In China’s Battle of the Lattes, Luckin Coffee Keeps Beating Starbucks

Luckin Coffee, a Chinese coffee chain that has been rebuilding its business since a fraud scandal four years ago, has reported a commanding sales lead over rival Starbucks in the important China market. In 2023, Luckin generated total net revenue of 24.9 billion yuan ($3.5 billion), up 87% from a year earlier. The vast majority of its sales come from China, with only 30 outlets in Singapore. Starbucks reported total revenue of $3.05 billion in China for fiscal 2023 that ended October 1, according to a CNN calculation based on the company’s quarterly results. The US coffee chain has not reported a full-year figure for China sales.

Luckin said its unaudited net income for 2023 reached 2.85 billion yuan ($396 million), compared to 488 million yuan ($68 million) in 2022. It already calls itself China’s biggest coffee chain and says it had surpassed Starbucks in mainland China by the number of outlets in 2019. The surge in Luckin’s sales last year was partly driven by its rapid expansion. By the end of 2023, Luckin had 16,218 stores in China, nearly double its 2022 count of more than 8,200. Starbucks, by contrast, had 6,975 stores in China as of the end of January, up 14.5% from a year earlier. Some of Luckin’s stores are self-operated, while others are run by partners. Starbucks’ outlets in China are entirely company-owned.

Globally, Starbucks is still by far the largest coffee chain, with 38,586 stores worldwide. The United States and China are its two largest markets. China, once a tea-drinking nation, has become a global coffee industry powerhouse, despite grappling with numerous economic problems in recent years. Data from the International Coffee Organization last year showed that coffee consumption in the country grew 15% in the year ended in September. Much of this demand is driven by the younger generation, with 36% of coffee consumers in the country being between 25 and 34 years old, and 30% were between 35 and 44 years old, according to a 2021 survey by Daxue Consulting, a Chinese market research firm.

Luckin acknowledged the fierce competition and remains focused on its pricing and expansion strategy to sustain its growth and market share. Starbucks still maintains a wide lead over Luckin when it comes to profitability, as the Chinese company’s profitability has suffered due to its rapid expansion.

Read More @ CNN

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