Luckin Coffee announced to obtain the company’s Series B Financing of USD 200 million, with a post-investment value at USD 2.2 billion. Under the pressure from competitors like Luckin Coffee, Starbucks reported a sales decline (-2%) in China, according to its Q3 Earnings.
Dec 12, 2018 /EqualOcean/ - Luckin Coffee announced to obtain the company’s Series B Financing of USD 200 million, with a post-investment value at USD 2.2 billion. The investors include Joy Capital, Centurium Capital, GIC, and CICC. Except for CICC, the rest of investors are all from last round financing.
QIAN Zhiya (钱治亚), the founder of Luckin Coffee claimed that the fund raised will be used on product development, technology innovation, as well as business expansion, and ultimately improve user experience, which is the most important thing in her opinion.
Only 5 months ago, on July 11, Luckin Coffee had just completed its series A financing of USD 200 million, valued at USD 1 billion. This Starbuck's challenger in China showed its unbounded potentials in attracting and convincing investors.
With support from investors, Starbucks accomplished an amazing store expansion. Started in January 2018, Luckin Coffee had opened more than 1,700 stores in 21 big cities by the end of November, such as Beijing, Shanghai, Guangzhou, and Shenzhen, etc. The company achieved its “500-meters coverage” layout in the core urban areas of Beijing and Shanghai, so customers can easily walk to the stores within 5 minutes. In the author's opinion, this distribution strategy is actually designed on purpose to reduce the delivery ranges, because most of Luckin Coffee consumers would rather order cups of coffee in their offices via the mobile internet than go to the stores by themselves.
With 1,700 stores, Luckin Coffee still needs to open 100 more stores to be tantamount to half of the size of Starbucks stores in China, 3,600 stores Starbucks opened so far, according to its official websites. However, Starbucks achieved this in the past 19 years while Luckin Coffee costs less than one year.
Luckin Coffee's rapid growth style is similar to the early stage of Didi Chuxing (the mobile transportation platform, offering a full range of commuting options in 400 cities in China), burning the money from investors and wildly expanding. In addition to its aggressive advertising and store opening, Luckin Coffee so far had two other advantages in consumers' perspectives, compared with traditional cafes like Starbucks: Cost performance, Convenience.
With a long-term “Buy five Give five” promotion activity, Luckin's products are much cheaper than the traditional cafes, even with the delivery fee. It costs CNY 10.5 in Luckin for a large cup of Americano, which is similar and even a little bit larger than a grande cup of Starbucks charged at CNY 28 in China, and CNY 6 for the delivery fee (the delivery could even be free if consumers purchase products of more than CNY 55).
In Luckin Coffee App, consumers could easily order the coffee and snacks. This is also a part of the Luckin Coffee's "ANYWHERE" strategy, that consumers could enjoy the coffee anywhere, in-store, takeaway, or order from the home or offices. Starbucks App cannot provide such services until now, and it chose to cooperate with Ele.me (a platform that offers online food delivery service, backed by Alibaba) to provide the delivery service since August, which is seven months behind Luckin Coffee.
Under the pressure from competitors like Luckin Coffee, Starbucks reported a sales decline (-2%) in China, according to its Q3 Earnings.
- Author: ZHANG Fan; Write to ZHANG Fan at ZhangFan@EqualOcean.com