Will Luckin's Recipe For Success In China Translate To The US? – CoffeeTalk

Chinese coffee chain Luckin Coffee has made headlines in New York due to its turnaround story and the rising competitiveness of Chinese brands that leverage their country’s supply chain and manufacturing prowess to undercut western rivals. Five years ago, the Chinese chain was publicly disgraced for fabricating sales ahead of its Nasdaq debut, a scandal that would have killed most brands. Luckin used the proceeds of that initial public offering to turbocharge growth in China, where it outgrew upmarket rival Starbucks to become the largest coffee chain by store count and revenue.

Despite the differences between the US and China, their consumers have a surprisingly similar sweet tooth. Luckin’s signature coconut velvet latte drink has been a hit in New York, but the conditions that fuelled Luckin’s rapid expansion in China are not easily replicated across the Pacific. In New York, the company is largely sticking to its proven formula: a digital-first model with a heavy emphasis on speed, convenience, and data. Customers must order through the app, allowing Luckin to gather behavioral data and serve targeted promotions to encourage repeat orders.

Luckin prefers to describe itself as a technology company that happens to sell coffee, one whose algorithms and logistics expertise can deliver growth regardless of the market. However, this recipe book ignores the centrality of labour in its business. Visitors to China often marvel at the seamlessness of its consumer experience, but this marvel is hardly a product of technical prowess than an army of 84mn delivery workers, many of them young men from lower-income cities earning between Rmb20-30 per hour ($2.80-$4.17).

Luckin has leveraged this infrastructure better than Starbucks, which has access to the same networks but has been slower to adapt. Its flavor innovation and partnerships with the likes of Duolingo and Pingu on themed drinks and merchandise have also struck a particular chord with Gen Z consumers.

Early signs in America are encouraging, with online reviews largely positive and a $0.99 special for app downloads driving foot traffic in Manhattan. However, signs of friction are emerging, with some New Yorkers pushing back against Luckin’s app-only purchase policy, which violates the city’s regulation that mandates stores accepting cash.

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