As Starbucks Struggles, Luckin Coffee Takes Advantage And It Isn’t The Only New Arrival From China Looking To Do So – CoffeeTalk

Luckin Coffee Inc. is aiming to capitalize on the success of rival Starbucks Corp. and enter the US market, offering targeted discounts, speedy service, and an overall frictionless experience that should appeal to younger Americans as it has been to its Chinese counterparts. The coffee chain has five outlets across Manhattan, opening the first two over the summer. However, Luckin admitted to fabricating earnings a year later, leading to delistment, firing both its chairman and CEO, and paying a $180 million fine to the Securities and Exchange Commission.

Luckin has not collapsed, however, and just three years later, dethroned Starbucks in revenue terms in China to become the country’s biggest seller of coffee. Like many companies facing price competition at home, Luckin has opted to go abroad, opening its first outlet in Singapore in March 2023. China remains by far its biggest market, and after landing in Malaysia earlier this year, the chain now has its sights firmly on taking New York City and, presumably, the rest of America.

Luckin’s growth is accelerating this year, as it has entered a crowded space dominated by Starbucks, which is trying to recover from six consecutive quarters of declines in same-store sales. Chief Executive Officer Brian Niccol, a turnaround king who joined a year ago, wants more people to stop by and hang out, so he is ditching around 80 to 90 pickup-only locations to make things more cozy and conducive to conversation. That strategy pivot offers an opening for Luckin.

In addition to the troubled market leader, others like Dunkin’, fast-food restaurants, and diners sell their coffee at lower prices. Dutch Bros Inc., Tim Hortons Inc., Scooter’s Coffee LLC, and 7 Brew Co LLC are some of the other bigger names in the mix.

However, there is a potential issue with Luckin’s roots, as younger Americans have a more favorable view of China than older people, which is a consistent worldwide trend. Gen Z in China is finding it increasingly difficult to live their best lives due to a property crisis, deflation, and stagnant job market.

As for America, the richest 10% accounted for 49.2% of total spending in the second quarter, the highest level since data collection began in 1989. Long-term unemployment, especially for those with college degrees, is an issue, and the persistently high cost of living is also an issue.

Luckin needs to move fast, not just because it wants to go head-to-head with Starbucks. Chinese discount bubble tea chain Mixue Group has just signed a 10-year lease for an enormous 2,000 square-foot storefront on Canal Street. The real competitor to beat in New York may be another new arrival from China.

Read More @ Bloomberg