Starbucks Has Not Fared Well Against Luckin & Cotti In China. What Happens Now They’re Expanding Into The US? – CoffeeTalk

Chinese beverage chains, including Luckin Coffee and Cotti Coffee, are redefining coffee culture in China and aiming to win over customers in the U.S. and beyond. Luckin has expanded aggressively in China and overtaken Starbucks on the mainland, with more than twice as many outlets. Following an accounting fraud scandal that got the company delisted from the Nasdaq in 2020, Luckin has staged an unlikely comeback with quirky flavors and steep discounts, as low as $1.40 per cup during an earlier price war with rival Cotti Coffee.

Luckin is set to take its biggest leap yet with plans to open a branch in lower Manhattan, mirroring Cotti’s expansion into Singapore, Hong Kong, and Malaysia. The move mirrors Cotti’s expansion into Brooklyn and Manhattan, which has opened outlets in Southeast Asia to Dubai and California.

New York is considered culturally the best testing ground for an international brand to expand into, especially a Chinese one, citing the city’s diversity and large base of young consumers. However, it is also the most saturated and competitive markets. Chinese chains combine budget pricing with unusual flavors that often blur the line between coffee and bubble tea, jarring to purists but extremely popular at home.

Luckin has built its business around technology, allowing customers in China to order and get deliveries through the country’s ubiquitous WeChat app, replacing the traditional cafe experience with hyper efficiency. The company also runs large coffee-bean roasting and processing operations in China to help drive down costs.

However, the question is whether this will work in America. On an earnings call in April, Luckin’s co-founder Guo Jinyi said the company plans to “adopt flexible, locally tailored models” to steadily expand overseas. Slowing growth and intense competition in China have pushed companies to seek opportunities beyond its borders.

Coffee price wars have led to large-scale Chinese companies often following a familiar strategy: burn cash, grab market share, worry about profit later. Starbucks has announced it will lower the prices of dozens of drinks in China by an average of $0.70 this summer.

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