Luckin Coffee Eyes Bid For Nestle's Blue Bottle Coffee – CoffeeTalk

China’s Luckin Coffee Inc. is contemplating a bid for Nestle SA’s Blue Bottle Coffee to enhance its brand profile and expand its presence in the premium coffee market, as reported by sources acquainted with the developments. Luckin, the largest coffee chain in China, backed by Centurium Capital, is also assessing other acquisition opportunities, including the operator of % Arabica coffee stores in China, which is supported by the private equity firm PAG. Although initial talks included Coca-Cola Co.’s Costa Coffee, it seems they are unlikely to pursue that option.

On a related note, Luckin’s American depositary receipts fell by 7.3% recently, marking the largest drop since April, although the company’s shares have risen 25% this year, resulting in a market valuation of $9 billion. These acquisition discussions are still in their infancy and may not culminate in a formal bid. Nestle, PAG, and Coca-Cola have not commented on the situation, while Centurium, Luckin, and % Arabica were unavailable for immediate remarks.

Established in 2017, Luckin Coffee has rapidly grown its footprint, outpacing Starbucks Corp. in terms of store count in China, where Starbucks has opted to divest a majority stake in its local operations to Boyu Capital. Following its delisting from the Nasdaq in 2020 due to an accounting scandal, Luckin’s business has rebounded, reporting net revenues of $2.1 billion for the third quarter ending in September—up 50% from the previous year—and achieving a net income of approximately $180 million. During this quarter, Luckin opened a net total of 3,008 new stores globally, including five in Singapore, 21 in Malaysia, and three in the US, bringing its total to 29,214 locations worldwide.

On the other hand, Nestle has enlisted Morgan Stanley to evaluate strategic options concerning Blue Bottle Coffee. Founded in California in 2002, Blue Bottle was significantly backed by Nestle 15 years later, with the company acquiring a 68% stake for about $425 million. Blue Bottle currently operates in the US as well as in China, Hong Kong, Japan, Singapore, and South Korea. Meanwhile, % Arabica, established in 2013, boasts a presence in Asia and the Middle East, along with several locations in Europe and the Americas, predominantly in mainland China, where it has over 80 outlets.

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