Chinese 'Luckin Coffee' rivals Starbucks with IPO

The Chinese answer to Starbucks is going public in the United States.

By the end of 2019 Luckin Coffee aims to become China's biggest coffee
chain, sending Starbucks into second place.

And that's a tall order -- since Starbucks opens a new store in China
every 15 hours.

Luckin only operates in China but has chosen to list in the US to take
advantage of the world's largest equity markets.

Nick Harper reports.

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Something's brewing in the Chinese coffee market.
In under two years Luckin Coffee has stirred heated up competition
with Starbucks, opening some about 2,400 stores.
By the end of the year it aims to exceed its rival with 4,500 outlets
across China coffee shops.
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The company is as much about the tech as it is the coffee. Customers
order via an app with the option of delivery to their desk in under
within 30 minutes.

SOT - J Scott Laprise, Research analyst from Beijing
"They've offered a product that fits more to the Chinese consumers'
experience and taste. The taste of the coffee has got a little bit of
a sweeter, very gentler taste. It doesn't have any of the bitter taste
that you will often find in foreign coffees."

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Coffee consumption remains low in mainland China.
Luckin estimates the average person in China drinks just over six cups
a year, compared to nearly 440 in the US.
And Luckin will certainly need to tap into that growth opportunity in
the US?, as it reported after reporting a net loss of 240 million
dollars last year.

Nick Harper, New York
"Here in the US, where coffee is king, there are 14,000 Starbucks
stores across the country. There's even one just next door to the
Nasdaq, where Luckin Coffee is going public."

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But the timing is tough. Recent tech IPOs from ride-hailing apps Uber
and Lyft have stalled on/at the starting line.
Last week Uber suffered the worst opening-day loss of any US IPO public listing.

SOT - Santosh Rao, Manhattan Investment Partners
"I think they could get punished here because after Lyft and Uber
nobody wants a company that has no profits. It's growing but it's
hardly a year old and they have a $3.5 to $4bn valuation which is
ridiculous."

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Luckin is also entering a volatile market stirred up by US-China trade tensions.
But while that's potentially bad news for its share price, back home
in China it may help Luckin's rivalry with Starbucks.

SOT - J Scott Laprise
"The nice advantages of having a trade war, you can also build much
better loyalty to your brand. China's not a country with loyalty. And
that's the other reason I'm very worried about Starbucks in China –
Chinese will flip, on all brands."

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Even so, difficult market conditions may limit how much money Luckin's
offering raises – pouring cold water on the company's ambitious
expansion plans.
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