With Chinese coffee brands eyeing overseas expansion, analysts said those seeking to succeed as global players must move beyond low-price strategies and a narrow focus on operational efficiency. “Overseas consumers have long associated Chinese brands mainly with cost performance,” said Fu Yifu, Special Research Fellow at Merchants Bank in Nanjing, Jiangsu province. “To succeed globally, the core is to build a presence rooted in China’s operational efficiency while blending into local cultures.” Luckin Coffee, China’s biggest coffee chain by store count, has been rapidly expanding in Hong Kong and overseas markets including Singapore, Malaysia and the U.S.
According to its annual reports, it had more than 6,000 stores in mainland China by the end of 2021, eclipsing Starbucks. The chain, which is known for its budget drinks, announced that it now had more than 50 stores in Hong Kong. Since entering the Hong Kong market in 2024, it has set up outlets in core business districts, at tourist attractions and in residential areas. Locations include metro stations, Terminal 2 at Hong Kong International Airport and Ocean Park Hong Kong. In November, Co-founder and CEO Guo Jinyi said the company was planning to relist in the U.S. It was delisted from Nasdaq in 2020 over a USD310 million revenue fraud case. Centurium Capital, Luckin’s largest shareholder, injected fresh capital to help cover legal costs and fines.
Earlier last month, the private equity firm agreed to acquire U.S. premium chain Blue Bottle Coffee’s global physical store assets from Nestlé for under USD400 million, Bloomberg reported. Luckin declined to comment on its shareholder’s move. Fu said the acquisition aimed to address relative weaknesses in premium coffee and brand positioning. “Whether it can integrate the brand and build a unique overseas identity remains to be seen,” he said. He added that to compete with Starbucks globally, Luckin must go beyond efficiency and build stronger brand storytelling and consumer experience. Globally, Luckin opened 30 self-operated stores in Singapore, nine in the U.S. and 70 franchised stores in Malaysia last year, adopting localized strategies to offer differentiated products, the company said. “International expansion is a key part of Luckin’s long-term strategy,” Guo said at its annual results briefing. “As one of the world’s largest and most mature coffee markets, the U.S. represents one of our important long-term opportunities. At this very early stage, our priority remains on validating the business model and building operational experience.”
Other Chinese coffee chains, including Lucky Cup, Cotti Coffee and Nowwa Coffee have also been expanding quickly overseas. Lucky Cup, part of Mixue Group, surpassed 10,000 global stores by November, making it the third Chinese coffee chain to reach that milestone after Luckin and Cotti, the group said when announcing its annual earnings last week. “These Chinese coffee brands benefit from mature supply chains and highly replicable store models,” Fu said. “Yet the sustainability of their low-price approach remains uncertain. High overseas costs including rent, labor and compliance put pressure on gross margins. Consumer habits also differ from the domestic market. In mature Western markets, buyers value brand image, quality and experience over prices alone.”
Zhu Danpeng, an independent food and beverage analyst based in Guangzhou, said going global had become a path for many Chinese coffee retailers to break through growth ceilings. Zhu stressed that quality was the key for their overseas expansion, adding that only by delivering on quality could a brand be built and scale achieved. Once scale had been established, a loyal consumer following would naturally follow. Compared with mature markets like the U.S., Europe and Japan, the fresh-made beverage market in China and Southeast Asia is still growing. S&P Global Ratings projected it would grow at a compound annual rate of 15% to 20% in the coming years.
