USA – Chinese coffee giant Luckin Coffee is keen to expand into the US market as early as next year, with eyes on cities with “large numbers of Chinese students and tourists such as New York.”
Financial Times reports that the Xiamen-based company is building out its supply chain and customising its technology for the market, according to two people with knowledge of the matter.
To trim down the dominance of its rival Starbucks, the coffee chain plans to “undercut U.S. incumbents by selling drinks priced around US$2 or US$3.”
The company has been running advertisements during NBA games to build name recognition ahead of its planned launched, added one of the people.
Shaun Rein, founder of China Market Research Group underscored that Luckin Coffee is one of the great turnaround stories in Chinese business history.
“Many people thought they were dead, but underlying the fraud was a company with great technology and decent coffee at a competitive price,” he added.
“Over the past three years, Luckin has grabbed massive market share from Starbucks in China. Now, it is coming after Starbucks on its home turf.”
Convenience and affordability have been central to Luckin Coffee’s pitch since its founding in 2018. With small-scale stores and kiosk formats combined with a focus on mobile ordering and automation, the coffee chain experienced a quick growth in its home country, opening more than 4,000 stores within its first two years.
As of 2023, Luckin was opening an estimated 16.5 stores per day in China, becoming China’s largest coffee chain by a wide margin, followed by another relatively new chain, Cotti Coffee, and Starbucks. In July, Luckin Coffee said it had reached 20,000 stores.
Luckin’s annual revenue of Rmb24.9bn (US$3.5bn) exceeded Starbucks’ in China for the first time in 2023, though Starbucks has fewer outlets and its sales per store in China tend to be higher.
The company’s revenue rose 35 per cent in the second quarter of this year to Rmb8.4bn, with Rmb871mn in net income.
Customers in Luckin’s China stores must order through an app, which offers discounts for group purchases and collects a wealth of data on consumer behaviour.
Market Analysts argue that the chain will need to o adapt its cashless business model to the US market considering that the US coffee market is fiercely competitive.
Starbucks is also strategizing on new measures to win back its customers and go back to profitability.
Besides Starbucks’ nearly 17,000 US stores, coffee-and-doughnuts chain Dunkin’ has more than 9,500 locations.
New York-listed Dutch Bros has about 900 drive-through coffee outlets after expanding by a fifth in the past year. Meanwhile, coffee is sold everywhere from fast-food chains to convenience stores.
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