July 9, 2024 • 15 mins
China’s Luckin Coffee is the nation’s top coffee retailer, overtaking even Starbucks. That would be notable itself, but less than 4 years ago the company filed for bankruptcy, making its comeback even more unlikely. The turnaround is in part thanks to the chain’s automated stores, cut-price deals and innovative drinks that appeal to local tastes.
Today on The Big Take Asia, host K. Oanh Ha speaks with Bloomberg’s Rachel Chang on how Luckin managed to turn around its failing business to overtake Starbucks, and asks whether it can hold on to its success as coffee takes off in China, and more rivals emerge.
Read more: China’s Luckin Coffee Is Back From the Brink and Beating Starbucks
Further listening: What Does China’s Economic Slowdown Mean For the Communist Party?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio news. Earlier this week, in
the middle of a hectic news cycle, I got a drink.
I picked me up for a colleague, Rachel Ching. She's
Bloomberg's managing editor for Global Business in Asia. So I
have a very special treat for you. I got Rachel
(00:23):
some coffee, but not just any coffee.
Speaker 2 (00:27):
Wow, whe should you manage to get that? This cross
bought it? Yes?
Speaker 1 (00:33):
So I think you're holding a coconut latte that came
from a Luckin store all the way from Sinzen here
to Hong Kong. Luck and Coffee is the biggest coffee
seller in China, but it doesn't have a store in
Hong Kong, where we're based. So our fabulous producers arranged
a special delivery of some of Luckin's most popular flavors,
(00:53):
like their coconut latte.
Speaker 2 (00:54):
Amazing. Can I actually try it right now?
Speaker 1 (00:58):
Yes, hold on burgers right together.
Speaker 2 (01:03):
It's like two thousand calories.
Speaker 1 (01:06):
Well that aside, it's actually pretty good.
Speaker 2 (01:09):
It's very good, very delicious.
Speaker 3 (01:11):
I mean, I'm not a connoissan. I'm sure that coffee
fancy coffee people would hate the taste, but fancy coffee
people also hate Starbucks.
Speaker 1 (01:19):
That's true. Rachel used to cover Luckin during its early
days in twenty seventeen as a startup, and in just
seven years, Luckin has outpaced Starbucks, who opened its first
door in China as early as nineteen ninety nine, and
today Luckin's become the dominant coffee retailer in the country.
And it's done that with the mix of creative products,
(01:41):
from its salty cream cheese and Ti latte to a
popular alcohol infused coffee. I think we should try.
Speaker 3 (01:49):
It, Yeah, definitely, although might be a bit late for
caffeine and a bit early for alcohol, but.
Speaker 1 (01:54):
You know, somewhere somewhere in the world, it's cocktail hour.
But LUs, the astronomical rise was unthinkable. At one point
in twenty twenty, the company was on the brink of
collapse after a major accounting scandal wiped out its stock value,
sending it into bankruptcy.
Speaker 3 (02:12):
People really just thought, well, this company is done for.
They had to close a whole bunch of stores, and people,
I guess just really assumed that this company would just
be fading away.
Speaker 1 (02:22):
Luck And not only survived, but it staged an extraordinary comeback.
Earlier this year, the company reported its fourth quarter earnings.
Total sales revenue in twenty twenty three reached three and
a half billion dollars in China, surpassing Starbucks for the
first time.
Speaker 3 (02:39):
Luck and understand the local tastes and the local behavior
of consumers much better. And they have been very successful,
and the global giants have been on the backfoot, you know.
And whether you're talking about Nike, all Apple, all Stabucks,
you know, all of these companies have been humbled in
some ways in China.
Speaker 1 (03:03):
Welcome to The Big Take Asia from Boomberg News. I'm
wanh Every week we take you inside some of the
world's biggest and most powerful economies and the markets, tycoons
and businesses that drive this ever shifting region. Today on
the show, how Luck and Coffee went from filing for
bankruptcy to beating a coffee titan like Starbucks in China,
(03:25):
and what It's Rocky Road says about competition in the
world's second largest consumer market. Luck in Coffee was founded
in twenty seventeen by Lu Chung Yao and Chiang chu ya.
At that time, they were working at a car rental
company called China Auto Renting Inc. Or car Inc.
Speaker 3 (03:48):
Which Lou founded, so lu jiang Yao was already a
very successful entrepreneur, cause ink was really his most successful
venua and at the time tens Yeah, Jenny was a
very trusted executor of his team, and so she was
really the person who came up with the original idea
(04:08):
that there's a lack of coffee essentially in China.
Speaker 1 (04:12):
In twenty eighteen, the average person in mainland China only
drank about three cups of coffee a year. That's far
off from at least three hundred cups per person in
the US.
Speaker 3 (04:25):
China is a country of tea drinkers. It is really
difficult to find normal coffee when I was working and
living in China, you know, you wouldn't really be able
to wake up and order good coffee from a five
style hotel. It's just not like something that's embedded in
their everyday life.
Speaker 1 (04:39):
Chien saw an opportunity. She quit her c sweet job
at car Inc. To chase your dream of building a
coffee empire, and her boss Lou wanted in.
Speaker 3 (04:51):
How lu jangya reacted was that he was very supportive.
He wished it the best of luck, and he actually
invested money himself into luck In to become a co founder.
Speaker 1 (05:00):
With Loo's endorsement, Luckin raised about two hundred million dollars
at the end of twenty eighteen. By that time, it
had already opened more than two thousand stores across China.
Chan and Lou used that money to open more stores
and kept the shops small and low cost, which was
a very different strategy from Starbucks.
Speaker 3 (05:19):
Starbucks really has this idea of they think of their
cafes is what they call the third place, So it's
the place between home and office. You know, lush sofas,
just a really like pleasant music playing in the background.
Speaker 1 (05:34):
Luck And took another approach.
Speaker 3 (05:36):
Most of their stores were just tiny little kiosks, definitely
not a place to lounge. Just think about, you know,
the classics sort of young twenty something Chinese professional, you know,
rushing to work and just really needing to wake up,
just needing to grab something on the goal so that
she'll be on for her first meeting. And that's what
(05:58):
luck It is.
Speaker 1 (05:59):
So it's basically I guess you can get in terms
of store.
Speaker 3 (06:02):
Right, but that's because they're focused was so much on
mobile and takeaways.
Speaker 1 (06:08):
Rachel says. Luck And also capitalized on China's largely cashless society.
Speaker 3 (06:13):
So you know, you could order on the app, pick
whatever I want, pay everything's on the app, right, and
then you could literally just go to the store and
then pick it up, or you can have delivery which
would be so quick, you know, less than ten minutes.
And essentially, if you didn't want to, you don't have
to speak to any human being at all.
Speaker 1 (06:31):
And doubling down on digitalization not only saved customers time,
it also saved luck And a lot of money for them.
Speaker 3 (06:38):
It was really about innovation around the back end.
Speaker 2 (06:41):
Right.
Speaker 3 (06:41):
They would use these digital systems to manage staff, to
manage inventory. That cut down a lot in costs, a
lot in labor, and a lot in turn around time.
Speaker 1 (06:52):
That lean, digital forward approach help the company keep the
cost of its products down. Today, the average latte from
luck And costs about eleven y that's less than two dollars.
Here's how Luckin's chief strategy officer, right Out Shakol describes
its positioning in the market in an interview with Bloomberg
in twenty nineteen.
Speaker 2 (07:10):
If you look at the product, it's a premium product.
Speaker 3 (07:13):
If you look at the price, it's a mass market price,
and that's where I think our model is unique because
we can do both.
Speaker 1 (07:19):
After an IPO in twenty nineteen that raised more than
half a billion dollars, Luckin's growth accelerated, and within three
years of its launch, it was operating about forty five
hundred stores in China, from top cities like Shanghai and
Shinzen to more remote places like Shinjug. But its success
wouldn't last long.
Speaker 3 (07:41):
So in twenty twenty, Muddy Waters, which is cousin blocks
short selling firm, put out a tweet saying that they
had received a whistle blower report on how Luckin was
fabricating transactions and that really just everything just unravel from that.
Speaker 1 (08:02):
After the whistleblower report, the US Securities and Exchange Commission
investigated and charged Luckin with defrauding its investors and fabricating
transactions to inflate its revenue. In the wake of the investigations,
Luckin's shares plunged. At its IPO, Luckin was valued at
nearly three billion dollars. About a month after the fraud
(08:24):
allegations came to light, the company's value tumbled to about
seven hundred million dollars, and in twenty twenty one, Luckin
filed for bankruptcy.
Speaker 3 (08:36):
Everybody left this company foot dead, so it did seem like,
you know, the end of the luck And story.
Speaker 2 (08:42):
But it wasn't.
Speaker 1 (08:44):
After the break, Luckin bounces back. After an accounting fraud scandal,
luck and Coffee was on the edge of collapse. It
filed for bankruptcy in New York in February of twenty
(09:05):
twenty one and agreed to pay a one hundred eighty
million dollar penalty to settle the case with the US
Securities in Exchange Commission, But shortly after someone stepped in
with a helping hand.
Speaker 3 (09:17):
David Lee is the chairman of Centurium Capital, very close
to the founder, lu Jung Yao. He was one of
the original investors in the Ka Inc rental startup that
made Lose Fortune.
Speaker 1 (09:29):
David Lee's admiration for Luckin's founder. Lu Jung Yao was
well known in the industry, and he believed in Luckin's
business model. Lee's private equity company, Centurium Capital, doubled down
on its investment in the coffee chain. It stepped in
with two hundred and forty million in twenty twenty one,
which helped clear Luckin's legal fees and fines. Luckin also
(09:50):
underwent a major shakeup. Despite David Lee's personal connection with Lou,
he decided that Luckin needed new leadership to stem the crisis,
according to sources at the time, so in twenty twenty,
Chian and Lub, the founders of Luckin, were replaced by
new executives, and by twenty twenty two, Centurium became Luckin's
(10:11):
controlling shareholder.
Speaker 3 (10:12):
Centriium also put in its own people to help luck
and turn things around, closing down stores, hiring executives, and
also very importantly helping Luckin put in a franchise system
which allowed it to expand stores easily and quickly.
Speaker 1 (10:27):
With Centurium steering the ship, Luckin emerged from bankruptcy in
April twenty twenty two, just fourteen months after filing for protection,
and its small stores were ideal as China adjusted to
COVID measures.
Speaker 3 (10:41):
COVID in China was pretty much a really bad thing
for all consumer businesses because China was so strict about COVID.
You know, they just these huge lockedouts. But then what
was quite interesting was that its business model really insulated
it from the worst of COVID, you know, these bad bones,
(11:02):
contactless mobile payment, these kinds of takeout where you didn't
have to talk to another human being.
Speaker 2 (11:08):
It was actually perfect for covid.
Speaker 1 (11:12):
Luckin took its new lease on life and went even bigger.
On top of cementing its business strategy and setting itself
apart from competitors, the company released new best selling items.
The coconut latte we tried earlier, for example, accounts for
around seventy percent of sales at some stores, and its
alcohol infused Malti lat sold five point four million cups
(11:35):
on the first day of its launch, bringing in nearly
fourteen million dollars in sales. Rachel says a lot of
these out of the box concoctions have created buzz on
platforms like TikTok and shaohong Shu, China's equivalent of Instagram.
Speaker 3 (11:51):
I think they were just really smart with innovating around
the local consumer tastes and doing these like really catchy,
consumer friendly collaborations, right. So the Maltai thing, they just
always go viral with new things, right, and that's just
so important in the really competitive Chinese consumer market, Like
are you able to get attention?
Speaker 1 (12:11):
Luckin's now grown to more than eighteen thousand stores across China.
That's roughly double from twenty twenty three. Starbucks, in comparison,
has just over seven thousand, and last year, Luckin opened
more stores than Starbucks has ever done in China.
Speaker 3 (12:27):
You know, Starbucks is kind of facing a broader challenge,
a broader struggle. They're not just struggling in Chinay're struggling
around the world as well. Earlier this year, Starbucks issued
a profit warning that was so bad that found out
how It Shelts was technically retired, wrote this letter and
put it on LinkedIn. Talked about things that stop us
needs to do better. One of them was mobile ordering
(12:49):
and payment, which exactly the thing that Luckin and Chinese
companies do so well.
Speaker 1 (12:54):
Starbucks isn't the only competitor chasing after Luckin's success. After
found Lu and Chin were forced out of the company,
they went on to start a rival chain in twenty
twenty two called Kadi. Their brand already has nearly seven
thousand stores nationwide. That same year, KFC opened its first
takeaway only coffee outlet, k Coffee and Rachel says with
(13:19):
KFC's own delivery network and even cheaper prices, k coffee
is one of the biggest threats to Luck in so, Rachel,
we have all these coffee newcomers in China fighting to
sell a cheap cup that's also easy and quick to
get right. So, how sustainable is luck and success? I mean,
especially if it's customers are really just loyal to the
next cheapest coffee.
Speaker 3 (13:40):
I think that is the question around Luck, and now
that it's become so successful with the expansion, and now
that it's come back from the brink, is is the
Luck and brand strong enough? Is the more to the
Luck and brand than just being cheap and being everywhere? Right,
because being cheap and being everywhere is a game that
lots of chains can play. Is that brand loyalty or
(14:02):
could they easily just be overtaken by Luck? In version two,
when we talked to this former senior vice president, you know,
he would say he talked about how their ambition was
always to sell coffee in the countryside, you know, imagining
farmers and deep your nana weather, you know, sipping coffee
on their break. I think it's a nice narrative. Not
(14:22):
quite there yet, not quite there yet, but at least.
Speaker 1 (14:25):
For now, Lucking is still the company to beat in
China while it continues to launch new stores and new
drinks like that alcohol infused Maltai latte, and they're still
packing up punch.
Speaker 2 (14:38):
Maybe put the ice maybe a bit too much.
Speaker 1 (14:41):
Ice doesn't taste very alcoholic, And it's just the fragrance
of it, like it's you can smell it from here, yeah,
but actually you don't taste it.
Speaker 2 (14:50):
No, well, I feel it a little bit now.
Speaker 3 (14:52):
It's definitely a light bud going on already.
Speaker 2 (14:56):
It's very.
Speaker 1 (15:02):
This is The Big Take Asia from Bloomberg News. I'm
wan ha. This episode was produced by Young Young, Naomion
and Jessica Beck. It was mixed by Blake Naples and
fact checked by Eddie Dwan and Carmeli Argana. It was
edited by Aaron Edwards and Rachel Chang, additional reporting from
Danielle Away. Our senior producers are Nami Shaven and Kim Gettelson.
(15:23):
Our senior editor is Elizabeth Ponson. Nicole Beemster Bower is
our executive producer, and Sage Bauman is Bloomberg's head of Podcasts.
Please follow and review The Big Take Asia wherever you
listen to podcasts. That helps new listeners find the show
and see you next time.
Bloomberg Audio Studios, podcasts, radio news. Earlier this week, in
the middle of a hectic news cycle, I got a drink.
I picked me up for a colleague, Rachel Ching. She's
Bloomberg's managing editor for Global Business in Asia. So I
have a very special treat for you. I got Rachel
(00:23):
some coffee, but not just any coffee.
Speaker 2 (00:27):
Wow, whe should you manage to get that? This cross
bought it? Yes?
Speaker 1 (00:33):
So I think you're holding a coconut latte that came
from a Luckin store all the way from Sinzen here
to Hong Kong. Luck and Coffee is the biggest coffee
seller in China, but it doesn't have a store in
Hong Kong, where we're based. So our fabulous producers arranged
a special delivery of some of Luckin's most popular flavors,
(00:53):
like their coconut latte.
Speaker 2 (00:54):
Amazing. Can I actually try it right now?
Speaker 1 (00:58):
Yes, hold on burgers right together.
Speaker 2 (01:03):
It's like two thousand calories.
Speaker 1 (01:06):
Well that aside, it's actually pretty good.
Speaker 2 (01:09):
It's very good, very delicious.
Speaker 3 (01:11):
I mean, I'm not a connoissan. I'm sure that coffee
fancy coffee people would hate the taste, but fancy coffee
people also hate Starbucks.
Speaker 1 (01:19):
That's true. Rachel used to cover Luckin during its early
days in twenty seventeen as a startup, and in just
seven years, Luckin has outpaced Starbucks, who opened its first
door in China as early as nineteen ninety nine, and
today Luckin's become the dominant coffee retailer in the country.
And it's done that with the mix of creative products,
(01:41):
from its salty cream cheese and Ti latte to a
popular alcohol infused coffee. I think we should try.
Speaker 3 (01:49):
It, Yeah, definitely, although might be a bit late for
caffeine and a bit early for alcohol, but.
Speaker 1 (01:54):
You know, somewhere somewhere in the world, it's cocktail hour.
But LUs, the astronomical rise was unthinkable. At one point
in twenty twenty, the company was on the brink of
collapse after a major accounting scandal wiped out its stock value,
sending it into bankruptcy.
Speaker 3 (02:12):
People really just thought, well, this company is done for.
They had to close a whole bunch of stores, and people,
I guess just really assumed that this company would just
be fading away.
Speaker 1 (02:22):
Luck And not only survived, but it staged an extraordinary comeback.
Earlier this year, the company reported its fourth quarter earnings.
Total sales revenue in twenty twenty three reached three and
a half billion dollars in China, surpassing Starbucks for the
first time.
Speaker 3 (02:39):
Luck and understand the local tastes and the local behavior
of consumers much better. And they have been very successful,
and the global giants have been on the backfoot, you know.
And whether you're talking about Nike, all Apple, all Stabucks,
you know, all of these companies have been humbled in
some ways in China.
Speaker 1 (03:03):
Welcome to The Big Take Asia from Boomberg News. I'm
wanh Every week we take you inside some of the
world's biggest and most powerful economies and the markets, tycoons
and businesses that drive this ever shifting region. Today on
the show, how Luck and Coffee went from filing for
bankruptcy to beating a coffee titan like Starbucks in China,
(03:25):
and what It's Rocky Road says about competition in the
world's second largest consumer market. Luck in Coffee was founded
in twenty seventeen by Lu Chung Yao and Chiang chu ya.
At that time, they were working at a car rental
company called China Auto Renting Inc. Or car Inc.
Speaker 3 (03:48):
Which Lou founded, so lu jiang Yao was already a
very successful entrepreneur, cause ink was really his most successful
venua and at the time tens Yeah, Jenny was a
very trusted executor of his team, and so she was
really the person who came up with the original idea
(04:08):
that there's a lack of coffee essentially in China.
Speaker 1 (04:12):
In twenty eighteen, the average person in mainland China only
drank about three cups of coffee a year. That's far
off from at least three hundred cups per person in
the US.
Speaker 3 (04:25):
China is a country of tea drinkers. It is really
difficult to find normal coffee when I was working and
living in China, you know, you wouldn't really be able
to wake up and order good coffee from a five
style hotel. It's just not like something that's embedded in
their everyday life.
Speaker 1 (04:39):
Chien saw an opportunity. She quit her c sweet job
at car Inc. To chase your dream of building a
coffee empire, and her boss Lou wanted in.
Speaker 3 (04:51):
How lu jangya reacted was that he was very supportive.
He wished it the best of luck, and he actually
invested money himself into luck In to become a co founder.
Speaker 1 (05:00):
With Loo's endorsement, Luckin raised about two hundred million dollars
at the end of twenty eighteen. By that time, it
had already opened more than two thousand stores across China.
Chan and Lou used that money to open more stores
and kept the shops small and low cost, which was
a very different strategy from Starbucks.
Speaker 3 (05:19):
Starbucks really has this idea of they think of their
cafes is what they call the third place, So it's
the place between home and office. You know, lush sofas,
just a really like pleasant music playing in the background.
Speaker 1 (05:34):
Luck And took another approach.
Speaker 3 (05:36):
Most of their stores were just tiny little kiosks, definitely
not a place to lounge. Just think about, you know,
the classics sort of young twenty something Chinese professional, you know,
rushing to work and just really needing to wake up,
just needing to grab something on the goal so that
she'll be on for her first meeting. And that's what
(05:58):
luck It is.
Speaker 1 (05:59):
So it's basically I guess you can get in terms
of store.
Speaker 3 (06:02):
Right, but that's because they're focused was so much on
mobile and takeaways.
Speaker 1 (06:08):
Rachel says. Luck And also capitalized on China's largely cashless society.
Speaker 3 (06:13):
So you know, you could order on the app, pick
whatever I want, pay everything's on the app, right, and
then you could literally just go to the store and
then pick it up, or you can have delivery which
would be so quick, you know, less than ten minutes.
And essentially, if you didn't want to, you don't have
to speak to any human being at all.
Speaker 1 (06:31):
And doubling down on digitalization not only saved customers time,
it also saved luck And a lot of money for them.
Speaker 3 (06:38):
It was really about innovation around the back end.
Speaker 2 (06:41):
Right.
Speaker 3 (06:41):
They would use these digital systems to manage staff, to
manage inventory. That cut down a lot in costs, a
lot in labor, and a lot in turn around time.
Speaker 1 (06:52):
That lean, digital forward approach help the company keep the
cost of its products down. Today, the average latte from
luck And costs about eleven y that's less than two dollars.
Here's how Luckin's chief strategy officer, right Out Shakol describes
its positioning in the market in an interview with Bloomberg
in twenty nineteen.
Speaker 2 (07:10):
If you look at the product, it's a premium product.
Speaker 3 (07:13):
If you look at the price, it's a mass market price,
and that's where I think our model is unique because
we can do both.
Speaker 1 (07:19):
After an IPO in twenty nineteen that raised more than
half a billion dollars, Luckin's growth accelerated, and within three
years of its launch, it was operating about forty five
hundred stores in China, from top cities like Shanghai and
Shinzen to more remote places like Shinjug. But its success
wouldn't last long.
Speaker 3 (07:41):
So in twenty twenty, Muddy Waters, which is cousin blocks
short selling firm, put out a tweet saying that they
had received a whistle blower report on how Luckin was
fabricating transactions and that really just everything just unravel from that.
Speaker 1 (08:02):
After the whistleblower report, the US Securities and Exchange Commission
investigated and charged Luckin with defrauding its investors and fabricating
transactions to inflate its revenue. In the wake of the investigations,
Luckin's shares plunged. At its IPO, Luckin was valued at
nearly three billion dollars. About a month after the fraud
(08:24):
allegations came to light, the company's value tumbled to about
seven hundred million dollars, and in twenty twenty one, Luckin
filed for bankruptcy.
Speaker 3 (08:36):
Everybody left this company foot dead, so it did seem like,
you know, the end of the luck And story.
Speaker 2 (08:42):
But it wasn't.
Speaker 1 (08:44):
After the break, Luckin bounces back. After an accounting fraud scandal,
luck and Coffee was on the edge of collapse. It
filed for bankruptcy in New York in February of twenty
(09:05):
twenty one and agreed to pay a one hundred eighty
million dollar penalty to settle the case with the US
Securities in Exchange Commission, But shortly after someone stepped in
with a helping hand.
Speaker 3 (09:17):
David Lee is the chairman of Centurium Capital, very close
to the founder, lu Jung Yao. He was one of
the original investors in the Ka Inc rental startup that
made Lose Fortune.
Speaker 1 (09:29):
David Lee's admiration for Luckin's founder. Lu Jung Yao was
well known in the industry, and he believed in Luckin's
business model. Lee's private equity company, Centurium Capital, doubled down
on its investment in the coffee chain. It stepped in
with two hundred and forty million in twenty twenty one,
which helped clear Luckin's legal fees and fines. Luckin also
(09:50):
underwent a major shakeup. Despite David Lee's personal connection with Lou,
he decided that Luckin needed new leadership to stem the crisis,
according to sources at the time, so in twenty twenty,
Chian and Lub, the founders of Luckin, were replaced by
new executives, and by twenty twenty two, Centurium became Luckin's
(10:11):
controlling shareholder.
Speaker 3 (10:12):
Centriium also put in its own people to help luck
and turn things around, closing down stores, hiring executives, and
also very importantly helping Luckin put in a franchise system
which allowed it to expand stores easily and quickly.
Speaker 1 (10:27):
With Centurium steering the ship, Luckin emerged from bankruptcy in
April twenty twenty two, just fourteen months after filing for protection,
and its small stores were ideal as China adjusted to
COVID measures.
Speaker 3 (10:41):
COVID in China was pretty much a really bad thing
for all consumer businesses because China was so strict about COVID.
You know, they just these huge lockedouts. But then what
was quite interesting was that its business model really insulated
it from the worst of COVID, you know, these bad bones,
(11:02):
contactless mobile payment, these kinds of takeout where you didn't
have to talk to another human being.
Speaker 2 (11:08):
It was actually perfect for covid.
Speaker 1 (11:12):
Luckin took its new lease on life and went even bigger.
On top of cementing its business strategy and setting itself
apart from competitors, the company released new best selling items.
The coconut latte we tried earlier, for example, accounts for
around seventy percent of sales at some stores, and its
alcohol infused Malti lat sold five point four million cups
(11:35):
on the first day of its launch, bringing in nearly
fourteen million dollars in sales. Rachel says a lot of
these out of the box concoctions have created buzz on
platforms like TikTok and shaohong Shu, China's equivalent of Instagram.
Speaker 3 (11:51):
I think they were just really smart with innovating around
the local consumer tastes and doing these like really catchy,
consumer friendly collaborations, right. So the Maltai thing, they just
always go viral with new things, right, and that's just
so important in the really competitive Chinese consumer market, Like
are you able to get attention?
Speaker 1 (12:11):
Luckin's now grown to more than eighteen thousand stores across China.
That's roughly double from twenty twenty three. Starbucks, in comparison,
has just over seven thousand, and last year, Luckin opened
more stores than Starbucks has ever done in China.
Speaker 3 (12:27):
You know, Starbucks is kind of facing a broader challenge,
a broader struggle. They're not just struggling in Chinay're struggling
around the world as well. Earlier this year, Starbucks issued
a profit warning that was so bad that found out
how It Shelts was technically retired, wrote this letter and
put it on LinkedIn. Talked about things that stop us
needs to do better. One of them was mobile ordering
(12:49):
and payment, which exactly the thing that Luckin and Chinese
companies do so well.
Speaker 1 (12:54):
Starbucks isn't the only competitor chasing after Luckin's success. After
found Lu and Chin were forced out of the company,
they went on to start a rival chain in twenty
twenty two called Kadi. Their brand already has nearly seven
thousand stores nationwide. That same year, KFC opened its first
takeaway only coffee outlet, k Coffee and Rachel says with
(13:19):
KFC's own delivery network and even cheaper prices, k coffee
is one of the biggest threats to Luck in so, Rachel,
we have all these coffee newcomers in China fighting to
sell a cheap cup that's also easy and quick to
get right. So, how sustainable is luck and success? I mean,
especially if it's customers are really just loyal to the
next cheapest coffee.
Speaker 3 (13:40):
I think that is the question around Luck, and now
that it's become so successful with the expansion, and now
that it's come back from the brink, is is the
Luck and brand strong enough? Is the more to the
Luck and brand than just being cheap and being everywhere? Right,
because being cheap and being everywhere is a game that
lots of chains can play. Is that brand loyalty or
(14:02):
could they easily just be overtaken by Luck? In version two,
when we talked to this former senior vice president, you know,
he would say he talked about how their ambition was
always to sell coffee in the countryside, you know, imagining
farmers and deep your nana weather, you know, sipping coffee
on their break. I think it's a nice narrative. Not
(14:22):
quite there yet, not quite there yet, but at least.
Speaker 1 (14:25):
For now, Lucking is still the company to beat in
China while it continues to launch new stores and new
drinks like that alcohol infused Maltai latte, and they're still
packing up punch.
Speaker 2 (14:38):
Maybe put the ice maybe a bit too much.
Speaker 1 (14:41):
Ice doesn't taste very alcoholic, And it's just the fragrance
of it, like it's you can smell it from here, yeah,
but actually you don't taste it.
Speaker 2 (14:50):
No, well, I feel it a little bit now.
Speaker 3 (14:52):
It's definitely a light bud going on already.
Speaker 2 (14:56):
It's very.
Speaker 1 (15:02):
This is The Big Take Asia from Bloomberg News. I'm
wan ha. This episode was produced by Young Young, Naomion
and Jessica Beck. It was mixed by Blake Naples and
fact checked by Eddie Dwan and Carmeli Argana. It was
edited by Aaron Edwards and Rachel Chang, additional reporting from
Danielle Away. Our senior producers are Nami Shaven and Kim Gettelson.
(15:23):
Our senior editor is Elizabeth Ponson. Nicole Beemster Bower is
our executive producer, and Sage Bauman is Bloomberg's head of Podcasts.
Please follow and review The Big Take Asia wherever you
listen to podcasts. That helps new listeners find the show
and see you next time.
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Sarah Holder
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