Starbucks Rival In China Luckin Coffee Raises US$150 Million In Latest Financing Round

Luckin Coffee
Freshly-made coffee flows into cups inside a coffee shop (Photo: Reuters)

China's Luckin Coffee, long hailed as Starbuck's biggest competitor in the country, has announced that it has raised more than US$150 million in its latest financing round. With the newly acquired capital from its Series B-Plus of funding, the Chinese coffee shop chain is now valued at an estimated US$2.9 billion, up from US$2.2 billion in January of this year.

Major participants in the firm's latest financing included a BlackRock-controlled private equity, which invested US$125 million in the company. Last year, the company raised around US$400 in two separate financing rounds. The biggest investors during those rounds included Singapore's sovereign wealth fund GIC. Other major participants included China International Capital Corp and Joy Capital.

Luckin Coffee was originally founded in Beijing in 2017 and had started as a series of small booths that filled online orders for delivery and pickup. The chain eventually grew to more than 2,073 stores located in 22 different Chinese cities by the end of last year.

The company has announced plans to open another 2,500 stores this year. With the help of the newly raised capital, the company may very well overtake Starbucks, which currently only has around 3,000 stores in China.

Luckin Coffee's founder, Qian Zhiya, blatantly mentions in a recent news conference that his company aims to overtake Starbucks in both number of stores and cups it has in the country. The coffee chain has so far exceeded expectations, with total revenues of US$56 million generated last year. The company had a loss and a gross margin of about US$130 million.

To achieve the company's goals, the firm recently mortgaged a number of its movable properties in various cities such as Chengdu, Beijing, Shenzhen, and Shanghai. Reports are also now circulating of a possible IPO to further raise new capital. According to some reports, Luckin Coffee is apparently tapping Credit Suisse to help it raise around US$300 million in the United States markets through an IPO. The company is allegedly planning to go public sometime in the second quarter of this year.

Part of Luckin Coffee's success in the country has been due to its more domestic appeal when compared to its foreign competitors. The company had even announced that it would soon start to sell tea-based beverages, which are more popular in China, to satisfy its customer's diverse taste. The company's recent moves to raise massive amounts of new capital have been seen by some as a strategy to further push Starbucks out of the Chinese market. Starbucks has yet to release a statement in response to the firm's recent announcements.

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