CHINA October 2019
 
Luckin Coffee to have its own Luckin Tea brand
 
China’s domestic coffee chain, Luckin Coffee will separate its tea drinks business into an independent brand in a bid to speed up market expansion.
The niche brand Luckin Tea will open specific outlets focusing on a variety of tea drinks, and will complement its coffee drink stores.
Luckin Coffee started serving tea drinks in April in response to booming demand for tea drinks, as many players seek to integrate different ingredients such as juice, cheese and milk to tea to offer unique taste to freshly-brewed tea.
The new set-up Luckin Tea is open to collaboration with potential partners to expand its market presence, with partners enjoy branding and traffic support from Luckin. Luckin Tea stores will initially be rolled out in 2nd, 3rd and 4th tier cities, whereas Luckin Coffee will focus on 1st and 2nd tier cities.
Luckin Coffee has rapidly opened nearly 3,000 stores across 40 cities in the country since it started operation in 2018. It plans to have 4,500 stores by end-2019. Luckin Coffee is Starbuck’s biggest rival in China. Luckin’s total net revenue from products stood at Rmb 870 million (US$121.2 million) in 2nd quarter 2019, representing a 700% increase year on year.
Starbucks CFO Patrick Grismer however has shown pessimism on Luckin Coffee prospect. He said, “They have done that on the back of extreme marketing and very aggressive discounts and I think it remains to be seen how they will be able to sustain that growth and over time.” Grismer however admitted that Starbucks faces growing competition from other players in the market.
 
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