Coffee upstart Luckin looks to take on Starbucks in China with ‘new retail’ model
Luckin Coffee is looking to cater to people everyday and everywhere with its online and offline coffee shops
With five million cups sold in four months since its founding, Luckin Coffee – seen as an up-and-coming challenger to Starbucks in China – has had the kind of espresso-charged start to business that any new retailer could wish for.
The recipe behind its early success is not entirely new though, relying on innovative on-demand services and heavy initial subsidies – both of which have featured in the Beijing-based coffee chain’s roll-out in China.
“Our initial investment will likely exceed one billion yuan (US$156 million),” said Jenny Qian Zhiya, chief executive of Luckin Coffee, in a transcript from a press briefing held in Beijing last month. “We have plenty of cash,” she added, declining to specify exactly how much.
With a large latte priced at 24 yuan, about 20 per cent cheaper than what it costs at its Seattle-based rival, the start-up is very competitive on price. It also has “unlimited” special offers including ‘buy two, get one free’ and ‘buy five, get five free’ for the really thirsty.
Luckin, which offers American-style coffees and a range of bakery items, began soft operations in Beijing and Shanghai at the start of the year. Of the shops opened so far, about 231 or 44 per cent are effectively “take-out kitchens”, according to the company, where coffees are delivered mainly by courier – with a free drink offered if your order doesn’t arrive within half an hour.
However, Qian is adamant the company will not simply be a ‘coffee delivery brand’. “We hope to achieve full coverage of targeted areas with delivery kitchens in the first instance, so that customers can order our coffee,” she said, adding that the take-out kitchens will ultimately only comprise 15 per cent of its network, with full sit-down cafes making up the main bulk.