Chinese coffee upstart Luckin Coffee, supercharged by a recent US$200 million Series B funding, is pairing up with Hong Kong-listed Meituan as the company looks to expand its customer reach given Meituan’s position in China’s food delivery market.
Previously, Luckin only let consumers place orders from its proprietary app. And Meituan is so far the only 3rd-party food delivery platform where Luckin lists a proportion of its shops per local media report (link in Chinese).
Founded earlier this year, Luckin now has more than 1,700 outlets in China, meaning the company opens a new store every 5 hours throughout this year. In comparison, its archrival Starbucks as of now has about 3,300 stores in China.
The firm’s rapid-fire growth was often attributed to its generous discounts to gain quick market share and its unique delivery-focused approach, which proved to be a success with about 40% of its outlets serve as central kitchens to fulfil delivery orders from Luckin’s app.
However, Luckin’s heavily subsidised business model is costing the company a big fortune; this is one of the reasons the company has to raise a US$200 million Series B again at short intervals. It just raised a Series A of US$200 million in July.
Luckin’s discount-driven campaign did help the company to build up industry and consumer recognition very quickly, but partnering up with Meituan would bring further exposure to the latter’s dominating food delivery platform with a whopping 290 million monthly active users (MAU) as of April 2018.
The tie-up is probably a reaction against the recent alliance between Ele.me (Alibaba’s food delivery app) and Starbucks, who is still the biggest premium coffee player in the Middle Kingdom. Last week, Starbucks announced that it will double its store footprint to 6000 by 2022 in China. This announcement was made a few days after Luckin’s news on its Series B funding.
This is not the first public battle between the two largest coffee players in China. In May, Luckin sued Starbucks for market monopoly, stating that the latter signed exclusive contracts with property developers to prevent competitors from renting storefronts.
Editor: Ben Jiang