Valuation of $2.2 Billion — Can Luckin Coffee Eclipse Starbucks in China?
The answer is NO.
If you go to a Starbucks in the U.S., chances are you would bump into clusters of coffee consumers leisurely chatting to one another while waiting for their daily dose of caffeine. But if you are at a Luckin Coffee, you might only see the apparition of these faces in the crowd.
This is because Luckin Coffee is more like “an Uber for coffee” or a data-driven New Retail business, in contrast to Starbucks, which brands itself as the third place besides the home and office.
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“The first location [of Luckin] I went to wasn’t much of a ‘store’. It was more of a kiosk,” said Ying-Ying Lu, co-host of TechBuzz China, a tech podcast on China’s innovation. She remembered customers in the store picking up orders they had placed on the app, and deliverymen rushing in and out.
Lu also found that she couldn’t buy coffee unless she ordered through Luckin’s mobile app, nor could she pay with cash or WeChat pay. “Everything is done on the mobile. Every interaction is captured digitally,” she added.
Yang Fei, CMO of Luckin Coffee, confirmed the company’s strategy. “From the first day our brand was established, we have relied on technologies and processes such as smart dispatching (of orders), smart ordering, smart quality control, and smart marketing,” Yang said.
Instead of comparing Luckin to Starbucks, companies like Cloud Kitchen and Kitchen United should really be taken into account.
Although Luckin started operations from January, it now has over 1,700 stores in 21 major cities in China by November.
The company has raised $200 million in its latest funding round on Dec.12, raising its valuation to $2.2 billion. Only five months ago, it gathered the same amount of money during its Series A round.
Apart from investors that have invested in the previous round, such as GIC, Joy Capital and Centrium Capital, China International Capital Corp Ltd. also joined the funding.
As for where the money raised from Series B financing will flow, Qian Zhiya, founder and CEO of Luckin Coffee, said it will be used on product research, technical innovation and business development. And Luckin will continue to subsidize its customers.
“We have covered 100 percent areas within 500 meters around core areas in Beijing and Shanghai. It only takes a five-minute-walk for our customers to enjoy a cup of Luckin Coffee,” said Qian.
“Luckin is basically a data-driven F&B delivery business. It’s much more about logistics rather than real estate, unlike Starbucks,” said Rui Ma, co-host of TechBuzz China, a tech podcast on China’s innovation.
