China’s upstart coffee brand, Luckin, has an audacious plan: convince China to switch from tea to coffee, overtaking Starbucks while they’re at it. It’s an expensive proposition, so they’re relying on an IPO — and a Silicon Valley mindset.
“Technology is the core of our business,” Luckin Coffee, the young unicorn that emerged last year as a challenger to Starbucks in China, says in the prospectus it filed with the SEC this week, reportedly seeking to raise $800 million for a $5 billion valuation. Casual observers might have suspected that “coffee” would be the core of the company’s business, but Luckin has always acted more like a tech startup than a coffee house.
Founded in 2017 by CEO Jenny Qian, the former COO of Uber-rival UCAR, Luckin is the pioneer of a web-centric business model that has facilitated the company’s rapid expansion. Customers order coffee online and pay through mobile wallets, such as WeChat Pay or Alipay. Couriers then rush the coffee to wherever the customer is, or the customer can collect their joe to-go from a nearby Luckin location.
Taking cues from the Silicon Valley playbook, Luckin has burned through hundreds of millions of dollars to fuel an aggressive expansion plan, subsidizing prices to attract customers and opening 2,370 stores in less than two years. Of those locations, only 109 are so-called “Relax Stores,” where customers can actually sit-in and sip their brew — the rest are dedicated to churning out takeaway orders.