Chinese coffee chain Luckin Coffee is looking to expand in the United States and other overseas markets amid intensified domestic competition that is impacting same-store sales. Guo Jinyi, Chairman and CEO of Luckin, said that the international market is filled with opportunities, but also presents significant challenges that require patience, time and continuous investment. Guo said: “We remain both patient and confident in our ability to succeed. We are actively evaluating opportunities in the U.S. and other markets”. The Financial Times reported that Luckin is considering a U.S. launch as early as next year, targeting cities with large numbers of Chinese students and tourists, such as New York. The report also suggests that Luckin Coffee plans to undercut U.S. competitors by selling drinks priced around USD2 or USD3. Luckin expanded its presence in Singapore a year and a half ago. The company opened eight new outlets there in the quarter, bringing the total number to 45. Guo said that the company’s initial attempts in Singapore resulted in financial losses, but these experiences provided invaluable insights into the complexities of overseas operations.
The company will continue to increase overseas investment in areas such as store expansion, supply chains and branding. Considering the maturity and competitiveness of the U.S. coffee market, Luckin intends to approach its expansion strategy there with careful consideration and a disciplined execution plan, Guo said. “With fierce competition in the Chinese coffee sector, overseas expansion and the possibility to regain trust from the capital market might be strategic options for Luckin. However, the tarnished reputation brought by a previous scandal in the capital market might affect Luckin’s branding image in the U.S.,” said Jason Yu, General Manager of Kantar Worldpanel China.
Luckin’s revenue in the third quarter stood at CNY10.8 billion, a 41.4% year-on-year increase. Net profit was CNY1.3 billion, reflecting a net margin of 12.8%. The operating profit of self-operated stores was CNY1.75 billion, with a self-operated store operating margin of 23.3%, compared to a store-level operating profit margin of 23.1% in the same quarter of 2023. Same-store sales growth for self-operated stores in the third quarter was down 13.1%, compared to a growth of 19.9% in the same quarter of 2023, the China Daily reports. In the fourth quarter, Starbucks China has faced a 14% decline in comparable store sales, driven by an 8% decrease in average product prices and a 6% drop in comparable transactions. The coffee shop chain opened a net 290 stores, entering 78 new county-level markets.
