China’s coffee war moves up a notch as Luckin and Tencent ink strategic agreement

Bejing-based Luckin Coffee and internet giant Tencent have entered into a strategic agreement, according to 36Kr (in Chinese). The two will reportedly collaborate on the marketing side of their businesses—which includes promoting the adoption and user engagement of WeChat Pay and exploring more ways to leverage WeChat mini program intelligent marketing tools as well as developing new retail solutions.

The two will also jointly work on offline applications of new retail technologies such as image recognition, facial-recognition payment, delivery robots, and AR interaction. Additionally, the two will develop personalized services including product recommendation and menu customization.

The coffee shop market in China was worth over $4.5 billion last year, and it is still growing. Not so surprisingly, tech giants have been scrambling to get a piece of the big market pie. Forging a strategic partnership with Luckin not only gives Tencent a leg-up in the new retail race, but also an edge in its rivalry with Alibaba. In July, Starbucks announced a tie-up with Alibaba-owned food delivery platform Ele.me hoping to roll out its own coffee delivery service. Facing rising competition from young startups like Luckin, Starbuck’s revenues have suffered.

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