The Chinese chain of coffee shops Luckin Coffee, which was founded in 2017, confidently tightens up the more influential American competitor in the Chinese market.
According to Nikkei Asian Review, the results of 2019 showed that Luckin Coffee has a leading position in the country by the number of open coffee shops. The Chinese chain has 4,500 outlets, and the company Starbucks has opened 4,300 coffee shops in China to date. It should be noted that the number of new establishments in both companies is increasing rapidly.
Chinese coffee chain is implementing a strategy of expansion in those areas where Starbucks is not represented, and these are mainly remote regions, due to this the company managed to bypass its main competitor by the number of coffee shops by November 2019. The Chinese chain's points are often smaller than Starbucks coffee shops, some of which do not even have seats, customers take their coffee with them or use delivery services. Also, at Luckin Coffee points, shoppers can drink freshly brewed tea, which is very popular in China. The Luckin Coffee strategy also includes significant marketing costs and all sorts of promotions.
The ability to order coffee in advance through a mobile application and simply pick it up at a coffee shop attracts more and more visitors to Luckin Coffee, who do not want to stand in line, as is often the case at much more traditional Starbucks establishments. And although the American company has recently started testing the new Starbucks Now format, it is not yet possible to compete with the young competitor in a severe way.
Starbucks' strategy has traditionally been to win big cities. The first store of the chain was opened back in 1999 in Beijing, China World Trade Building. Since then, the company sees China as one of the most attractive markets and is actively working to conquer it. One of the steps in this direction was cooperation with Alibaba Group Holding, in the field of testing delivery services.
The financial results of Luckin Coffee allow us to talk about the success of the chosen path. Profit figures for the third quarter of 2019 amounted to $208.9 million, which is an impressive 557.6% more than the same value for the previous year. The stock price of the network after the announcement of financial results increased by 124% since the initial public offering in May 2019. To date, Luckin Coffee has taken the position of the largest coffee chain in China by the number of outlets.