Is McDonald's Big Beverage Push Good or Bad for Dutch Bros?

McDonald's (NYSE: MCD) is expanding its beverage options. For Dutch Bros (NYSE: BROS), it's a liquid situation. McDonald's is confirming that it will roll out handcrafted sodas and refreshers next month. Flavored energy drinks will follow this summer.

If you're Dutch Bros, the move by the baron of burgers is both flattering and alarming. The fast-growing provider of quick-service beverages has built an empire on raising the bar for creative drinks that are trending with younger sippers. Now Mickey D's has a straw reaching across the room to drink up Dutch Bros' business? I'm not buying it. It's not just wishful thinking; it's as easy as reading up on history.

Image source: Getty Images.

Dutch Bros isn't an overnight success. It started 34 years ago with a pair of brothers -- yes, of Dutch descent -- operating an espresso cart in Oregon. It gradually evolved into a small-box retailer, which now has more than 1,000 locations and a presence in almost half the states in the U.S.

True to its roots, coffee makes up roughly half of its sales. However, its proprietary Blue Rebel line of customized energy drinks now accounts for a quarter of its business. Dutch Bros also offers refreshers and handcrafted sodas. McDonald's jumping in at presumably lower price points could be problematic, but history is on Dutch Bros' side.

CosMc's rewind

McDonald's has always tried to make a splash in new markets. Three years ago, it introduced a concept called CosMc's, in which artisan beverages would be front and center. Leaning on the same drive-thru model as Dutch Bros, it led with colorful, sweetened refreshers and energy drinks. McDonald's opened the first location in its home state of Illinois, then added four stores in Texas in 2024. It shut them all down in the spring of last year.

That may have seemed like a quick surrender, but McDonald's was just dipping its toe into the sparkling, fruity waters where popping boba replaces beach balls. It shifted to test some of CosMc's premium beverages at hundreds of McDonald's locations. It was more a matter of when -- not if -- the company would take this platform countrywide.

Dutch Bros stock is feeling the pinch. As the market has pushed higher through the first three trading days of this week, Dutch Bros has declined each day, resulting in a 6% week-to-date slide through Wednesday's close. Investors have seen disrupters get disrupted before, and the narrative is convincing -- until you check in on McDonald's.

Pour unfortunate souls

McDonald's has been taking aim at Starbucks (NASDAQ: SBUX) since its coffee bar McCafé introduced fancier coffee beverages in 2009 and blended frappes in 2010. That hasn't derailed the bullish case for investing in Starbucks. While that coffee chain has been struggling in recent years, it has nothing to do with what Ronald McDonald did 17 years ago.

Starbucks' revenue has nearly quadrupled since fiscal 2009. McDonald's revenue is up just 15%, though that figure is affected by its handing off so many of its company-owned restaurants to franchisees over the years. If anything, McDonald's entry into premium java products validated Starbucks, while improving its own visibility.

Starbucks and fast-casual chain Panera have been diving into refreshers and other charged beverages for a couple of years now, but they haven't slowed down Dutch Bros; as I mentioned earlier, the chain has been posting positive annual comps for almost two decades now. McDonald's may wind up with a slice of the market, but the pie itself will get even bigger. The burger giant will be doing Dutch Bros and other retail beverage stocks a favor by educating the market.

McDonald's will win, too. Dutch Bros is unique for a beverage company in that the afternoon is the busiest part of its day; that is not the case at McDonald's or at Starbucks. Dutch Bros is also growing faster than concepts looking to unseat its momentum. Revenue soared 29% in its latest blowout quarter, as continued expansion and a 7.7% pop in same-store sales combined to deliver another strong performance.

It's a good time to be looking at companies growing in the handcrafted space. Let the bobas hit the floor.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Dutch Bros and Starbucks. The Motley Fool recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.