Caffeine war in China brewing between Luckin and Starbucks

Luckin, which only officially launched in January, has opened more than 660 outlets in 13 Chinese cities thanks to a supercharged growth plan based on cheap delivery, online ordering, big discounts and premium pay for its staff. Its assault comes at a crucial time for Starbucks, which has 3,400 stores in China – its second biggest market after the US - and plans to almost double that number by 2022. And the speed of the attack is a warning to other established consumer brands in China that they too could be vulnerable to a start-up’s attempt to reinvent a market, brand consultants 

say. 

Starbucks’ shares were pummelled in June after it warned same store sales growth in China had plunged to zero or worse last quarter, against 7 percent growth a year earlier. Its fiscal third-quarter results are due out on Thursday. Starbucks said some new café openings were cannibalizing customer visits at nearby stores and it also blamed a drop-off in orders through delivery firms. While it did not mention increased competition, investors and analysts said it is clear that Luckin does represent a threat. 

However, they also point out that Starbucks’ brand has been very resilient to challenges from rivals around the world over the years, largely because of the ambience of its stores, its service and the consistent quality of the coffee served. There is also no sign that Chinese consumers have turned against such a very American brand as a protest over US President Donald Trump’s imposition of punitive tariffs on Chinese exports. Big promotions Reuters spoke to 30 consumers in Beijing Yin tai Center, a shopping mall that has a Starbucks, Costa Coffee and Luckin outlet, among others. Half of those polled said they had tried Luckin; most said they liked it, though more than two-thirds said their top choice remained Starbucks. 

The majority drank coffee in-store or bought to take away, with only a small number saying they had coffee delivered, a potential challenge for Lucien’s delivery-focused strategy. Taste, convenience and environment were their top three priorities, more than price.