CHINA – Luckin Coffee, a Chinese chain of coffee shops start-up, is aiming at opening 2,500 new stores in 2019 as it strategize to being the largest coffee chain by number of outlets.
The company targets having more than 4,500 stores by the end of 2019 and overtake Starbucks as it seeks to dominate the coffee business in the world’s second-biggest economy.
The firm, which only officially launched its business at the start of 2018, has recorded a tremendous expansion, propelled by a focus on technology, delivery and heavy discounting even at the cost of mounting losses.
Luckin’s chief marketing officer, Yang Fei, said that the company is focused on quick delivery on attracting more customers
“What we want at the moment is scale and speed.
There’s no point talking about profit,” he said, adding that subsidies to lure in more users would be an important part of the firm’s strategy for the next few years.
Luckin has said that with the increased number of stores will take it past Seattle-based Starbucks that has long dominated China’s coffee scene and has more than 3,600 stores in the country.
The firms accelerated expansion is in stark contrast to Starbucks, which opened its first China store in 1999 and has spent two decades reaching its current store count.
The US chain, which spearheaded the growth of a coffee culture in China, started to see competition rise from smaller peers over the last 18 months, though Luckin has stood out as the most aggressive competitor.
However, it has taken great investment to see Luckin’s current position with the firm recording a loss of US$116.34 million in 2018, which its chief marketing officer said was in line with expectations as it pushed to expand.
The price for a large cup of latte coffee at Luckin is US$3.50 which is about 20 per cent cheaper than a comparable order at Starbucks as the company vows to continue with the subsidies.
At the same time, Starbucks has said it welcomes competition and will proceed with its plans to open 600 stores annually in China over the next four years, targeting more than 6,000 outlets in 230 cities.
Luckin, backed by Singapore sovereign wealth fund GIC and China International Capital, opened more than 2,000 locations last year, gaining a valuation of $2.2bn after raising US$200 million in a funding round in December.