Luckin Coffee in China wants to win over Starbucks customers

05/01/2019

 

Luckin plans to add around 2,500 new stores and increase retail outlets to over 4,500

 

Although the Chinese Luckin Coffee is losing the challenge, it does not intend to give up and wants to continue to challenge the American giant Starbucks. In fact, even if at a loss, Luckin Coffee is doubling its store expansion and consumer subsidies, with plans to open about 2,500 new stores in China.

According to the co-founder and CEO of the company Qian Zhiya, this would bring the total number of Xiamen start-up stores in the country to over 4,500. In addition, it would exceed the current Starbucks number of around 3,600 stores across China.

 

“Luckin aims to become China’s biggest coffee chain brand by the year end, totally surpassing Starbucks by cups of coffee sold and number of shops,” Qian said.

 

Born as an idea from the same founding team of the UCAR platform, Luckin was founded in 2017 as a chain of coffee and bakery products, Luckin has had a busy start in terms of store expansion, fueled by subsidies to consumers and the growing demand for coffee in a country that traditionally preferred to drink tea. Although initially described as an o-demand chain, Luckin eventually turned into a more traditional chain of coffee shops.

Subsidy will remain as one of our core strategies, at least in the next three to five years,” Luckin chief marketing officer Yang Fei said in the same briefing. “Our investors are not the least concerned. On the contrary, they believe we are being too conservative.”

 

Luckin’s expansion plan reflects the well-trodden path taken by China’s on-demand internet service providers

 

But how much will the challenge to Starbuks cost? The expansion of the Luckin store has a value of US $ 2.2 billion. This calculation also includes agreements with coffee suppliers, such as Meituan Dianping, which will also bring other food products through the national delivery network of the Chinese on-demand services giant.

But Starbuks will not stay still. A spokesperson for Starbucks China said today that the company is in favor of competition, but plans to open 600 stores each year in China over the next four years, addressing more than 6,000 stores in 230 cities, he said.

The price for a large cup of Luckin milk coffee is 24 yuan (US $ 3.50), which is about 20% cheaper than a similar order to Starbucks. Luckin also offers a free drink for any delivery order that is paid or does not arrive within half an hour. Luckin, however, confirmed last month that consumer subsidies caused over 850 million yuan of losses from January to September last year.

 

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