Chinese Coffee Chain Lost 6million RMB/day But Just Went Public
Are you familiar with the blue cup and white antlers?
Maybe some of you have tried your hand at Luckin Coffee in China.
Luckin Coffee is a new Chinese retail coffee chain. They’ve sold 1.6 billion coffees a year and once raised questions if they would be able to survive or not. Now, on May 17th, they successfully went public in the United States.
Even Starbucks' second-biggest shareholder, BlackRock Inc., invested $125m into Luckin Coffee.
Established on October 31, 2017 with trial operations starting on January 1, 2018, Luckin Coffee began their official operation on May 8, 2018. With an official listing on May 17, 2019, Luckin Coffee not only set the world's fastest IPO record but also officially became the first Chinese new retail coffee to be listed in the international capital market.
According to the prospectus of Luckin Coffee, the company has a net income of 840 million RMB and a net loss of 1.62 billion RMB in 2018. Net income for the first quarter ending March 31, 2019, was 480 million RMB, with a net loss of 550 million RMB.
According to the prospectus, Luckin Coffee lost 6 million RMB per day in the first quarter of 2019. At present, it is still relying on subsidies to expand its scale, and when will the subsidies be extended?
In the view of Luckin Coffee, China's coffee market is seriously deficient. Substandard quality, high prices, and inconvenience are hindering the development of new business in China’s coffee market.
According to Luckin Coffee, China's rising urbanization and disposable income have become and are expected to continue to be the main growth engines of its coffee industry. More and more Chinese are beginning to consume coffee in their daily lives.
The company aims to become China's largest coffee chain by increasing its number of stores by the end of 2019.
Qian Zhi Ya, founder, and CEO of Luckin Coffee
As of March 31, 2019, the total number of Luckin Coffee stores increased to 237 in just 18 months. At the end of last year, the company announced that it would open another 2,500 stores in 2019.
Who is the biggest coffee chain brand in China?
The answer right now is Starbucks.
Starbucks, which has been in China for 20 years, opened about 3,400 stores by the end of 2018, expanding at a rate of 500 a year.
In terms of store types, Luckin Coffee is mainly an express store. They feature a small number of seats and are usually located in areas where there is a high demand for coffee, such as office buildings, business districts, and university campuses.
What's more, the cost of an express store is lower, which is why the size of the store has grown so quickly.
What do you think of Luckin Coffee versus Starbucks?
Which do you prefer?
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