Business

Caffeine war: Luckin brews up a threat for Starbucks

Its assault comes at a crucial time for Starbucks, which has 3,400 stores in China

Bejing/Shanghai: Qian Zhiya may be Starbucks’ worst nightmare. The 42-year-old Chinese entrepreneur says she is betting that her fledgling Luckin Coffee brand will eventually have more cafes in China than Starbucks (SBUX.O), and she has Singapore’s sovereign wealth fund and other investors bankrolling her plan.

Luckin, which only officially launched in January, has opened more than 660 outlets in 13 Chinese cities thanks to a supercharged growth plan based on cheap delivery, online ordering, big discounts and premium pay for its staff.

Its assault comes at a crucial time for Starbucks, which has 3,400 stores in China its second biggest market after the US – and plans to almost double that number by 2022.

And the speed of the attack is a warning to other established consumer brands in China that they too could be vulnerable to a start-up’s attempt to reinvent a market, brand consultants say.

Starbucks said some new café openings were cannibalising customer visits at nearby stores and it also blamed a drop-off in orders through delivery firms.

Storm in a cup

  • Half of those polled said they had tried Luckin; most said they liked it, though more than two-thirds said their top choice remained Starbucks.
  • The majority drank coffee in-store or bought to take away, with only a small number saying they had coffee delivered, a potential challenge for Lucien’s delivery-focused strategy.
  • Luckin’s customers can order coffee via an app, watch a live-stream of their coffee being made, and have it delivered to their door in an average of 18 minutes, the company says.
  • A regular latte, roughly the size of a Starbucks grande, costs 24 yuan plus 6 yuan for delivery (free delivery for orders of more than 35 yuan), but can be half price after promotions. A grande latte at Starbucks costs 31 yuan.
  • The speed of Luckin’s growth is extraordinary it took Starbucks about 12 years to open as many stores. In many ways it echoes the way in which some major Chinese technology firms have burned through cash to grab market share.

(With inputs from Reuters)

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