Luckin Coffee Aims to Become China's Biggest Java Empire This Year, Leave Starbucks in the Dust
Chen Juan
/SOURCE : yicai

(Yicai Global) Jan. 4 -- Chinese unicorn startup Luckin Coffee plans to outpace its archrival Starbucks in competition by opening more stores this year and becoming the largest coffee chain in China. 

Luckin Coffee intends to build 2,500 more shops so that the total tally rises to 4,500 retail outlets, which will help it surpass Starbucks in both the number of stores as well as cups of joe sold, the Beijing-based firm said in a news conference yesterday. 

Starbucks has also made its grand expansion plan known, but the question is who is faster. It plans to operate as many as 6,000 stores on China's mainland by 2022, the Seattle-based firm announced in a statement last May. The company had 3,300 stores in over 140 Chinese cities at that time. 

In this business, being fast means having more cash to burn. The one-year-old Chinese firm had set up over 2,000 stores in 22 Chinese cities by the end of last year, selling 89.7 million cups of coffee, most of which were picked up by a client. In the first nine months of that year, the company had revenues of CNY370 million (USD53.8 million), and net loss was more than double that at CNY857 million, its earnings report showed last December. 

Losses were expected, said Yang Fei, Luckin Coffee's co-founder and chief marketing officer, adding that penetrating while educating a new market comes at a price. "None of the investors have shown any concern about it [the losses] and they even think that we are conservative," Yang added. 

Investors such as GIC Private, which is the Singaporean government's sovereign wealth fund, and Beijing-based venture capital firm Joy Capital, have helped boost Luckin Coffee's valuation to USD2.2 billion as of at the end of last year. 

A Chinese citizen drinks four cups of coffee per year, which is far below the 170 cups that Japanese and South Korean people consume on average, according to the International Coffee Organization. However, the group of Chinese coffee drinkers rises 15 percent each year while the related global growth rate is only 2 percent.

Luckin Coffee got popular at the start with its business model that relied on takeout and heavy discounts. On average, a delivery takes less than 17 minutes, according to data provided by the firm. Those that take more than 30 minutes are free for the client, and yet only 0.4 percent of all orders exceed that time limit. 

Editor: Emmi Laine 

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Keywords: Luckin Coffee , Starbucks