Luckin Aims to Overtake Starbucks in China
Luckin Coffee burst onto China’s coffee scene in January 2018 when the company opened its first store. To date, Luckin has launched 2,500 stores in 21 cities across China, serving more than 85 million cups of coffee. The start-up is taking on Starbucks and strives to become the number one player in China’s growing coffee market.
Luckin has captured a large market share in a short period of time thanks to its focus on technology, discounts and delivery service. 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 plans to run more than 4,500 stores by the end of 2019. The start-up is aiming to overtake Starbucks, which currently dominates China’s coffee market with more than 3,600 stores. Luckin has always had ambitions to become China’s coffee leader, as its chief executive officer Qian Zhiya previously noted, “in the future, we will have more cafes than Starbucks”.
Due to the fierce competition, Starbucks admitted a 2% decline in sales in Q3. Starbucks China CEO Belinda Wong contended: “While recent coffee market entrants have chosen to capitalize 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.”
In response to Luckin’s popularity, Starbucks has established a partnership with Alibaba and Ele.me to launch delivery services. However, Luckin has responded by expanding its drinks menu to incorporate food items. Despite Luckin’s rapid expansion, the company is far from profitable, recording a loss of 800 million yuan ($116.34 million) in 2018.
Yang Fei, Luckin’s chief marketing officer, dismissed the importance of profits: “What we want at the moment is scale and speed,”, “There’s no point talking about profit,” he said.
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