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Coffee startup Luckin aims to overtake Starbucks in China by end 2019

Luckin Coffee

BEIJING, China – Startup Luckin Coffee is aiming to open 2,500 new stores this year and overtake Starbucks Corp as the largest coffee chain by number of outlets in China. That would bring the Xiamen-based start-up’s total number of stores in the country to more than 4,500, according to company co-founder and chief executive Qian Zhiya at a press briefing in Beijing on Thursday.

It would also overtake Starbucks’ current total of about 3,600 stores across China.

Founded in 2017 as a coffee-and-bakery chain, Luckin has had an espresso-charged start in terms of store expansion, fuelled by consumer subsidies and growing demand for coffee in a country that traditionally preferred drinking tea.

It was originally billed as a smartphone-based on-demand coffee business but has morphed into a more traditional bricks-and-mortar coffee shop chain.

Since then, Luckin has expanded to 2,000 stores in 21 cities across China, serving up more than 85 million cups of coffee to a customer base some 12 million strong.

Luckin has challenged the US coffee chain’s dominance in the country by appealing to tech-savvy youth who prefer to order coffee using their smartphones and have it delivered.

Starbucks is responding with a delivery service of its own, and continues to rely on its more upmarket position to justify higher prices. Luckin is also relying on heavy discounts to poach consumers, a tactic used by other homegrown startups.

“What we want at the moment is scale and speed,” Luckin’s chief marketing officer, Yang Fei, told reporters on Thursday. “Subsidy will remain as one of our core strategies, at least in the next three to five years,” Yang Fei said in the same briefing. “Our investors are not the least concerned. On the contrary, they believe we are being too conservative.”

In 2017, China’s coffee shop sales reached some 30 billion yuan (around US$4.4 billion), and are expected to reach 1 trillion yuan by 2025, according to consultancy firm Qianzhan