While China is expected to become the world’s largest consumer market in the next few years, Starbucks succumbed to increasing competition in China. According to company reports, China’s Luckin Coffee has surpassed Starbucks as China’s largest coffee chain in terms of sales and units.
Starbucks, ChineseIt lost its first place among the chains competing to meet the increasing coffee demand of .
According to company reports, China’s Luckin Coffee has surpassed Starbucks as China’s largest coffee chain in terms of sales and units. Luckin currently operates approximately 13,300 stores, all but a handful of which are in China. This figure is approximately twice the size of Starbucks’ 6,800 stores in the country.
China, traditionally a tea-drinking society, consumes very little coffee compared to many other countries, but companies say Chinese demand is growing. Analysts expect China to become the world’s largest consumer market within the next few years. Major Western brands selling to Chinese consumers face increasing competition from local brands as consumers begin to favor these brands.
LOSS IN THE SECOND LARGEST MARKET
Seattle-based Starbucks, the world’s largest coffee chain, has considered expansion in the world’s second most populous country among its top priorities for decades. Although a complex place to do business, China represents one of Starbucks’ biggest opportunities for growth, former CEO Howard Schultz said. China is now Starbucks’ USAIt is the second largest market in terms of stores and revenue after .
Starbucks sought to gain first-mover advantage after opening its first cafe in China in 1999. The chain has expanded from the country’s largest cities to smaller cities, building hundreds of new stores in the country every year. The pandemic badly affected Starbucks’ business in China, with sales in the country falling by 17 percent in 2020 compared to 2019.
COMPETITION INCREASED AND SALES DECREASED
Luckin generated sales of $855 million in the three months ending June 30, ahead of Starbucks’ $822 million in revenue from its China business in the three months ending July 2, according to company filings. Luckin’s sales superiority further increased in company reports in November.
Despite increasing competition and declining sales, Starbucks executives remain determined about China. In its statement in November, the company stated that it aims to open approximately 1,000 stores a year in China and increase this number to 9 thousand by 2025. China will one day become Starbucks’ largest market, executives said. “I’m very confident that this is just the beginning,” Starbucks China Co-CEO Belinda Wong said at an investor event in November.
LUCKIN WAS SHAPED AROUND THE MOBILE APPLICATION
Founded in 2017, Luckin shaped its strategy around its mobile app and integrated the take-out option from the beginning, which Starbucks later added to its China operations. Luckin had 3,680 stores in the fall of 2019, approaching the 4,130 stores Starbucks had built over the two decades leading up to that year.
Luckin went public in 2019. In 2020, Luckin recorded approximately 310 million in sales in the previous year. dollar He admitted that they showed too much. The Nasdaq Stock Exchange delisted the company that year. Luckin has promised to restructure by bringing in new executives and attracting investment from Chinese private equity firm Centurium Capital. The chain opened its 10,000th store in China this summer.
Another emerging rival is China’s Cotti Coffee, founded last year by Luckin founders who are no longer with the company. Cotti Coffee offers low-cost beverages aimed at young people and said in August that it had opened 5,000 stores in about a year.