How Luckin Coffee is taking on Starbucks in the U.S.

Core Viewpoint - Luckin Coffee, China's largest coffee chain, is expanding into the U.S. market, specifically targeting New York City, where it has opened 5 locations as of mid-September [1]. Group 1: Business Model and Strategy - Luckin Coffee operates without cashiers, requiring customers to place orders through its mobile app, and employs a heavy discounting strategy, offering coupons typically ranging from 30% to 50% off [2]. - The company aims to enhance brand awareness in the U.S. despite its initial stores operating at a loss, contrasting with Starbucks' focus on profitability [3][4]. Group 2: Financial Performance and Market Position - Research from Bernstein indicates that Luckin's current pricing and store volumes are unsustainable, as initial stores are not profitable [3]. - Luckin Coffee reported over $3.5 billion in net revenue by 2023, surpassing Starbucks's operations in China, and has rapidly scaled to over 26,000 locations, compared to Starbucks's approximately 8,000 stores in China [6]. Group 3: Company History and Challenges - Founded in 2017, Luckin Coffee went public in 2019 but faced significant challenges, including an SEC charge for accounting fraud in 2020, leading to a $310 million sales fabrication by its COO, delisting from Nasdaq, and subsequent bankruptcy [5]. - The company has since emerged with new leadership and is now trading on the OTC market, which is less regulated [5][6].