China’s fast-growing “new retail” startup and purveyor of coffee Luckin has announced it has completed its A round of financing worth $200 million valuing it at $1 billion. The round was financed by Dazheng Capital, Joy Capital, the Government of Singapore Investment Corporation (GIC) and Legend Capital, Sohu reports.
The rise of Luckin shows that traditionally tea-loving China is warming up to coffee. Much like cheap (and mediocre) 7Eleven coffee won the hearts of Japanese several years ago, Luckin is taking the cheap (and mediocre) formula even further by localizing it to China’s mobile-focused lifestyle and adapting it to the “new retail” trend. After placing orders online, customers can choose to either pick them up in nearby stores or have them delivered within 30 minutes.
This kind of distribution capabilities is only possible with plenty of stores. Until now, it has opened more than 500 stores in 13 cities. During an interview in early May, founder and CEO Qian Yazhi, former COO at UCAR, one of China’s biggest car rental services, said the company had served more than 1.3 million customers and sold around 5 million cups. The sales were boosted with generous subsidies in the form of coupons.
The company also garnered attention after writing an open letter to (slightly less mediocre) Starbucks accusing it of monopolistic practices in the country and proposing a possible lawsuit. Starbucks responded to the allegations by saying that China’s coffee market is huge and is open to competition and that the company has “no intention of participating in the promotion hype of other brands.”
Coffee consumption is growing 15% annually in China and the market is expected to reach RMB 1 trillion in 2025. Before Luckin Coffee, other “new retail” coffee brands have also started to gain grounds in China. Coffee Box (连咖啡), a coffee delivery platform, raised RMB 158 million in series B+ funding.