A fight brewing: Luckin targets Starbucks for China’s coffee crown

Luckin’s caffeine-fueled growth has come at the expense of profits. (Reuters)
Updated 04 January 2019

A fight brewing: Luckin targets Starbucks for China’s coffee crown

  • The firm has expanded at breakneck speed, propelled by a focus on technology, delivery, and heavy discounting, even at the cost of mounting losses

BEIJING: Chinese coffee startup Luckin is aiming to open 2,500 new stores this year and overtake Starbucks as the largest coffee chain by number of outlets in the world’s second-biggest economy, it said on Thursday.

The firm, which only officially launched its business at the start of last year, has expanded at breakneck speed, propelled by a focus on technology, delivery, and heavy discounting, even at the cost of mounting losses.

“What we want at the moment is scale and speed,” Yang Fei, Luckin’s chief marketing officer, told reporters on Thursday at a presentation in Beijing.

“There is no point talking about profit,” he said, adding that subsidies to lure more users would
be an important part of the firm’s strategy for the coming few years.

Luckin said that it was targeting a total of more than 4,500 stores by the end of 2019, which would take it past Seattle-based Starbucks, which has long dominated China’s coffee scene and has more than 3,600 stores in the country.

Luckin’s caffeine-fueled expansion is in stark contrast to Starbucks, which opened its first China store in 1999 and has spent two decades reaching its current store count.

The US chain, which spearheaded the growth of a coffee culture in China, started to see competition rise from smaller peers over the last 18 months, though Luckin has stood out as the most aggressive competitor.

But Luckin’s rise has not come cheaply. The company recorded a loss of more than 800 million yuan ($116.34 million) last year, which its chief marketing officer said was in line with expectations as it pushed to expand.

Luckin, backed by Singapore sovereign wealth fund GIC and China International Capital Corp, opened more than 2,000 locations in the past year, gaining a valuation of $2.2 billion after raising $200 million in a funding round last month.

The firm’s CEO, Qian Zhiya, told Reuters last year that Luckin aimed to outnumber Starbucks
in China.

Reuters previously reported that Luckin was also in early-stage talks with investment banks about an overseas initial public offering.

The firm, however, declined to answer questions about IPO plans on Thursday. 


Japan’s capital sees prices fall most in over 8 years as COVID-19 pain persists

Updated 27 November 2020

Japan’s capital sees prices fall most in over 8 years as COVID-19 pain persists

  • Tokyo core CPI marks biggest annual drop since May 2012
  • Data suggests nationwide consumer prices to stay weak

TOKYO: Core consumer prices in Tokyo suffered their biggest annual drop in more than eight years, data showed on Friday, an indication the hit to consumption from the coronavirus crisis continued to heap deflationary pressure on the economy.
The data, which is considered a leading indicator of nationwide price trends, reinforces market expectations that inflation will remain distant from the Bank of Japan’s 2% target for the foreseeable future.
“Consumer prices will continue to hover on a weak note as any economic recovery will be moderate,” said Dai-ichi Life Research Institute, which expects nationwide core consumer prices to fall 0.5% in the fiscal year ending March 2021.
The core consumer price index (CPI) for Japan’s capital, which includes oil products but excludes fresh food prices, fell 0.7% in November from a year earlier, government data showed, matching a median market forecast.
It followed a 0.5% drop in October and marked the biggest annual drop since May 2012, underscoring the challenge policymakers face in battling headwinds to growth from COVID-19.
The slump in fuel costs and the impact of a government campaign offering discounts to domestic travel weighed on Tokyo consumer prices, the data showed.
Japan’s economy expanded in July-September from a record post-war slump in the second quarter, when lockdown measures to prevent the spread of the virus cooled consumption and paralyzed business activity.
Analysts, however, expect any recovery to be modest with a resurgence in global and domestic infections clouding the outlook, keeping pressure on policymakers to maintain or even ramp up stimulus.