Report: Luckin Coffee planning massive overseas expansion

Beijing-based Luckin Coffee, China's largest coffee brand by store number, is planning a massive expansion in the fourth quarter of this year and the first quarter of 2025, to fuel its next phase of growth amid intense competition in the domestic market, according to a media report.

Latepost, a unit of Caijing Magazine, reported that Luckin is planning to expand overseas with focus on Southeast Asia and the United States. The company was not available for comment.

Luckin runs over 20,000 stores in China, with its operations covering both online and offline channels.

There are 38 directly run Luckin stores in Singapore, with the first one having opened in April 2023.Unlike in China, Luckin does not prioritize its low-price approach in Singapore.

The company views the Singapore market as a testing ground for its overseas operations and business model development. Latepost reported that over the next three to five years, the coffee chain aims to expand its operations in neighboring regions, with Singapore serving as the headquarters for its operations in Southeast Asia.

In the first half of this year, Luckin started discussions with BJ Food, the franchiser of Starbucks in Malaysia, to form a joint venture for entry into the Malaysian market.

"Chinese coffee and tea brands are expanding overseas, and the international brands are focusing on penetrating lower-tier cities in China to find their own growth stories," said Jason Yu, general manager of Kantar Worldpanel China.

Chinese coffee and tea brands are seeking to offer high-value products at affordable prices, aiming to reach a broader consumer base without resorting to the heavy subsidies seen in the domestic market, Yu said.

To win over local consumers abroad, however, optimizing supply chains, ensuring product supply and establishing trustworthy brands are essential tasks, he said.

A strong supply chain has helped Luckin to cut costs. Since 2019, the company has built two roasteries with another one under construction.

In June, Luckin announced plans to buy about 120,000 metric tons of coffee beans from Brazil from 2024 to 2025. Brazil is currently one of the most cost-effective coffee bean producing regions in the world. In 2022, Luckin signed a three-year agreement to buy about 45,000 tons of coffee beans from Brazil.

In the domestic market, Luckin has sought growth by expanding into tea-based beverages, rolling out new products like the light jasmine tea, a runaway hit that sold 11 million cups in its first week.

The move is aimed to attract tea-drinking consumers during afternoons that are seen to have significant growth potential for coffee shops.

Chinese tea brands Chagee and Heytea have opened pop-up stores in Paris during the 2024 Olympic Games. In March, Chagee launched its first drive-through store in Malaysia. Heytea began global expansion in 2018 and now has nearly 30 stores abroad.

As of June, ChaPanda had eight stores in South Korea, Thailand and Australia. Tianlala has set its sights on Indonesia and aims to open 300 stores. Mixue Bingcheng, a beverage chain, operates more than 4,000 stores overseas.