China’s overall coffee sales will rise at an 8.7 percent compound annual growth rate (CAGR) during the 2022–27 time period, with hot coffee outpacing sales of ready-to-drink coffee drinks, according to GlobalData. Xiamen-based Luckin Coffee Inc. (“Luckin”) has tapped into the rising popularity of coffee in China, and it has overtaken Starbucks to become the largest coffee chain in nation of 1.4 billion, according to Global Times.

Luckin’s Q1–2024 financial report states that “[t]otal net revenues in the first quarter were RMB6,278.1 million ($869.5 million), representing an increase of 41.5 percent from RMB4,436.7 million in the same quarter of 2023.” Total net revenues in fiscal year 2023 were RMB24,903.2 million (~$3.5 billion), representing an increase of 87.3 percent from RMB13,293.0 million in fiscal 2022, according to Luckin’s 2023 financial report. By comparison, Starbucks reported total revenue of $3.05 billion in China for fiscal 2023 that ended October 1, according to a CNN calculation based on the company’s quarterly results.

In its Q1–2024 financial report, Luckin states that “[n]et new store openings during the first quarter was 2,342, including two new store openings in Singapore, resulting in a quarter-over-quarter store unit growth of 14.4 percent from the number of stores at the end of the fourth quarter of 2023, ending the first quarter with 18,590 stores which include 12,199 self-operated stores and 6,391 partnership stores.”¹ Starbucks’ outlets in China are entirely company-owned, according to CNN, which reports (citing data from Starbucks) that as of the end of January 2024, Starbucks had 6,975 stores in China—a 14.5 percent increase from a year earlier. China is Starbucks’ second largest market after the U.S., according to Visual Capitalist.²

CNBC reports that Luckin and Starbucks have different pricing strategies and because Luckin “offers heavy discounts and offers,” a cup of coffee from Luckin costs 10 to 20 yuan, or about $1.40 to $2.75, whereas a cup of coffee from Starbucks is priced at 30 yuan or more (i.e., at least $4.10). Luckin has introduced menu items that appeal to the Chinese customer and elevate the popularity of coffee in the country. For example, Luckin collaborated with Kweichow Moutai³ to create the Jiangxiang-flavored⁴ latte which, according to a Q3–2023 Luckin earnings call, broke Luckin’s single-item sales record with 5.42 million cups sold on launch day. According to an April 8, 2024 Luckin press release, “[t]he ‘Jiangxiang Flavored Latte’, a successful product jointly launched by Luckin Coffee and Kweichow Moutai, has captured the hearts of China’s younger demographic, amassing a transacting customer base of over 25 million.” The same press release also announced that on March 29, the Luckin Coffee x Kweichow Moutai theme store opened in Shenzhen, Guangdong province.

In terms of site criteria, Luckin stated in a fiscal year 2023 SEC Form 20-F that “[w]e primarily operate two types of stores, namely pick-up stores and relax stores, for different purposes, and we strategically focus on pick-up stores, which accounted for 98.5 percent of our total self-operated stores as of December 31, 2023. Our pick-up stores have limited seating and are typically located in areas with high demand for coffee, such as office buildings, malls, shopping districts and university campuses.” … “The majority of these [pick-up] stores generally range from 20 to 60 square meters [(215-646sf)] in size …” The filing states further: “We open relax stores for branding purposes. Our relax stores accounted for 1.5 percent of our stores as of December 31, 2023. Relax stores are generally spacious and larger than 120 square meters [(1,292sf)] in size.”⁵

On April 24, 2024, Luckin announced the opening of a new roasting plant in Kunshan, Suzhou City of Jiangsu Province. The press release stated that “[w]ith a total planned investment of $120 million and an annual roasting capacity of 30,000 tons, it is the largest coffee roasting plant in China to date.”

Luckin was founded in 2017 by Jenny Qian. It trades on the OTC market. Centurium Capital, a private equity firm headquartered in Beijing, is currently the controlling shareholder of Luckin, according to Bloomberg.

1. As of December 31, 2023, Luckin had 10,628 self-operated stores in operation, including 10,470 pick-up stores and 158 relax stores, according to an SEC filing. ↩︎
2. As of October 2023, Starbucks had 16,346 stores in the U.S., of which 9,645 were company-owned and 6,701 were licensed, according to Visual Capitalist. ↩︎
3. Kweichow Moutai, is a Chinese company specializing in the production, sale, and distribution of Maotai, a style of baijiu made in the town of Maotai, Guizhou Province, China. ↩︎
4. Kweichow Moutai Jiangxiang baijiu (酱香) is described as “floral, dried dates with a hint of nuts and toasted rice,” and with 53 percent ABV. ↩︎
5. The typical Starbucks store ranges in size from 1,500sf to 2,000sf. ↩︎

Last Updated on May 26, 2024 by Ramin Seddiq