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Tag: luckin coffee

  • Scandal-plagued Luckin Coffee secures US$250 million lifeline

    Scandal-plagued Luckin Coffee secures US$250 million lifeline

    Luckin Coffee, the scandal-plagued Chinese coffee shop chain, secured a $260 million investment from existing shareholders Centurium Capital and Joy Capital. It also replaced its independent auditor.

    This will help Luckin satisfy a $180 million settlement struck last year with the SEC, which had accused Luckin of faking retail sales figures. The company went public on the Nasdaq less than two years ago at a $4.3 billion valuation but was later delisted because of the accounting fraud.

    The investment is structured as convertible preferred stock, with an option for Centurium and Joy to invest an additional $150 million.

    The bottom line, Luckin was supposed to be China’s answer to Starbucks, but so far has been closer to China’s answer to Enron.

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  • Luckin Coffee fined US$9 million for accounting fraude

    Luckin Coffee fined US$9 million for accounting fraude

    Disgraced Chinese coffee chain Luckin Coffee, along with more than 40 other firms involved in the deception, has been fined almost US$9 million for falsifying its financial records.

    According to reporting, China’s finance ministry has previously found Luckin to have booked RMB2.25 billion in sales via counterfeit coupons between April and December last year, as well as having inflated its reported revenues, costs, and profits.

    China’s market regulator found Luckin to have flouted Chinese regulations and misled the public over the period in question.

    “We have carried out an overall rectification on the related issues,” said a representative from the firm in acknowledging that Luckin respected the regulator’s decision. “We will further improve our operations according to related laws and regulations.”

    Luckin was formerly considered a likely competitor against Starbucks within the territory.

  • Luckin Coffee names new chairman and CEO after founder ousted

    Luckin Coffee names new chairman and CEO after founder ousted

    Luckin Coffee has named Jinyi Guo as chairman and CEO as the Chinese chain tries to move past an accounting scandal that nearly brought it down.

    Guo, a director, and former acting CEO, replaces founder and former chairman Charles Zhengyao Lu, who was voted out by shareholders, the company said Monday in a statement. Yang Cha, Feng Liu, Jie Yang, and Ying Zeng were also appointed as independent directors, while David Hui Li, Erhai Liu, and Sean Shao left the board following an extraordinary general meeting July 5 and board meeting July 12.

    While shareholders voted to remove Lu and the other three directors, some investors cried foul because Lu had nominated two of the new members to the board, potentially giving him ongoing influence at the company, according to the Wall Street Journal.

    Lu has come under fire amid an accounting scandal that has already led to the firing of Luckin’s CEO and made its stock nearly worthless. Chinese and U.S. regulators have been investigating the company over fabricated transactions that inflated net sales by about US$300 million last year.

    The scandal has rocked the Xiamen-based company once considered among China’s brightest growth stories, sending the US-listed stock plunging 93 percent this year. The situation is also a black eye for China Inc as the US Congress moves closer to passing legislation that could bar Chinese companies from trading on US stock exchanges.

    In May, Luckin Coffee dismissed CEO Jenny Zhiya Qian, COO Jian Liu, and some employees who reported to them, after uncovering the scheme that funneled funds to the company from several third parties with links to the participants. The board said it fired the executives based on evidence showing their participation in the false transactions.

    Lu became a billionaire after his fast-growing Chinese chain went public in the US, but much of his wealth was wiped out by the plunge in Luckin’s stock. Lu last month resigned as chairman of Car Inc, China’s biggest rental-car fleet operator, as scrutiny increased over Luckin and the accounting scandal.

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  • Luckin Coffee’s value crashes after it admits falsifying sales data

    Luckin Coffee’s value crashes after it admits falsifying sales data

    Chinese chain Luckin Coffee has admitted senior executives exaggerated sales to boost the company’s worth and reputation.

    In a stunning admission, the company has advised investors not to rely on financial statements for the nine months to September last year. Transactions totaling about 2.2 billion yuan (US$310 million), have been cited.

    COO Jian Liu and an unspecified number of other employees have been suspended while the company’s board investigates their misconduct.

    “Certain costs and expenses were also substantially inflated by fabricated transactions during this period,” Luckin said in a stock exchange filing.

    Shares in the company plunged by 81 percent yesterday after the company’s admission.

    Launched in January 2018, Luckin Coffee’s growth trajectory was so fast the company was valued at an astonishing US$2.2 billion within 12 months.

    The true extent of the misrepresentations remains unclear while a panel reviews financial records. However, in November, the company claimed sales were running at six-times the rate of the previous year.

    Prior to its listing in the US, the company secured investment from the Singapore Government sovereign wealth fund GIC and China International Capital Corp, among others. It raised US$778 million in early January and $645 million in a US IPO.

    Luckin Coffee has previously been touted as a serious threat to US chain Starbucks which currently dominates China’s fast-growing coffee cafe market.

    Luckin Coffee’s aggressive competitive strategy involves an IT-focused approach whereby customers purchase coffee via an app, with which they can then monitor brewing progress via live stream. It was counting on technology and a considerably lower price point to win market share from Starbucks.

    Luckin Coffee was planning to reach 10,000 locations by the end of next year, but analysts are now casting doubt on its ability to achieve that goal. At the end of last year it had 4500.

    “It will take several years for management to repair its credibility,” Keybanc Capital Markets analyst Eric Gonzalez said in a note to clients, reported by Bloomberg.

  • Luckin Coffee stronger than Starbucks in China

    Luckin Coffee stronger than Starbucks in China

    Luckin Coffee has now become the largest coffee chain in China, surpassing Starbucks in terms of number of locations.

    The firm has launched 4500 outlets within the Chinese territory, around 200 more than its Seattle-headquartered competitor. The brand soared past Starbucks late last year and has rapidly multiplied its footprint in the market backed by strong investment from supporters such as BlackRock.

    The firm focuses primarily on the coffee delivery and pickup business, and so stores are typically smaller in size than Starbucks locations and some are without seating. Starbucks itself has responded to the challenge by entering into a partnership with Alibaba to offer a more robust delivery solution.

    Many of Luckin’s new locations are in areas not currently served by Starbucks.

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  • Luckin Coffee plans expansion into India and Middle East

    Luckin Coffee plans expansion into India and Middle East

    China’s Luckin Coffee wants to expand into India and the Middle East.

    The company has signed a memorandum of understanding to create a joint venture with Kuwait-based Americana Group which will open stores across the Greater Middle East and India. No further details have been released, according to Reuters.

    Luckin, which sells coffee by app from a fast-growing network of stores and pick-up points across China’s main cities, raised US$561 million by listing in the US in May. It says it will open 2500 stores this year.

    Americana Group operates 1800 restaurants and 29 restaurants and food factories in the Middle East. It has franchises for a raft of fast-food and quick-service restaurant brands including KFC, TGI Fridays, Pizza Hut, Hardees, Baskin Robbins, Costa Coffee, Krispy Kreme, Red Lobster, Grand Cafe, Maestro, Longhorn Steakhouse and Chicken Tikka.

    It operates in 20 markets and boasts a payroll of 60,000. Besides the Middle East, the company has KFC and Pizza Hut stores in Kazakhstan and KFC stores in Morocco.

    “This collaboration represents Luckin Coffee’s first step toward bringing its leading products from China to the world,” said Luckin Coffee founder and CEO Jenny Qian Zhiya in a statement.

    Earlier this month, the hitherto coffee-focused company announced it would launch a tea brand, Xiaolu.

  • Luckin Coffee to launch tea brand Xiaolu

    Luckin Coffee to launch tea brand Xiaolu

    Luckin Coffee, the Chinese cafe startup that has directly taken on Starbucks in the territory, is moving into the takeaway tea market with its new Xiaolu brand.

    “Coffee and tea are the two most popular drinks in the office,” said Luckin VP Jinyi Guo. “However, there are currently few renowned brands of milk tea in China, the quality of franchise stores is inferior, and supply chain management is deficient.”

    The new brand, launched this week, is targeting young Chinese white-collar workers and offers cheese foam tea, fresh tea and milk tea, among others.

    “We want to transform the tea series from traditional tea drinks into creative ones and we hope people drink it in the offices instead of streets,” said the brand’s chief marketing officer Fei Yang.

    Luckin completed its New York IPO this May, raising US$561 million.

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  • China’s Luckin Coffee Looking at The USA

    China’s Luckin Coffee Looking at The USA

    China’s Luckin Coffee has filed for a US IPO seeking to raise up to US$800 million.

    For the time being, the IPO is officially indicated by a $100 million placeholder figure, however knowledgeable sources have disclosed the actual amount sought may be more than $500 million and up to $800 million, with the company’s valuation estimated at $4–5 billion, far higher than has been reflected in previous statements.

    Within the last few weeks the company secured a further $150 million in equity funding, ahead of the IPO.

    If the public listing is successful, it will make the Beijing-based cafe chain the largest US IPO by a Chinese company so far this year.

    China’s Luckin Coffee has undergone “expansion on steroids” in an effort to displace Starbucks as the biggest operator in the nation. This year, the firm plans to more than double its current network of 2370 stores, despite still operating at a loss following the ambitious growth spurt.

    Luckin’s net loss to shareholders was $475.4 million last year against a total revenue of $125.27 million. However the firm insists the future is bright – a prospectus released by China’s Luckin Coffee suggests that coffee consumption in China will rise to 15.5 billion cups by 2023 compared with the 8.7 billion cups consumed last year.

    “The big question for the brand long term is if, when it rolls back discounts, enough customers stick around,” said Shanghai-based principal at China Market Research Group Ben Cavender. “But the company has completely rewritten the rules for the coffee business in China and has impacted Starbucks as well as a host of smaller players.”

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  • Luckin Coffee worth $2.2 billion in quite short time

    Luckin Coffee worth $2.2 billion in quite short time

    Fast-growing Chinese cafe chain Luckin Coffee has raised US$200 million in its latest funding round, effectively valuing the company at a stunning $2.2 billion. That’s up to $700 million more than its value was estimated just one month ago when the quest for funding was announced.

    Launched only in January, the company had already opened more than 1700 outlets in 21 Mainland China cities by last month. Its rapid growth is based on an inexpensive delivery service concept and online ordering system.

    An aggressive competitive strategy involves an IT-focused approach whereby all customers must purchase coffee via an app, with which they can then monitor brewing progress via livestream. Its pricing is considerably less than Starbucks.

    Luckin said the latest funding round was led by Singapore Government sovereign wealth fund GIC and China International Capital Corp. They were likely attracted by a mid-term plan for an IPO of the Luckin business in either Hong Kong or New York. GIC was a participant in a similar capital raising in July.

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  • China’s Luckin Coffee worth $2 billion after just less than a year

    China’s Luckin Coffee worth $2 billion after just less than a year

    Fast-growing Chinese coffee chain Luckin Coffee is seeking a new round of funding which would value it at US$1.5–2 billion. Launched only this year, the company has already opened more than 1400 outlets in 21 mainland locations, its rapid growth based on its inexpensive delivery service concept and online ordering system. Luckin’s aggressive competitive strategy involves an IT-focused approach whereby all customers must purchase coffee via an app, with which they can then monitor brewing progress via livestream.

    Its expansion has been backed by multiple investors, including Singapore’s GIC. It is currently seeking up to US$300 million in additional funding to continue its momentum.

    Starbuck currently operates 3400 stores in China, which is its second-largest market worldwide. It intends to increase that number to 6000 stores within three years. The brand recently partnered with Alibaba to establish a coffee delivery service, foreshadowing Luckin’s own recently-signed partnership with Alibaba rival Tencent.

    Some reports have suggested that Luckin may be in discussion with investment banks to launch an IPO overseas, most likely in either New York or Hong Kong.

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  • Starbucks and Alibaba form New Retail Partnership in China

    Starbucks and Alibaba form New Retail Partnership in China

    Starbucks China and Alibaba have announced an alliance that stretches way beyond the latter’s online delivery platform Ele.me.

    The two companies describe their pact as “a deep, strategic New Retail partnership” that will enable a seamless Starbucks experience and transform the coffee industry in China.

    The partnership spans Ele.me, the food delivery platform acquired by Alibaba last month, Hema supermarkets, Tmall, Alipay and Taobao. Pilot delivery services by Starbucks China will start next month with the coffee company opening delivery kitchens to fulfil orders and “co-create an unprecedented virtual Starbucks store”.

    Starbucks China CEO Belinda Wong says the partnership with Alibaba breaks the physical and virtual barriers between the home, office, in-store and digital space.

    “It will make China the first Starbucks market to deliver a seamless Starbucks experience across all facets of our customers’ lives.”

    Alibaba CEO Daniel Zhang said Starbucks is more than a destination for premium coffee “and we share the same vision to pioneer a new coffee culture and lifestyle through innovation and technology”.

    It starts with Ele.me

    Ele.me, China’s largest on-demand food delivery platform with 3 million registered delivery riders, will start delivering Starbucks orders from 150 stores in key trading zones in Beijing and Shanghai next month. By the end of the year, that service is expected to expand to more than 2000 Starbucks stores across 30 Chinese cities.

    The two companies have worked together to develop what they describe as “a unique, customised delivery infrastructure” including dedicated delivery riders, precise delivery times, and custom carriers. They believe they will be able to offer “a best-in-class coffee delivery service standard for Chinese customers” which could well be interpreted as a challenge to local startup Luckin Coffee which has grown into a US$1 billion company in less than a year, based on a mixed delivery and in-store model.

    Starbucks will partner with Hema supermarkets to open dedicated “Starbucks Delivery Kitchens” within stores. The kitchens will use Hema’s fulfillment and delivery capabilities to complement the delivery of Starbucks beverages offered through existing Starbucks stores. Starbucks will also use Hema’s consumer insights and fulfillment expertise to reach more communities across China.

    Data from Hema stores will be used to help plan the location of future Starbucks cafes, combined with delivery kitchens. The first delivery kitchens will open in selected Hema supermarkets in Shanghai and Hangzhou next month.

    Digital transformation

    Starbucks China and Alibaba say the creation of a ‘virtual Starbucks store’ in China is a key strategic initiative under the partnership.

    Alibaba will develop a centralised online management hub, with the capability to integrate and deliver a consistent Starbucks experience across multiple digital platforms. “This innovation will transcend the traditional limitations of a single-app visit by providing the consumer an elevated, and even more personalised Starbucks digital experience across the Starbucks app and Alibaba’s customer-facing mobile apps, including Taobao, Alipay, Tmall and Koubei,” the companies said in a statement.

    “This latest innovation will revolutionise the traditional offline-to-online model by effectively extending the reach of the Starbucks experience into the everyday lifestyle ritual of the Chinese consumer, regardless of time or place. Whether it is at home or in the office, within a Starbucks store or online, Starbucks customers will be able to access and enjoy a one-stop Starbucks experience when purchasing merchandise online, buying a Starbucks handcrafted beverage to be delivered to a friend or sending a Starbucks gift of love on the “Say it with Starbucks” social gifting platform.”

    Starbucks will progressively integrate its Starbucks Rewards membership platform onto the centralised system to use its consumer insights to deliver a personalised experience to customers.

    “Starbucks China and Alibaba are trusted business partners who share common values in the spirit of innovation and the unrelenting pursuit of product and service excellence,” the statement said.

    “Thanks to the elevated customer experience delivered by our more than 45,000 partners, Starbucks is growing and innovating faster in China than anywhere else in the world,” said Kevin Johnson, president and CEO at Starbucks Coffee Company. “Our transformational partnership with Alibaba will reshape modern retail, and represents a significant milestone in our efforts to exceed the expectations of Chinese consumers. Starbucks China is one to watch, and I have full confidence in the team that will bring the new innovation behind the Starbucks Experience to life.”

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  • A startup challenging Starbucks in China is now worth $1 billion

    A startup challenging Starbucks in China is now worth $1 billion

    Starbucks’ second-largest market after the US is China, where it has over 3,300 stores and operates with virtually no serious competition.

    A Beijing-based startup could change that. Luckin Coffee has opened 525 outlets across China’s major cities less than nine months after its launch (link in Chinese). Today the fast-growing company confirmed it’s closed a $200 million funding round giving it a $1 billion valuation. Investors include Centurium Capital, a private equity fund founded by the former China head of Warburg Pincus, and GIC, Singapore’s sovereign wealth fund.

    In domestic Chinese media, Luckin has aggressively courted comparisons to the world’s best-known coffee chain. In May, it even wrote an open letter accusing Starbucks of “monopolistic behavior” (Starbucks called the move a “publicity stunt”). But Luckin isn’t a Starbucks copycat—rather, it meshes trends in China’s tech industry with the coffee-shop model mastered by its rival.

    First, Luckin Coffee revolves around the smartphone. When customers walk into one of its blue-and-white shops, they’re immediately asked to download the Luckin app to order coffee (assuming they haven’t done so already). They can pay using WeChat payments or Luckin’s own “coffee wallet”—but not cash. This fits into China’s so-called “new retail” trend, in which tech giants like Alibaba and Tencent partner with supermarkets and convenience stores on mobile payments, analytics, and inventory management.

    Luckin has also aggressively promoted its delivery services—of its 525 outlets, 231 are kitchens dedicated exclusively to filling orders placed in offices, homes, or elsewhere. This mimics China’s boom in e-commerce and food delivery, which has thrived on the back of low-wage couriers.

    When it comes to marketing, Luckin has more in common with a Chinese gadget company than with its Seattle-based coffee rival. Whereas Starbucks typically shuns traditional advertisements, Luckin has plastered China’s cities with billboards featuring popular actors Chang Chen and Tang Wei holding blue-and-white coffee cups. Chinese smartphone makers Oppo, Vivo, and Xiaomi employ similar tactics, using celebrities to pose with products.

    Finally, Luckin’s beverages are relatively cheap. In Beijing, a large Americano costs 21 yuan ($3.15), a matcha latte 21 yuan, and a Hawaiian pineapple wrap 9 yuan. That’s roughly 20%-30% lower than comparable items from Starbucks in China (which is more expensivethan Starbucks in the US).

    Despite the company’s early emphasis on delivery, it insists that bricks-and-mortar retail is the future—a spokesperson said that the company expects delivery kitchens will make up just 15% of its locations in the future.

    But with such low prices and rising expansion costs, can the company justify its valuation and take on the world’s coffee retail giant?

    Jeff Towson, who teaches investment at Peking University in Beijing, says that Luckin Coffee is “easily worth $1 billion if it can execute on the business—but that’s a big if.” A large part of Starbucks’ success globally has to do with real estate—many of its stores are placed in expensive, high-traffic locations that rivals can’t afford. Most Luckin outlets are not in such spots, Towson notes. The company uses the app to draw people to less-bustling locations that are cheaper to rent. “It may be that that real estate power can be overcome if you’ve got a really sticky hold on people’s smartphones,” he adds.

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