China’s Starbucks challenger Luckin Coffee files for US IPO, set to raise US$300 million

Luckin Coffee, the ambitious start-up that is challenging Starbucks in the race to dominate China’s growing coffee culture, filed for a US initial public offering.

The Beijing-based company applied to list American depositary shares on Nasdaq under the ticker LK. The coffee unicorn is said to plan to raise around US$300 million in the IPO, Bloomberg News reported in February. Last week, Luckin raised US$150 million from BlackRock and other investors at a valuation of US$2.9 billion.

Luckin is spending millions of dollars a year opening outlets to unseat Starbucks as China’s top coffee company. Since its inception in June 2017, Luckin has quickly expanded into 2,370 stores in 28 cities, with backing from investors including Singapore sovereign wealth fund GIC and China International Capital. By the end of this year, Luckin aims to become the largest coffee network in China in terms of number of stores.

It faces an uphill battle against Starbucks, which entered China 20 years ago and dominates with more than 50 per cent of the market last year, according to Euromonitor. Luckin held only a 2.1 per cent share in 2018. Starbucks has more than 3,700 outlets in the country and is also expanding at breakneck speed, opening a new store roughly every 15 hours. It’s aiming to have 6,000 sites in China by 2023.

China may become an increasingly important market for coffee retailers due to the country’s low per-capita consumption of the drink and rising middle-class affluence, Bloomberg Intelligence analysts wrote in January. Coffee consumption is estimated to grow by roughly 3 per cent a year through 2023, according to Euromonitor.