Coffee wars: China's Luckin gains on Starbucks

Credit: Reuters - Business (Amazon FireT
Published on May 16, 2019 - Duration: 02:12s

Coffee wars: China's Luckin gains on Starbucks

Luckin Coffee, the Chinese challenger to Starbucks, is going public this week.

It's official launch was only early last year, but it's already waging a caffeine war against its U.S. rival in China.

Michelle Hennessy reports.


Coffee wars: China's Luckin gains on Starbucks

This coffee has big ambitions.

It hails from Beijing.

It's official launch was only early last year.

And it's already waging a caffeine war with Starbucks in China.

The Luckin Coffee brand has been expanding across the country at breakneck speed.

And its listing on the Nasdaq this week has been hotly anticipated.

Analysts are saying if there was such a thing as a coffee business rule book, Luckin would tear it up.

It took just six months to be valued at one billion U.S. dollars, it's lured in top notch investors worldwide including BlackRock and GIC.

And it's already opened more than two thousand cafes, which it plans to more than double by the year's end - to overtake Starbucks in China.

So what does this mean for its older American rival?

(SOUNDBITE) (ENGLISH) REUTERS FINANCIAL CORRESPONDENT, JULIE ZHU, SAYING: "I think Starbucks is quite worried about Luckin" Julie Zhu has been following the company for Reuters since its launch.

(SOUNDBITE) (ENGLISH) REUTERS FINANCIAL CORRESPONDENT, JULIE ZHU, SAYING: "So basically Luckin coffee is a relatively young but very interesting Chinese coffee startups.

According to its IPO price range Luckin can actually raise up to nearly 600 million US dollars in IPO this week, that'll make it the biggest US listing by a Chinese company so far this year." And that appeal from investors comes despite the fact Luckin - is yet to break even, let alone turn a profit.

For the first three months of 2019, it posted a net loss of over 85 million dollars.

(SOUNDBITE) (ENGLISH) REUTERS FINANCE CORRESPONDENT, JULIE ZHOU, SAYING: "Luckin has been burning through cash to bring in customers with online ordering, big discount, cheap delivery and celebrity marketing.

That's why Luckin has said it will continue to record losses in the future." In order to compete, Starbucks has already teamed with Alibaba to deliver its coffee, as it witnessed a surge in local competition.

The big question now is whether Luckin can reign in its spending, while still keeping its customers fueled on Chinese coffee.

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