Starbucks' coffee chain monopoly in China is being challenged by a local company that is bent on surpassing everything that the foreign brand has done in the country so far. China reportedly has a $3.2 billion retail coffee market and Starbucks presently holds over 50 percent of the market share. It is also the Seattle-based brand's second biggest and fastest growing location.
Luckin Coffee, a Chinese startup company that mainly targets the on-the-go clientele with its small coffee outlets, is reportedly spending millions of dollars yearly to become the top coffee chain in the country, writes the Sydney Morning Herald. Backed by well-oiled investors such as China International Capital and Singapore's GIC, the relatively small firm is poised to achieve its ROI targets in less than nine years, which is the amount of time that Starbucks had to deal with losses first before it becomes profitable.
Luckin is confident that China's rapidly growing on-the-go coffee market, given the booming economy and the rise in the number of office workers, will drive its growth. That's not to mention its unique business model where customers can get their coffee fix wherever they are through a mobile app in just 18 minutes, cashless outlets, and plenty of discounts. The company is currently valued at $2.2 billion.
The Chinese startup did not enter the coffee market until 2018, writes Bloomberg, but it's already spending some $130 million per year to be able to overtake Starbucks. And as the latter has slowed down on its expansion amid a generally slowing economy, the time is right and opportunities are ripe for Luckin's picking. The US coffee company still intends to triple is revenue targets by 2022, though it has said that it is expecting comparative growth to at only 1 percent moving forward.
Luckin has a solid strategy to make sure that it is close to its target market without isolating the rest of the potential buyers. Its branches are typically located near or inside office buildings and have a wide networked delivery service to ensure that it makes good on its 18-minute serving promise each time. It reportedly expects to hit its branch target of 4,500 stores in 2019.
