Asia Minute: Betting on Chinese Coffee

May 20, 2019

People walk past a Luckin Coffee shop at a shopping center in Beijing, Saturday, May 18, 2019. Shares of Luckin Coffee, a fast-growing rival to Starbucks in China, rose 20% in their U.S. stock market debut Friday.
Credit AP Photo/Mark Schiefelbein

One of the latest hits with Wall Street investors is a Chinese coffee company. It’s giving some competition to Starbucks, but with a very different approach.

China’s Luckin Coffee listed on the NASDAQ Friday, and the stock popped nearly 50% before ending the day – about 20% higher than its opening price.

This is a brand that’s not familiar to American consumers, but has a growing presence in China – which also happens to be the second largest market in the world for Starbucks. Starbucks has more than 3,700 stores in China now, with plans to open an additional 2,000 over the next four years.

But Luckin has dialed up the competition – and quickly.

Since opening its first location a little more than a year and a half ago, it’s put up nearly 2,400 shops. But Luckin is not a place where you plop down on a comfy couch, open a laptop and settle in with a leisurely latte for hours at a stretch. The stores have a much smaller footprint than Starbucks and similar coffee shops.

They do have some seating, but the emphasis is on take-out and delivery. And the approach is tech-heavy. No cash is accepted at the stores. Payment is done by way of the store’s app.

Luckin has ambitious goals. It plans to open 2,000 more stores in China by the end of the year.

There is one other detail worth noting — the company’s not making a profit.

Last year the company had sales of more than 125-million dollars, and a loss of nearly twice that much.