The value-focused coffee chain will likely move to undercut established operators on price in an increasingly competitive US branded coffee shop market.
China’s largest coffee chain, Luckin Coffee, is reportedly planning a US launch in 2025, according to a Financial Times report
Citing unnamed sources with knowledge of the matter, the FT said the Xiamen-based business is laying groundwork for the move by building out its supply chain and customising its app order technology for the US market.
Luckin Coffee will seek to open stores in cities with high concentrations of Chinese students and tourists, such as New York, the newspaper added. If Luckin Coffee adopts a similar growth strategy in the US as it has in China, stores will likely be smaller format with a focus on pick-up and delivery.
Fast-growing Luckin Coffee, which reached 20,000 stores in China in July 2024, has been running advertisements during NBA games to further build brand recognition after signing a multi-year strategic partnership with Texas-based basketball team Houston Rockets in November 2023.
The FT also reported that Luckin Coffee will seek to ‘undercut US incumbents’ with plans to price beverages from $2-$3.
World Coffee Portal research shows the average price of a 12oz latte among US branded coffee chains reached $4.60 in 2024, costing $4.75 and $4.85 respectively at drive-thru coffee chains Dutch Bros and Scooter’s Coffee and an average of $5.25 at market leader Starbucks.
However, value has become a key battle ground in the $54bn US branded coffee shop market as consumers grapple with the high cost of living and operators face growing competition.
Starbucks and Dunkin’, which operate 16,700 and 9,600 US stores respectively, both introduced lower cost food and beverage ranges in 2024 amid strong competition from value-focused non-specialist operators, such as McDonald’s, 7-Eleven, Circle K and Whataburger.
Luckin Coffee’s reported US launch comes after value-focused rival Cotti Coffee entered the marketin May 2024.
The expansion of serial discounters, Luckin and Cotti, which have been locked in price war in the Chinese market for past year, could present a fresh headache for Starbucks as it seeks to reverse three consecutive quarters of falling sales among its 16,700 stores in the US. The coffee chain’s new CEO Brian Niccol has pledged to overhaul Starbucks’ marketing and assess its ‘pricing architecture’ to ensure it remains competitive on value.
If confirmed, a US launch would represent a remarkable turnaround for Luckin Coffee which was delisted from the New York Nasdaq stock exchange in June 2020 after a financial scandal shone light on $340m in fabricated sales – an event which also led to Luckin replacing its senior management team.
Luckin Coffee’s reported move to challenge Starbucks in its home market comes amid a period of sustained falling sales for the US coffee chain in its key China growth market.
Starbucks, which operates over 7,500 stores in the vast East Asian country, posted a 14% like-for-like sales decline in China in its fourth quarter, alongside an 8% year-on-year fall in average ticket 6% decline in comparable transactions.
After making its international debut in Singapore in March 2023, Luckin Coffee has been strengthening its supply chain to support further international expansion, with launches in Hong Kong and Malaysia expected over the next six months.
In April 2024, the value-focused coffee chain opened a 570,000sq ft roasting facility in Suzhou City before breaking ground on a new RMB 3bn ($21.2m) roastery and supply chain hub in the eastern port city of Qingdao five months later.
In June 2024, Luckin Coffee also has signed a Memorandum of Understanding (MoU) with the Brazilian Trade and Investment Promotion Agency (ApexBrasil) to purchase 120,000 tons of coffee from the South American country over the next two years – a deal worth approximately $500m.
Source: World Coffee Portal
