Starbuck's Chinese rival Luckin Coffee has announced that it will be entering the coffee and snacks vending machine market as part of its efforts to expand its network. The company, which has overtaken Starbucks as China's largest coffee chain operator, released a statement on Wednesday revealing its latest strategy.
According to its statement, the company plans to initially release two kinds of vending machines. The first one will be a product called the Luckin Coffee Express; a vending machine that will serve the company's signature coffee drinks. The second product will be its Luckin Pop snacks and beverage vending machine.
The two vending machines will reportedly be placed in strategic locations, particularly inside high-traffic office buildings. The company stated that it does not necessarily expect to generate a lot of revenue from the machines but they should generate more interest in the brand and hopefully allow consumers to more conveniently have access to its products.
The first batch of vending machines will also be placed in locations such as gas stations, bus terminals, campuses, airports, and service stations that aren't in close proximity to a Luckin Coffee branch. The company hopes that the machines will complement its rapidly growing Luckin Coffee store network. Luckin Coffee revealed that it spent close to a year actively researching and developing the new machines.
By the end of 2019, Luckin Coffee had over 4,507 self-operated stores in China. This officially made it the largest coffee chain operator in the country, overtaking Starbuck's 4,100 Chinese stores. The company managed to grow exponentially in the country thanks to its expansion into other food and beverage products, including hand-brewed tea drinks and a number of specialty snacks.
The Xiamen-based coffee chain operators stated that the products in its vending machines would be priced significantly lower when compared to its competitors. The company managed to achieve this by working closely with its global suppliers and purchasing in volume.
Analysts have pointed out that Luckin Coffee's strategy is somewhat unorthodox as it is essentially creating a new type of consumption scenario. While the rollout of vending machines will be much cheaper compared to opening up new branches, the endeavor will still likely eat into its profits in the long run.
Luckin Coffee CEO, Qian Zhiya, mentioned in the company's statement that the new vending machines would become a part of its core network comprised of its retail stores and e-commerce channels. The combined mediums are expected to create a closed-loop smart retail platform that will greatly enhance efficiency, accessibility, and loyalty to the brand.
