Starbucks rival Luckin Coffee files for US IPO

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A Luckin takeout order sits on a counter at a Shanghai store on Mar. 14, 2019 (Image credit: TechNode/Shi Jiayi).

Chinese coffee chain upstart Luckin Coffee on Monday filed an initial public offering (IPO) with the US Securities and Exchange Commission in an effort to fund its escalating battle with rival Starbucks.

The Xiamen-based coffee chain, which will list on Nasdaq using the symbol, “LK,” set a placeholder amount of $100 million in the filing. Bloomberg News reported in February the company is targeting around $300 million.

The company declined to offer further details when contacted by TechNode citing the quiet period.

The IPO filing comes less a week after the company’s $150 million Series B+ that raised its valuation to $2.9 billion. BlackRock, which is also a major investor in Starbucks, led the round with its $125 million investment. The company has raised more than $550 million.

Luckin generated $71.3 million in revenue in the quarter ended March 31 and its losses totaled nearly $79 million, according to the filing.

Different from Starbucks which is known for in-store experiences, Luckin says in the prospectus that they are strategically focused on pick-up stores with limited seating and typically located in areas with a high demand for coffee, such as office buildings. Began as delivery-focused service, the company has been shifting its focus in 2018 to pick-up stores, which account for 91.3% of the company’s total stores as of March 31, 2019. This approach enables the company to stay close to target customers and expand rapidly with low rental and decoration costs.

Luckin states that its business model features three kinds of stores: “relax” stores offering a premium in-store experience for brand image; “pick-up” stores, which are generally small-sized stores for pick-up and delivery orders; and “delivery-only kitchens” for broader customer coverage.

Luckin is the second-largest coffee chain in China behind Starbucks, according to research firm Frost & Sullivan. The filing shows that the coffee startup has 2,370 self-owned stores as of March 31, 2019, falling short of Starbucks’ 3,600 in China. It aims to overtake its US rival this year with the goal to increase store count to 4,500 this year.

Correction: This article has been corrected to reflect that Luckin focus on pick-up stores strategically to allow fast expansion at low costs.