Luckin Coffee could displace Starbucks in China

Chinese coffee start-up company Luckin Coffee has demonstrated strong potential in the Chinese coffee market. In just two years of existence the company has expanded prolifically and now threatens Starbucks, the leading coffee house chain operating in China. Luckin has made its intentions clear with the aim of become the nation’s leading specialist coffee provider by continuing an aggressive expansion strategy. The company has already achieved in two years what Starbucks has taken 19 years to complete in China. This has raised concern for Starbucks, which has begun taking action to mitigate the impact of emerging competition.

Luckin Coffee has experienced very swift growth since it was founded in 2017. The company has adopted an aggressive expansion strategy which has drastically increased the number of stores across China, enough to be recognized as a threat from the global and Chinese market leader Starbucks. In just two years Luckin Coffee has managed to open almost the same amount of stores it has taken Starbucks has in the past 19 years. Its expansion has invaded Starbucks retail business and has the potential to damage the US companies position in the Chinese marketplace.

Luckin Coffee has differentiated from other retail coffee specialists, helping it become a top competitor within China. Digitalization and delivery services have improved the convenience of purchasing coffee, a process which can now be completed using a smartphone. In addition, competitive prices have made Luckin a favorable option for customers wishing to save between 20% and 30% on their coffee purchases. A catalogue of promotional offers as well as a strong marketing campaign achieved widespread recognition, contributing to the company’s speedy growth.

Starbucks continues to act in response to the recent emergence of Luckin Coffee and has initiated strategies in order to mitigate growing competition. A number of new store openings as well as a partnership with Chinas multinational ecommerce giant, Alibaba, have been some of the strategies adopted by Starbucks in order to combat competition in China. Luckin Coffee could find ways to avoid Starbucks attempts to silence the company, but must pay close attention to the actions the company will take in retaliation to its presence in China.

Luckin Coffee: A local coffee chain with an internet business model

Starbucks Corporation – Mergers & Acquisitions (M&A), Partnerships & Alliances and Investments