Luckin Coffee pledges 10,000 stores in China by 2021

Luckin Coffee founder and CEO, Qian Zhiya says her firm will open 10,000 stores by the end of 2021 and reach 4,500 stores in 2019, a move which would unseat Starbucks as China’s biggest coffee chain

A still from a Luckin Coffee promotional video. The Chinese coffee chain's rapid ascent has been questioned by some analysts, with an initially promising IPO debut falling below expectations 



Speaking at Luckin Coffee’s Global Partner Conference and Global Coffee Industry Development Forum at the firm's headquarters in Xiamen, Qian added her firm’s intention to reach 4,500 stores by the end of 2019 – a goal that would surpass market leader, Starbucks’ 3,700+ portfolio.

"The development of [Luckin] Coffee is really fast, but it is based on advanced technology systems, strong team capabilities and adequate resource preparation. We control every order and every product flow through technology. Ensure quality of service in rapid development. At the same time, our customer satisfaction reached 99.7%,” Qian said.

Luckin, which is also known as Ruixing Coffee in China, currently operates 2,370 stores in more than 20 cities across the vast east-Asian nation. Most outlets are pick-up stations or non-public facing kitchens from where mobile orders can be picked up or prepared for delivery via Luckin’s app.

At the industry forum, Qian reaffirmed Luckin’s commitment to value, product quality and user experience, stating the coffee chain had developed strategic partnerships with well-known global companies, including syrup supplier, Monin, coffee solution provider, UCC Group and delivery firm DHL. Highlighting Luckin’s value-focused business model, Qian said just a quarter of Chinese consumers were willing to purchase fresh-ground coffee for 30 yuan ($4.92) or more. Luckin currently charges around 24 yuan ($3.70) for a large latte, less than their main competitor, Starbucks’ 30 yuan grand latte.

Luckin Coffee sold around 90 million cups of coffee in 2018 through its value-focused business model, which includes regular discount promotions and free drink if orders do not arrive within 30 minutes. The Chinese upstart is, however, not yet profitable and has incurred significant losses since opening its first stores in January 2018. That year, the firm reported net revenue of 840.7m yuan ($121.5m) incurring a net loss of 1.62bn yuan ($234.2m). The first quarter of 2019 saw revenues of 478.5m yuan ($69.2m) and net loss of 551.8m yuan ($79.8m).

The losses have prompted some analysts to question the viability of Luckin’s business model. In April 2019, Luckin sought to raise up to $800m in a highly anticipated US IPO debut, closing its first trading day above its $17 price to reach $20.38 per share. However, concerns over the businesses’ high valuation, cash burn and uncertain profitability strategy contributed to Luckin’s stock dropping to $15-17 since. 
 

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