China's Largest Coffee Chain Plans Entry Into U.S. Markets

Luckin Coffee is brewing plans to enter the U.S. market as early as next year.

After recovering from potential downfall following a fraud scandal, Luckin, the largest coffee chain in China, has regained its footing and is now looking to take on America's dominant coffee force, Starbucks, the Financial Times reports.

Luckin had grown to 20,000 locations in China as of July, far surpassing Starbucks' 7,000, by offering coffee at prices ranging between $2 and $3. Its annual revenue in 2023 surpassed Starbucks' in China for the first time, according to the FT. The recovery has come in the aftermath of the firm paying a $180M fine in 2019 for inflating its revenues when it listed as a public company in the U.S. 

Meanwhile, Starbucks has faced challenges in China, reporting a 14% drop in same-store sales in the third quarter, Yahoo Finance reported. 

Starbucks is redesigning its stores to improve efficiency, focusing on quieter environments and faster drink orders. The company is also planning to gain more global ground by expanding to 55,000 locations by 2030, up from 38,500 as of the first quarter.

Luckin is gradually expanding into Southeast Asia and surrounding areas to prepare for its potential overseas debut. Luckin’s expansion will target high-traffic areas with large Chinese student and tourist populations, like New York, to appeal to its customer base, the FT reported.

The chain leverages its affordable approach to combat competitors and is known for its kiosk format and focus on convenience.

The new territory is expected to present challenges to the growing coffee chain with a different market to compete with. Luckin Coffee would be contending with more American industry giants like Dunkin’ and Dutch Bros.

U.S. coffee shops expanded to more than 40,000 locations last year, with Starbucks leading the wave. The total is approximately 7% more than before the pandemic, World Coffee Portal reported. 

Luckin's expansion into the U.S. retail market comes amid dwindling available space. Just 4.7% of the country's retail space was available at the end of the third quarter, according to Colliers, nearly 26% below peak availability during the pandemic.