13 June 2018 | China

Luckin Coffee raises the stakes for Chinese dominance

Beijing-based coffee shop is reported to have raised $200-300m in latest round of funding, with the company now estimated to be worth $1bn
The upstart coffee shop chain, which only began operations in early 2018, has so far opened 525 stores across 13 cities in China, with 40 opened in the week of June 5.

The burgeoning domestic chain offers a range of specialty 100% Arabica coffee sourced from Ethiopia alongside a range of bakery items. Around half its stores operate as so-called “takeaway kitchens”, with coffee delivered via courier through a partnership with Chinese logistics provider, SF Express.

Touted by many to be a prominent challenger to Starbucks, which entered the Chinese market in 1999, Luckin claims to be representative of China’s new retail coffee culture.

So-called ‘new retail’ was a term coined by Alibaba Group founder Jack Ma and refers to a shift toward e-commerce over bricks and mortar offerings. Luckin, also known as ‘Rui Xing’ in China, has targeted convenience-driven consumers with a range of offline and online retail options, including an app offering delivery or pick-up.

Luckin also appears to be targeting value-conscious consumers, with a large latte priced at 24 yuan (US$3.70) comparable to Starbucks’ 30 yuan ($4.92) grand latte.

Reports of the latest round of funding emerged on a Chinese tech news site 36kr.com, with Luckin so far declining to comment. However, last month Luckin CEO and founder, Jenny Qian Zhiya, told reporters that her firm’s latest investment round would “likely exceed one billion yuan (US$156m),” adding: “We have plenty of cash.”

In May Luckin hit headlines when it issued an open letter to Starbucks accusing the international chain of monopolistic practices in the Chinese market. ‘Starbucks continually requires Luckin Coffee’s suppliers to choose between the two coffee companies’, part of the letter alleges.

Seattle-based Starbucks is still some way ahead of Luckin in terms of Chinese sites and enjoys an estimated 60% share of the branded Chinese coffee shop market. The global giant announced plans in May to build around 3,000 new stores in mainland China by 2022, a move which would double its current 3,300 stores. In 2017, Starbucks opened a prestigious Reserve Roastery in Shangai, one of only two such sites currently across the globe.
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