Chinese start-up Luckin Coffee has secured $150m in Series B funding as it continues its ambition to overtake Starbucks in China.
The latest funding values the coffee start-up at $2.9bn, an increase on its $2.2bn valuation at the start of the year.
Luckin, which currently operates 2,000 locations which include pick-up stations, cafes and small preparation kitchens, aims to open 4,500 outlets by the end of 2019.
The move would see the local start-up overtake Starbucks, which currently dominates the China market with more than 3,600 stores. Luckin has been vocal about its plans to unseat the market leader and its chief executive officer Qian Zhiya has previously said, “in the future, we will have more cafes than Starbucks”.
Luckin Coffee, which launched in Beijing in January 2018, operates a digital model enabling customers to order via an app and then watch via live-streaming video as their coffee is made and delivered within 20 minutes.
This focus on technology, discounts and delivery has helped it grow rapidly, along with heavy discounting and special offers.
The company has already made an impact on its main rival Starbucks, which reported its first market decline – a 2% drop in sales in Q3 last year.
Starbucks China CEO Belinda Wong said at the time, “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 has responded to Luckin’s challenge by partnering with e-commerce giant Alibaba and leading delivery company Ele.me to launch a delivery service for Chinese consumers.
The start-up responded to the move by expanding its menu to include food and launched café-style stores.
Starbucks currently occupies a 55% share of China’s coffee market, however, it faces huge competition from McDonalds, Costa, Peets and of course Luckin, as well as hundreds of thousands of smaller operators.