Insurgent Chinese café chain Luckin Coffee appears to have fulfilled a pledge made at the start of 2019 and edged ahead of Starbucks to become the country’s biggest coffee chain.
Beijing-based Luckin, which only launched in January last year and has yet to turn a profit, now has around 4,500 stores in China, outnumbering its American rival by roughly 200 locations, according to research firm Thinknum Alternative Data and information supplied to Caixin by Luckin.
Starbucks, for which China is the company’s second-largest revenue stream after the U.S., has 4,300 locations in the East Asian nation.
Luckin’s rise to the top of China’s hyper-competitive coffee industry has been on the cards since early November, when its total number of outlets drew level with Starbucks on 4,200 locations each. Since then, the techy Chinese coffeemaker has opened nearly 300 new cafés while its U.S. counterpart has lagged behind with around 100 new locations, Thinknum said.
According to Thinknum, Luckin’s growth over the last several months owes much to opening stores in China’s more remote areas where Starbucks continues to lack a solid presence. That trend contrasts with its initial strategy of focusing on the country’s large, coastal cities.
Luckin, which began trading on the Nasdaq stock exchange in May, posted revenue of 1.5 billion yuan ($214.3 million) in the third quarter, up more than sixfold year-on-year. But its losses also widened by 9.7% to 531.9 million yuan over the same period.
As Luckin’s rapid store expansion may foretell an increase in both sales and revenue, some industry analysts remain cautiously optimistic about the company’s future growth prospects. To date, Luckin has largely depended on huge product discounts as a means to attract customers, a practice that the company has said will continue in the long term.
Last month, Luckin reportedly withdrew a lawsuit against Starbucks, ending a yearlong spat triggered when it sued the U.S. company for allegedly violating Chinese antitrust laws.
This story has been updated to correct the number of Luckin locations in China. According to the company, it had 4,500 at the end of 2019.
Contact reporter Ding Yi (firstname.lastname@example.org)