China’s Luckin Coffee is taking on Starbucks in more big markets

Posted at 7:24 AM, Jul 22, 2019
and last updated 2019-07-22 09:24:28-04

The coffee company trying to topple Starbucks in China is planning to storm other big markets.

Luckin Coffee will partner with Kuwait-based company The Americana Group to set up a coffee retail business in the Middle East and India, it announced Monday. Americana runs 1,900 franchises across the Middle East for several fast food brands, including KFC, Red Lobster, Olive Garden, Krispy Kreme and even Starbucks’ UK rival Costa Coffee.

Luckin and Americana signed a memorandum of understanding in Beijing on Monday and will run the new coffee business as a joint venture, the Chinese firm said.

“This collaboration represents Luckin Coffee’s first step toward bringing its leading products from China to the world,” CEO Jenny Qian Zhiya said in a statement.

Luckin is fighting Starbucks in China by opening thousands of stores in the past two years and relying on technology for orders, deliveries and payments to give it an edge. It currently has around 3,000 stores across 40 Chinese cities, which it plans to increase to 4,500 by the end of this year. That would make it China’s biggest coffee chain (Starbucks currently has a little under 3,800 stores in the country).

Luckin has made no secret of its global ambitions, choosing to make its initial public offering in New York in May. The company raised around $645 million through its US listing, according to data from Refinitiv.

The Middle East is a major market for Starbucks, which has 202 stores in Dubai, 191 in Saudi Arabia, and 151 in Kuwait. The Seattle-headquartered chain also has 146 stores in India, where it has partnered with one of the country’s biggest conglomerates, Tata.

The prospect of a new rivalry comes as Starbucks’ international business faces several challenges.

“There are ongoing pressures across the region,” Martin Brok, president of Starbucks’ operations in Europe, the Middle East and Africa, said late last month, while announcing that it had lost money in the United Kingdom — its sixth-biggest global market.