China’s most hyped coffee startup Luckin just joined the echelons of global unicorns after completing a Series A between USD 200 million and 300 million, valuing the company at north of USD 1 billion, according to people familiar with the matter told 36Kr.
New retail model-based Luckin coffee has taken top-tier Chinese cities by storm, since its inception last November.
It has set up 525 stores as of this May; and it has taken Starbucks, one of its biggest and most formidable rivals, to court by accusing the latter of market manipulation.
“Beat Starbucks in China”
Came to life late last year in a “beta” model, Luckin announced its official opening on May 8, by when it has already opened around 525 stores across 13 Chinese cities, including Beijing, Shanghai, and many other higher-tier cities with affluent consumers who are receptive to the coffee culture.
Luckin’s quick pace in setting up shops speaks to an amazing feat, especially since the first physical store only arrived on the first day of 2018.
This is a huge testament to the bold claims of the CEO of the startup, Ms. Jenny Qian Zhiya.
She plainly told the official China News Service that her goal was to ‘’beat Starbucks in China.’’
However, like all other fast-growing startups, the young coffee start-up is currently a bleeding business, still far from raking in a profit as yet.
The timeline to start raking in profits has not even been set. Ms. QIAN, on the contrary, appeared not to be unduly worried.
Rather, she claims that she’s prepared for this ‘loss-making’ state and is comfortable to stay unprofitable for a long time, citing that it will take much time to nurture the coffee culture within China.
Uphill battle
In spite of all the hype, it’s important to consider the startup’s intensifying domestic competition and imminent fierce battles.
Among the growing new retail-based coffee players, Coffee Box is potentially one of the bigger competitors, having completed 4 funding rounds.
Armed with its asset-light approach and big data prowess, it has recently raised up to RMB 158 million, plus rotational funds in March. Zhang Xiaogao, the CEO of Coffee Box has declared, this year, 2018 to be the year for coffee’s rapid scale expansion.
Archrival, Seattle-based Starbucks has long become the epitome of China’s coffee chain since the early 21st century.
In 2017, Starbucks has garnered 80.7% market share of China, cementing its dominant position in the country.
It boasts of up to 3,300 Starbucks stores across 141 Chinese cities as of May 2018.
In the same month this year, Luckin Coffee released an open letter, accusing Seattle-based global coffee chain, Starbucks for abusing its market dominance power, severely hindering the startup’s bold business development plans in China and impairing a supposed competitive domestic trade market, even as Starbucks revealed its most ambitious goal of tripling its revenue over the next five years and doubling the number of stores by 2022.
With the lawsuit and massive growth, this Series A funding could be the much-needed boost in the continuing growing battle in China’s coffee market.