Luckin coffee plans 2,500 new stores in bid to overtake Starbucks
Luckin Coffee, the Chinese coffee start-up that is taking on Starbucks, plans to launch 2,500 stores across China this year as it seeks to become number one.
Chinese coffee start-up Luckin is taking on Starbucks dominance in the market
Luckin has made headlines since its official launch in Beijing in January 2018 as its focus on technology, discounts and delivery has helped it grow rapidly. The company’s digital model enables customers to order via an app and then watch via live-streaming video as their coffee is made and delivered within 20 minutes.
Luckin has plans to run more than 4,500 stores by the end of 2019, according to media reports.
The move would see the local start-up overtake Starbucks, which currently dominates the China market with more than 3,600 stores. Luckin has always been vocal about its plans to unseat the market leader, Luckin chief executive officer Qian Zhiya has previously said, “in the future, we will have more cafes than Starbucks”.
Starbucks currently occupies a 55% share of China’s coffee market, however, it faces huge competition from McDonalds, Costa, Peets and Luckin, as well as hundreds of thousands of smaller operators.
Last year Starbucks acknowledged this competition on a call with analysts after reporting a 2% decline in sales in Q3. Starbucks China CEO Belinda Wong said: “While recent coffee market entrants have chosen to capitalise on delivery combined with heavily discounted offers, there's significant compromises at play in terms of quality, experience, and business sustainability. These will prove to be short-lived.”
Starbucks partnership with Alibaba and Ele.me to launch delivery services was seen as the company’s attempt to fight off Luckin’s popularity, however, the start-up hit back by expanding its drinks menu to incorporate food.
However, Luckin’s rapid expansion means the company is far from profitable with it recording a loss of 800 million yuan ($116.34 million) last year.
Luckin’s chief marketing officer, Yang Fei said, “What we want at the moment is scale and speed,”, “There’s no point talking about profit,” he told reporters.