Luckin Coffee to open 10,000 stores by 2021

Starbucks' challenger in China – Luckin Coffee – vows to open 10,000 stores in the country by 2021 and plans to expand its non-coffee sector in a move aimed at raising profitability, said its CEO on Wednesday.

Qian Zhiya, CEO of Luckin Coffee, told the audience at its global coffee industry forum that the 22-month-old retailer is going to add 8,000 new stores in about two years.

She said their store management system – propelled by technology and information system -- will boost their expansion. By doing so, it will break the bottlenecks of the catering industry that has heavily relied on store professionals, Qian added.

Luckin has 2,370 stores in 28 cities in China, mostly pickup stations. It sold 90 million cups of coffee in 2018 with heavy discounts.

Luckin reported a net revenue of 840.7 million yuan ($121.5 million) in 2018 and incurred a net loss of 1.62 billion yuan last year. During the first quarter of 2019, it posted net revenue of 478.5 million yuan and net loss of 551.8 million yuan. Qian said earlier they were expecting to continue their discount strategy for another three to five years.

With losses widening, concerns have been raised on long-term growth and profitability. Qian said their single cup cost has fallen to 13.3 yuan in the first quarter from 28 yuan of the same period last year. Its delivery proportion has declined from 61.7 percent to 27.7 percent in the first quarter this year compared with the year before.

Lu Zhengyao, chairman of Luckin, said Starbucks sells about 1 million cups of coffee in China every day and Luckin was closing the gap.

The market dominator Starbucks now has 3,800 stores in China and is going to open more than 6,000 stores by 2022.