In China’s battle of the lattes, Luckin Coffee keeps beating Starbucks
Hong Kong (CNN) - Luckin Coffee, the Chinese chain that became mired in a fraud scandal and was delisted from the Nasdaq four years ago, has reported a commanding sales lead over rival Starbucks in the important China market.
In 2023, Luckin generated total net revenue of 24.9 billion yuan ($3.5 billion), up 87% from a year earlier, according to its financial results released on Friday.
It didn’t break down its revenue by geography, but the vast majority of its sales come from China. Internationally, it has only 30 outlets in Singapore, the first of which debuted last March.
Starbucks (SBUX), in comparison, reported total revenue of $3.05 billion in China for fiscal 2023 that ended October 1, according to a CNN calculation based on the company’s quarterly results.
The Xiamen-based company said its unaudited net income for 2023 reached 2.85 million yuan ($401,000), compared to 488,246 yuan ($67,830) in 2022, it said.
Luckin, which already calls itself China’s biggest coffee chain, says it had surpassed Starbucks in mainland China by number of outlets in 2019.
The surge in Luckin’s sales last year was partly driven by its rapid expansion. By the end of 2023, Luckin had 16,218 stores in China, nearly double its 2022 count of more than 8,200.
Starbucks, by contrast, had 6,975 stores in China as of the end of January, according to the company’s latest quarterly result published earlier this year. That number was up 14.5% from a year earlier.
Some of Luckin’s stores are self-operated, while others are run by partners. Starbucks’ outlets in China are entirely company-owned.
Globally, Starbucks is still by far the largest coffee chain, with 38,586 stores worldwide. The United States and China are its two largest markets.
China, once a tea-drinking nation, has become a global coffee industry powerhouse, despite grappling with numerous economic problems in recent years. Data from the International Coffee Organization last year showed that coffee consumption in the country grew 15% in the year ended in September.
Much of this demand is driven by the younger generation. As many as 36% of coffee consumers in the country were between 25 and 34 years old, and 30% were between 35 and 44 years old, according to a 2021 survey by Daxue Consulting, a Chinese market research firm.
The number of branded coffee shops in China jumped 58% in the past twelve months, reaching 49,691 outlets, according to a December report by World Coffee Portal. That helped China overtake the US as the world’s largest branded coffee shop market.
Luckin acknowledged the fierce competition.
“We remain focused on our pricing and expansion strategy to sustain our growth and market share,” said Jinyi Guo, chairman and chief executive officer of Luckin Coffee, in a statement that accompanied the company’s results.