(Yicai Global) May 16 -- Chinese startup Luckin Coffee Co. is preparing to file an antitrust suit in China against Starbucks Corp. just as the US chain said it is looking to more than triple its revenue in the country by 2020.
Luckin Coffee accuses Starbucks of creating a monopoly with rental contracts that extend beyond the properties in question, according to a document signed by a partner at Luckin’s legal firm King & Wood Mallesons that has surfaced online. The contracts stop property owners from renting to other coffee chains, Zhao Yanyan, Luckin’s director of public relations, confirmed in two documents sent to Yicai Global.
“We do not want to get involved in other brands’ marketing hype,” Starbucks said in response to Yicai Global. “We welcome orderly competition that promotes market development.”
Luckin Coffee is arguably a market agitator, said food sector analyst Zhu Danpeng. Some rivals do not approve of its aggressive marketing practices, he added.
The Chinese coffee market is worth about CNY100 billion (USD16 billion) and expands about 40 percent a year, according to Chinese news portal Foodaily. Seattle-based Starbucks aims to boost revenue from the market partly by almost doubling the number of its stores in China to 6,000 over the coming five years. It now has about 3,300 outlets in 141 cities across a nation where coffee drinking has become popular.
“The coffee market in China is about to explode,” Luckin founder Qian Zhiya said at a press conference on May 8. The chain is expanding rapidly and plans to have 525 outlets across 13 cities by the end of the month, compared with the 13 in Beijing and Shanghai it had in January.
The Beijing-based startup is inspired by the New Retail model and relies heavily on online campaigns. Alibaba’s Jack Ma coined the term New Retail in 2016, describing it as “the integration of online, offline, logistics and data across a single value chain.”
Luckin offers a free coffee to new mobile registrants and another for referrals. It also offers heavy discounts for buying multiple cups and provides free 30-minute delivery for orders worth more than CNY35 (USD5.50). Deliveries are handled by SF Express and if they take longer than half an hour, customers get their drinks free.
Luckin Coffee has secured funds from angel investor Lu Zhengyao, chairman of car-hailing startup Ucar Inc., Qian's last employer. The coffee chain completed more than 3 million orders and sold some 5 million cups during its January trials, serving over 1.3 million customers.
Editors: Emmi Laine, James Boynton