Chinese Startup Aims to Overtake Starbucks

One Chinese company is going down a road of massive losses in a seemingly megalomaniac attempt to operate more stores in China than market top dog Starbucks by the end of 2019. Beijing startup Luckin Coffee only officially launched in January of 2018 but has already managed to open approximately 2,000 stores across the country. The Chinese growth objective of 600 new stores per year of their competitor seems tame in comparison – even though it entails opening a new location every 15 hours.

The attack on the Chinese market that is important to Starbuck's bottom-line is a calculated one. Luckin even threatened to sue Starbucks for monopolistic behavior as part of a PR stunt. China - traditionally a nation of tea drinkers - is currently the country with the most Starbucks stores in the world after the U.S.

By the end of 2019, Starbucks would run 4,121 stores in China if they reach their goal. Luckin hopes to be operating at approximately 4,500 locations by that time. This extreme growth strategy comes with a price tag – the company was running at a supposed loss of US$ 123 million in 2018. The company, whose products are currently about 20 percent cheaper than Starbucks, reportedly does not have a profitability objective yet and is bankrolled by Chinese and Singaporean investors.

Despite the losses, Luckin is hugely popular with consumers. Not only are they cheaper than their competitor but they also cater to a consumer base that loves mobile payments and delivery options. Many Luckin locations do not sell over-the-counter but take delivery orders over an app only. The company operates without cash via pay-on-your-phone schemes popular in China. Customers pre-order items on their phone before arriving at the store.