(Yicai Global) June 5 -- Luckin Coffee Co. is preparing to file an antitrust suit against Starbucks Corp. in which it accuses the latter of creating a monopoly with rental contracts that extend beyond the properties in question.
Starbucks' lease contracts prevent property owners from renting properties to other coffee chains, according to a document signed by Li Zhongsheng, a partner at Luckin’s legal firm King & Wood Mallesons, which has begun to surface online. Zhao Yanyan, director of public relations, confirmed the matter in two documents sent to Yicai Global.
“We do not want to get involved in other brands’ market hype," Starbucks said in response to Yicai Global. "We welcome orderly competition that promotes market development.”
“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 stores across 13 cities by the end of the month, compared with the 13 in Beijing and Shanghai it had in January.
The Chinese market is worth about CNY100 billion (USD16 billion) and grows at about 40 percent a year, according to Chinese news portal Foodaily. Starbucks aims to have 5,000 stores in the country by 2021 while breaking down any domestic rivals, reported 36Kr's business news website Kr Asia.
Luckin Coffee has received 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.
The firm is inspired by the New Retail model and relies heavily on online campaigns. It offers a free coffee to new mobile registrants and another for referrals. It also offers heavy discounts for buying multiple cups and offers free 30-minute delivery for orders over CNY35 (USD5.5). Deliveries are handled by SF Express and if they take longer than half an hour, customers get their coffee free.
"I just received five coffee coupons which offer an 82-percent discount,” said Liu Xiaoying, a white-collar worker in Shanghai’s Jing'an district. Luckin has opened a number of stores which are close to Starbucks, he added.
Luckin Coffee is arguably a market agitator, said Zhu Danpeng, an analyst of China's food sector, adding that some of the sector's rivals do not approve its aggressive marketing practices.