Luckin Just Overtook Starbucks As The Biggest Coffee Chain In China

Luckin Just Overtook Starbucks As The Biggest Coffee Chain In China
Theodora Lee Joseph, CFA

3 months ago2 mins

Mentioned in story

What’s going on here?

Luckin became the biggest coffee chain in China, as Starbucks’ signature green siren call fell on deaf ears.

What does this mean?

Starbucks has cemented itself as the head honcho of the frappuccino industry, planting a bright green mermaid on every block in any major city. But in China, coffee addicts are getting their caramel macchiato fix from Luckin instead. The Chinese-backed company used a slick app and home delivery service to start competing against the world’s biggest coffee chain in 2017. Now, Luckin owns a roster of 13,300 frill-free stores mainly located in China, making Starbucks’ 6,800 look like a struggling independent artisan roaster. That, despite Luckin being booted from the Nasdaq in 2020 after fiddling with its books. Clearly, decent coffee forgives a multitude of sins.

Luckin stock
Source: Google Finance

Why should I care?

The bigger picture: Homemade is best.

China’s retail market is one of the world’s biggest, so it’s no wonder global chains like Starbucks are clawing to make a name for themselves in the country. Problem is, the US dollar is expected to stay strong for a while, which means any international sales will probably be diluted when converted between currencies. Starbucks seems to think the hit is worth taking, increasing its three-year cost-saving plans by $3 billion to make room for international ambitions.

Yuan to dollar
Source: Google Finance

For markets: The US has no excuse.

Foreign companies can blame China’s lagging economy for shortcomings in the country – for now. But when the country’s eventual recovery pads shoppers with cash, they’ll likely use it to back companies founded on home turf. Alibaba and Tencent are already dominating the tech scene in China, while Anta has the run of the sportswear scene and Xiaomi is outselling Apple in the smartphone market. What’s more, with high interest rates forcing US companies to streamline their operations and future budgets, outsiders may struggle to fund the kind of inventions that could help them keep pace.



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