Luckin Coffee Is Making a US Run at Starbucks

Luckin Coffee, China’s largest coffee chain, is making a fully caffeinated move into the U.S., directly challenging Starbucks. After surpassing Starbucks in store count across China, Luckin has launched five cashier-less locations in New York City.

All orders at Luckin stores are placed via a mobile app, and to help convert American coffee guzzlers, Luckin offers steep app-based coupons, with discounts of up to 50%, undercutting Starbucks’ prices and going straight at its legacy model of in-store ambience and experience.

Related: Starbucks Is Revamping 1,000 Locations

While Starbucks focuses on operational profitability—targeting a per-store minimum margin of 15%—Luckin is accepting early losses to build brand recognition and rapidly increase its market presence, Bernstein U.S restaurant equity research analyst Danilo Gargiulo told CNBC.

Speaking on Luckin’s mindset, Gargiulo said: “I want to make sure that the brand gets recognized on a national basis, even though at the beginning, this means that I might need to be suffering from some smaller losses on a per-store basis.”

What Is Luckin Coffee?

Founded in 2017 in Beijing, Luckin Coffee is now China’s dominant coffee retailer, boasting more than 26,000 stores worldwide. (Starbucks has 8,000 China locations.) The menu includes Americanos, matcha drinks, fizzy drinks, and a selection of creative lattes, including the popular coconut and velvet varieties.

In 2020, the company was embroiled in a massive accounting fraud scandal, with executives admitting to fabricating over $300 million in sales. The incident led to fines, executive firings, bankruptcy proceedings, and a major corporate overhaul, per the SEC.

Despite these setbacks, new management and a focus on transparency allowed Luckin to recover, and by 2023, Luckin Coffee was brewing $3.5 billion in net revenue.