their coffee itself is not very flavorful, comparable to bad diner or fast food coffee but then they use a ton of shots, add a bunch of cream and pump after pump of sugary flavoring. These drinks are similarly problematic to the Panera caffeine charged lemonade that has killed and sickened multiple customers.

I do think there is a backlash forming against energy drinks. People are asking how much caffeine is in each drink. As the energy drink business has been shrinking I believe Dutch Bros has had early success in converting many of those customers but it will not last. When people become more aware of the high fat, sugar and caffeine content of Dutch Bros they will recognize it as a very unhealthy version of Starbucks and reduce their consumption. I think Dutch Bros is over expanding already with too many weird gaps in their SoCal coverage so far. I think they're going to be closing some stores before they finish opening enough for the whole market.

I have multiple Dutch Bros locations that are busy all day in my area. Starbucks has in some cases opened (locations that make no sense) near a Dutch Bros just to "be there" and it is funny to see those Starbucks hardly do any business and operate short hours. Dutch Bros is opening a couple questionable locations shortly in Sparks, but it seems like customers come out of the ground for this chain when and where you'd least expect it.

My observation is more of the 20something crowd is interested in Dutch Bros than Starbucks. Then when they grow out of Dutch Bros it is on to local coffee shops. Whether or not Dutch Bros will keep capturing every group of young customers that is upcoming, remains to be seen.

[storewanderer]

The CEO has commented that they are going to make some changes and although he has not mentioned getting off the crazy train for weird drinks I strongly believe that is the route they're going to go. He did mention some new menu items (unnamed and not described) coming soon. He also directly stated that they will be adding 5 additional sugar free flavors in the next couple of months which should correct a problem that has been costing them customers for a couple of years now.

I still think they got the right CEO and Schultz needs to have his stock bought out by the company and be silenced. I cannot believe that at once point I looked up to that guy as an inspirational business person. Many of their problems besides what I mentioned above stem from forcing their restaurants to make products they weren't engineered for along with process difficulties such as too many different types of lids and such. The insane difficulty of making drinks amongst all the customizations, sometimes 10 different steps per drink which require walking all over the kitchen area, combined with labor reductions have pushed these employees to the limit and led to the union drives. In effect Starbucks became McDonald's without all the automated machinery, streamlined work flow and other efficiency. Laxman is an expert in re-engineering the stores and processes, and he has been forcing what seem like little changes but they will be tremendously meaningful for the workers which will help the customers as well. Getting all the cups redesigned so they have the same lid for example, why was that so difficult to do before? His work at Unilever should also help address the broken supply chain.

I think they will get back on the right path in the US by the end of the year but they need to address the fact that the company has become so bloated that they are not able to adjust to market trends like they used to and it has cost them dearly.

Meanwhile, I keep finding myself at Dunkin especially for their iced coffee and cold brew drinks which are delicious and available with many choices of unsweetened flavors.

I think Starbucks US has over-expanded, diluted its brand with too many "licensee" locations in airports/casinos that run poorly and have outrageous prices, or supermarkets that run poorly, and their hours of operation have become too inconsistent. They have tried to make some changes like forcing all those "licensee" locations to accept the app and mobile ordering which was a start, but there are still a lot of other issues.

Starbucks US has a major efficiency problem and whatever they seem to do to try to fix it, a week later they seem to take multiple steps backwards with some new product or some other change so nothing ever improves with them from a speed perspective.

Opening "mobile only" stores, having random stores with no customer restroom, having random stores with no customer seating, posting menus that do not show all sizes/all prices, Starbucks has made so many errors in how it runs the US business. Things were run far better when Howard was closer to the company. But the company was also much smaller and less complex then, and I think the competition has always been fierce but it perhaps more difficult now. At this point I think they need to take a hard look at their store network and close a lot of stores, and terminate a lot of licensees, who provide poor customer experiences or try to charge $8+ then solicit a tip in addition for a 12oz Iced Tea (looking at various casino operators there).

I hate to say that I prefer the Dunkin products... almost embarrassed to admit it. But I've tried pretty much the full drink menu at Dunkin over the years and even at very poorly run locations their coffee and tea and espresso based product is solid quality. It doesn't punch you in the face like super strong Peet's and there is a time Peet's is what I want, but Dunkin is just good anytime. Also I find the Dunkin App is much easier to operate... faster to make an order on it. Starbucks app takes forever, doesn't show prices until the end, still doesn't work at Safeway locations last I checked. I would like to be done with Starbucks but I keep getting Starbucks gift cards at various events.

[ClownLoach]

The CEO has commented that they are going to make some changes and although he has not mentioned getting off the crazy train for weird drinks I strongly believe that is the route they're going to go. He did mention some new menu items (unnamed and not described) coming soon. He also directly stated that they will be adding 5 additional sugar free flavors in the next couple of months which should correct a problem that has been costing them customers for a couple of years now.

I still think they got the right CEO and Schultz needs to have his stock bought out by the company and be silenced. I cannot believe that at once point I looked up to that guy as an inspirational business person. Many of their problems besides what I mentioned above stem from forcing their restaurants to make products they weren't engineered for along with process difficulties such as too many different types of lids and such. The insane difficulty of making drinks amongst all the customizations, sometimes 10 different steps per drink which require walking all over the kitchen area, combined with labor reductions have pushed these employees to the limit and led to the union drives. In effect Starbucks became McDonald's without all the automated machinery, streamlined work flow and other efficiency. Laxman is an expert in re-engineering the stores and processes, and he has been forcing what seem like little changes but they will be tremendously meaningful for the workers which will help the customers as well. Getting all the cups redesigned so they have the same lid for example, why was that so difficult to do before? His work at Unilever should also help address the broken supply chain.

I think they will get back on the right path in the US by the end of the year but they need to address the fact that the company has become so bloated that they are not able to adjust to market trends like they used to and it has cost them dearly.

Meanwhile, I keep finding myself at Dunkin especially for their iced coffee and cold brew drinks which are delicious and available with many choices of unsweetened flavors.

I think Starbucks US has over-expanded, diluted its brand with too many "licensee" locations in airports/casinos that run poorly and have outrageous prices, or supermarkets that run poorly, and their hours of operation have become too inconsistent. They have tried to make some changes like forcing all those "licensee" locations to accept the app and mobile ordering which was a start, but there are still a lot of other issues.

Starbucks US has a major efficiency problem and whatever they seem to do to try to fix it, a week later they seem to take multiple steps backwards with some new product or some other change so nothing ever improves with them from a speed perspective.

Opening "mobile only" stores, having random stores with no customer restroom, having random stores with no customer seating, posting menus that do not show all sizes/all prices, Starbucks has made so many errors in how it runs the US business. Things were run far better when Howard was closer to the company. But the company was also much smaller and less complex then, and I think the competition has always been fierce but it perhaps more difficult now. At this point I think they need to take a hard look at their store network and close a lot of stores, and terminate a lot of licensees, who provide poor customer experiences or try to charge $8+ then solicit a tip in addition for a 12oz Iced Tea (looking at various casino operators there).

I hate to say that I prefer the Dunkin products... almost embarrassed to admit it. But I've tried pretty much the full drink menu at Dunkin over the years and even at very poorly run locations their coffee and tea and espresso based product is solid quality. It doesn't punch you in the face like super strong Peet's and there is a time Peet's is what I want, but Dunkin is just good anytime. Also I find the Dunkin App is much easier to operate... faster to make an order on it. Starbucks app takes forever, doesn't show prices until the end, still doesn't work at Safeway locations last I checked. I would like to be done with Starbucks but I keep getting Starbucks gift cards at various events.

Starbucks has also boxed themselves into this labor problem. They need to invest in the specialized equipment that automates the process for Dunkin. Problem is they historically decided more people and more real estate was a better investment than machinery and automation. Now they have the issue of the people who are pissed off about how complicated and difficult working there is. Add the pressure of increased labor costs that forced them to trim labor and aggravate the souring relationship with the employees. And they know the right answer for the business and the customer experience is to install all the costly automated equipment that will expedite the drinks but it will also eliminate the need for so much staffing which makes the employees even more angry.

I have a drive thru Dunkin/Baskin combo store I visit and they never have more than 4 people working, most times two or three. They have kiosk ordering that is available but not required. The employees are attentive and fast but do not look overworked or stressed because the machines do so much for them. They're dealing with a much larger menu than Starbucks with less people plus the pressure of making donuts but they do just fine with the equipment helping them. And as a result they are much faster than Starbucks and I've never had a bad drink there. Plus they have the unique ability to separate flavors from sweeteners which Starbucks tested extensively in San Diego County ten years ago but did not expand because it added even more complexity to the process (basically for say a vanilla latte now they would need to shake 3 shots of the vanilla flavor with these odd little bottles that premeasure for them, and then they would need to pump however many pumps of a plain syrup). Dunkin has machines that dispense syrups, sugar, creamer, etc. and Starbucks desperately needs that equipment especially in drive thru stores.

It's like Starbucks wanted to always be a small neighborhood coffee shop so they built and equipped their stores for that small scale operation. But they aren't a small shop anymore. And when you have over 50 years of being about the same business it becomes very hard to change as much as Starbucks needs to. I think that's why they chose a CEO with so much big manufacturing and engineering background. It's not as sexy and exciting to pull the drinks in a big closed off factory kitchen room with stainless steel everywhere like a McDonald's or the less visible part of Dunkin but it works a lot better for the customer to get a better product faster.

The simplicity of the Starbucks operations (which are really not simple at all) are what makes them attractive to the supermarkets and casinos. But I fully agree that the licensed operators, especially the casinos for those who have been exposed to them, are ruining the entire brand. They are seldom producing the same quality drink, there are inconsistent menu options as some items are not offered like cold brew, and the pricing is way out of line. I was in Las Vegas a couple weeks ago and saw a Starbucks in the Venetian was basically at about $8.95 for basic drinks in a grande size. I was so pissed off that I walked across the street to the Fashion Show mall where there is a corporate Starbucks and got a trenta size ice blended refresher drink for a couple dollars less plus they happily gave me a trenta size ice water for free to refill my water bottle. But think about what that does to their brand image...

They have also begun to push the mall food court locations out of their system and into licensing. Simon Malls now operates all of the Starbucks kiosks in their malls nationwide as a licensee. They try to move these so that if a mall has several kiosks they now all report to only one manager so they can reduce costs. It's already not working well and in at least one mall (Mission Viejo) they gave up entirely and a independent is taking over the now closed Simon-Starbucks kiosk.

I also noticed that the airport franchise locations are starting to reduce and be replaced. John Wayne Airport just announced a full purge and replacement of HMS Host and their restaurants. I saw Dunkin is coming, McDonald's is staying, and I didn't see mention of Starbucks so I presume they are going to be exiting. HMS had already reduced and converted one Starbucks to a Coffee Bean and Tea Leaf, and it totally looks like a Starbucks with Coffee bean signs, they did no other work besides changing the menu boards, it was probably Starbucks one day and overnight change to Coffee Bean.