China’s rising coffee chain brand luckin coffee (luckin) is vying to become the nation’s largest coffee chain with a total of 4,500 stores in operation by the end of the year. Founder and CEO Qian Zhiya made the announcement at a press conference in Beijing in early January.
Luckin burst onto China’s coffee scene when it was founded in Beijing in October 2017. Since then, the company has expanded to 2,073 stores in 22 cities across China by the end of 2018, serving up more than 89.6 million cups of coffee to 12.5 million customers.
The coffee chain’s ambitious plan is backed by an abundant amount of capital. In December, luckin announced having raised USD 200 million in a Series-B round of funding from Joy Capital, Dazheng Capital, Singapore Investment Corporation (GIC) and China International Capital Corporation, which pushed its post-money valuation to USD 2.2 billion.
Despite the Chinese tradition of tea drinking, younger generations are increasingly enjoying coffee and the culture surrounding the beverage. The American coffee brand Starbucks has opened 3,500 stores in 150 Chinese cities since 1999. Considering Starbucks as its direct rival direct rival in China, Luckin is vying to become China’s largest coffee chain with a total of 4,500 stores in operation by the end of the year.
CEO Qian Zhiya considers the 2019 goal achievable because luckin’s business model is already tackling the biggest challenges currently facing the coffee industry in China: expensive prices and inconvenience.
“With the development of the internet, luckin has transformed the traditional coffee chain to a new retail model, integrating offline café services and online delivery services,” Qian said. “Thus, luckin ’s new retail model strikes an excellent balance of price and services.”
Luckin offers customers coffee at a more modest price point. For example, a “tall” size latte costs RMB 31 at Starbucks whereas just RMB 24 at Luckin.
Luckin’s delivery service likewise sets the brand apart. With in-app ordering, the company guarantees a delivery time of 18 minutes or less within major cities. Recently, Luckin has partnered with China’s largest food delivery giant, Meituan Dianping, and now allows customers to order Luckin Coffee products via Meituan’s delivery app Meituan Waimai. By the end of 2018, the company claimed to have achieved its “500-meters coverage” layout in downtown Beijing and Shanghai, meaning customers can walk to Luckin’s stores within five minutes.
Qian said that its Luckin’s established strategy that they will race to grab market share through subsidies. “So far, the loss is in line with our expectation, ” she added.
Will China’s own coffee brand conquer the domestic market? They may have a chance because the coffee industry in China exhibits vast potential for growth. In 2017, the country’s coffee shop sales reached USD 4.4 billion (RMB 30 billion) and are expected to reach USD 145 billion (RMB 1 trillion) by 2025, according to consultancy firm Qianzhan.
(Top photo from Luckin Coffee)