It was reported by Nasdaq that Louis Dreyfus Company, a leading merchant and processor of agricultural goods and NASDAQ listed Luckin Coffee (NASDAQ: LK) signed the joint venture agreement in Singapore last week. The ceremony was attended by Zhengyao Lu, Chairman of Luckin Coffee and Margarita Louis-Drefus, Chairperson of Louis Dreyfus Company.
“China is the fastest-growing NFC market globally and, together, Luckin and LDC see a significant opportunity to offer high quality, sustainably-developed NFC juices to the Chinese consumer. We are pleased to be partnering with one of the world’s largest citrus fruit growers and juice suppliers to launch a co-branded Luckin Juice and continue our ambitious growth plans,” said Jinyi Guo, Luckin Coffee Senior Vice President and Co-founder.”
The new business will sell orange, lemon and apple juice and plans to bottle and brand other fruit and vegetable juices. Louis Dreyfus Company masters the full value chain from its farms to customers at the destination, and plans to build its own bottling plant in the future. Luckin Coffee stores will play an important role as sales outlets, while the business also plans to market its juices via other channels.
Luckin, opened its first store in Beijing less than two years ago, and now has more than 2,300 locations and plans to surpass the 3,700 stores Starbucks has in China by the end of the year.
Talking about the joint venture James Zhou, global vice president and regional head for Louis Dreyfus Company in North Asia said: “Our areas of expertise are totally complimentary, with LDC's know-how in managing a sustainable juice value chain and Luckin's knowledge of the Chinese consumer, marketing and digital platform know-how and established consumer base.”
Only a month ago Luckin Coffee announced its spin-off brand 'Luckin Tea.' For now, Luckin tea products are sold on the main Luckin Coffee app and prepared at its stores but it plans to launch an independent app and mini-program on wechat and separate bricks-and-mortar stores for Luckin Tea.
It plans to target tier two and lower-tier cities whereas Luckin Coffee will still be concentrating on tier-one cities. The parent company will also roll out a partnership plan, calling individuals to open Luckin Tea franchises in different cites over China.
Luckin rely's on its technology for orders, deliveries and payments to give it an upper hand against its rival Starbucks. According to the firm's second-quarter report, it booked CNY 681.3 million in net losses, more than 100% from CNY 333 million in the second quarter of 2018. It has been spending heavily on sales and marketing, which reached CNY 390.1 million, up 119.1% year-on-year.
Still, Luckin is favored by investors. The company arrived on Wall Street in May, surging as much as 47% on its first day of trading.