Roasted coffee beans in Bogota
Roasted coffee beans are seen on display at a Juan Valdez store in Bogota (Photo: Reuters)

Wall Street has seen a huge potential for Luckin, the 'Chinese Starbucks', to go big in China. The coffee chain, which went public not so long ago, is gaining favorable ratings from market analysts and firms. Today,

Luckin is just the second largest coffee chain in China, but it forecasts that with its technology-based business model, it has the capacity to surpass Starbucks and soon become the largest coffee chain in China.

The company was founded only two years ago but has already sold more than 110 million cups of coffee, according to CNBC.

As of today, Luckin has about 2,370 shops across China and plans to open 2500 more by the end of 2019. This may seem like a bold objective but as more investors buying shares and disclosing positions in the company are coming in, this goal is just within arm's reach.

In 2018, a Singapore-based investment firm, Carob Investments, bought a total of $45 million worth of shares from Luckin. Today, the shares are already worth more than $100 million.

This is particularly resemblant of the 50% share price increase that the company gained in May on its first trading day at NASDAQ.

The company attributes its success to several factors but one of its most effective approaches is its technology-driven business model. It says that it relies on big data and analytics in order to analyze consumer behavior and preferences.

The company has been able to figure out a strategy by which coffee can be sold in a country dominated by tea. For instance, 90% of its shops are modeled as 'pick-up' centers that are smaller in dimensions. These mini-shops are easier to maneuver and mobilize to areas where potential consumers are.

Right now, Luckin rests on the second spot behind Starbucks as the largest coffee chain in China. However, the coffee industry may shake up big time in the next few months or years as Luckin targets to open more shops in China. Wall Street analysts believe that Luckin Coffee is a real threat to Starbucks in the sense that it covers areas that matter more to people, particularly the Chinese population.

While Starbucks leads the competition in terms of mobile app, taste, and popularity, Luckin Coffee, on the other hand, is favored for its price category, convenience, and quality of service.

Luckin Coffee is an IPO unicorn and is not yet profitable; but with the way things are working for the company, there is no other way but up. With its plan to open more and more stores within the next few months, it might not be too long before it becomes the largest coffee chain in China.