China’s “new retail” startup Luckin Coffee announced today to accelerate and expand its business in light meals and snacks. The news comes just days after rumors that Luckin’s biggest competitor Starbucks is planning to deliver coffee with the help of Alibaba-owned food delivery platform Ele.me.
During its press event on August 1st, Luckin introduced a price comparison graphics showing that its food would be priced RMB 1-5 lower than its competition, local media reports (in Chinese). Though the company did not specify the competitor’s name, the industry suspects it’s highly likely to be Starbucks since the prices are strikingly similar.
Starbucks has seen its figures go down after its fast-rising competitor introduced a combination of in-shop and online shopping experiences originally created by Alibaba. Luckin has also managed to create additional buzz for itself by threatening Starbucks with an unfair competition lawsuit.
The comparison also implies that one of Luckin’s core strengths is quality at a low price. CEO Qian Zhiya once said Luckin has invested over RMB 1 billion since its formal debut in May, the majority of which went to subsidiaries.
The subsidy push will continue. Luckin said that from today to December 31, all stores around the country would offer a 50% discount for both delivery and pick-up of food items in order to cultivate purchasing habits and increase market share. Food items include sandwiches, muffins, and salads.
Prior to today’s announcement, Luckin already started a low-profile pilot of its food business. A Luckin barista who wishes to remain anonymous told TechNode that in some Luckin coffee shops, light meals are sold out before 12 PM.
“The business is hugely internet-based, and most people choose the delivery service. This means our shops are not initially built with much consideration of in-shop experience, at least at this stage,” he said.
To maintain cost, most shops are small, and refrigerators and devices for food give way to the main business coffee. To increase food supply most sites would have to upgrade their basic infrastructure. TechNode found that in some Luckin stores in Beijing food items have already run out by early afternoon.
“We can’t store that much food so it runs out fast. To ensure freshness and quality, we only sell what we get from the morning,” said the Luckin barista.
According to Luckin, by the end of July, the company has set up 809 coffee shops and sold over 18 million cups of coffee in China. Guo Jinyi, co-founder and senior vice president at Luckin says the plan is to have built 2,000 shops by the end of this year. The coffee startup’s strong performance is under close watch by its competitors including Starbucks.