Asia Minute: Starbucks’ China Challenge

Jan 4, 2019

Credit GoToVan / Flickr

News about Apple’s disappointing sales in China hit stock markets around the world this week. And while it’s not likely to have the same market impact, there’s another well-known American product that’s facing a new challenge in China.

China is not just an important market for Apple, it’s a crucial one for a number of American brands — including Starbucks. In fact, according to company figures, it’s the second-largest market in the world for Starbucks — and growing faster than any other.

But 2018 brought some domestic competitors in China — including a well-funded rival more concerned with growth than profitability.

The company’s name is “Luckin Coffee.”

According to the investment website “Seeking Alpha,” it has already opened more than 1,500 stores in 20 cities across China in less than a year.

This week, the company’s chief marketing officer made a presentation in Beijing about future plans. Reuters reports that Luckin wants to open about 3,000 more stores by the end of this year — which would overtake Starbucks.

It’s also got some serious financial support, including from the government of Singapore through its sovereign wealth fund GIC — which has more than 100-billion dollars in assets.

Another backer: the Chinese investment bank China International Capital Corporation.

That combination allows Luckin to focus on growth rather than profits. Which is good, because the company lost more than 116-million dollars last year . . . which the chief marketing officer says was “in line with expectations.”