
Luckin Coffee relies on apps and SF Express to deliver coffee from over 500 mainland outlets
A Chinese online-to-offline (O2O) coffee startup is claiming a $1 billion valuation, and unicorn status, after raising $200 million from a group that includes Singapore’s sovereign wealth fund, GIC.
Beijing-based Luckin Coffee (瑞幸咖啡), which combines mobile apps, WeChat integration and delivery via China’s ubiquitous SF Express messenger service has debuted 525 stores in 13 cities since it began operations at the beginning of the year, as it seeks to leverage China’s rapid adoption of online retail to challenge industry heavyweight Starbucks.
In this series A funding round GIC was joined by Beijing-based Joy Capital; Legend Capital (previously Lenovo Capital) and Centurium Capital, which was founded by the former China head of Warburg Pincus. Luckin had earlier received an estimated RMB 1 billion ($150 million) from executives of Ucar, the Beijing-based ride-sharing service.
Where Coffee Meets Technology
Tech leaders such as WeChat-maker Tencent, Alibaba and JD.com have been establishing physical outlets to connect with their customers, and Luckin, which is helmed by former Ucar COO Qian Zhiya (钱治亚), is seeking to use its new cash infusion to bring this tech powered retail evolution to the world of gourmet coffee.
“After this round of financing, we will focus on product development, technique innovation and business expansion,” Qian said in a statement on the company’s WeChat account. “We are confident that the best match between product quality, cost performance and buying experience can be achieved through mobile Internet and big data.”

CEO Qian Zhiya has accused Starbucks of being a coffee monopol
Luckin, officially opened in May after a five-month soft-launch period, is as tech as coffee could be. Customers order from an app and opt for delivery or pick up, all transactions cashless. Delivery, which is outsourced to SF Express, is guaranteed within 30 minutes. The company backs this up with a substantial bricks and mortar presence, and its 525 physical locations make it an instant number three in terms of mainland outlets. No forecast has been given for future numbers.
Waving the Flag in the Coffee Wars
With Starbucks already operating 3,300 outlets in China, Qian’s market strategy takes direct aim Luckin’s larger competitor.
In an open letter released in May, Luckin accused Starbucks of forcing landlords to sign exclusivity clauses preventing them from leasing to the competition. It also alleged that suppliers are being presented with overly restrictive terms. Qian has also stated that every country should have its own, home-grown brand leader, while claiming that Starbucks is exercising market hegemony.
Statistics indicate that Starbucks, which entered China in 1999 has more than 80 percent of the fancy coffee market on the mainland and hopes to double that number by 2022. China is already the company’s second largest market after the US.
The battle between the two is being dubbed the Blue vs Green War, because of the colour of their logos. In addition to intense marketing and the lawsuit, which may have been withdrawn and has been dismissed as a publicity stunt by Starbucks, Luckin coffees are about 20 percent cheaper than those from the American rival. Luckin is also reported to have poached staff from Starbucks in Beijing by offering them three times previous wages.
Dynamic Market with Competitors Old and New
Starbucks is also facing challenges from both traditional coffee retails and tech-enabled, highly caffeinated local players.
Tim Hortons has said it is planning to open 1,500 stores in China over the next decade. The Canadian doughnut and coffee chain, billing itself as Canada’s Favourite Coffee, is hoping that the brand will draw customers, and fourth-ranked player in China, Costa Coffee (with 420 outlets) is also set for aggressive expansion.
In March 2018, Coffee Box (连咖啡), which opens kiosks in strategic locations and provides coffee delivery, raised $25 million in a funding round, while Uin Coffee (友饮咖啡) raised $15 million the same month.
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