Chinese coffee chain startup Coffee Box announced on Wednesday it secured RMB 206 million ($30 million) in a fresh round of funding, yet another home-grown challenger to Starbucks looking to gain share in the country’s coffee market.
According to a company announcement sent to TechNode, investors include its two co-founders Wang Jiang and Zhang Xiaogao, as well as Chinese venture capital funds Gaorong and Qiming Venture Partners. The follow-on investment comes one year after its RMB 158 million Series B+, which was launched by the same two funds.
Founded in 2014, Shanghai-based Coffee Box started its business by offering on-demand delivery service from coffee chain brands including Starbucks and Costa. The company shifted focus to develop its own brand a year later, building shops near office buildings that allow users nearby to book orders via WeChat and receive their drinks within 30 minutes.
As of end-2018, the coffee startup boasted 400 shops, referred to as “stations” internally, across the country. It looked to compete for coffee drinkers by enhancing brand image like its peer, Luckin Coffee, and had planned to open 50 take-out stores in major Chinese cities within the year.
However, its expansion plan have stalled amid fierce competition; around 40% of its physical stores reportedly closed in late February, according to Chinese media. “Retail shop businesses are highly capital-intensive, and delivery-focused Coffee Box is less capable in store management and cost control,” media outlet China.com.cn reported citing an industry source. The company did not respond to requests for comment when contacted on TechNode on Thursday.
Coffee businesses are one of the latest investment targets in the Chinese O2O (online-to-offline) market. Last week, Beijing-based Luckin Coffee raised $150 million in a Series B+ from big global investors including US investment firm BlackRock. This was immediately followed by an IPO filing with plans to raise up to $300 million on Nasdaq, according to Bloomberg.
US coffee giant Starbucks entered the Chinese market 20 years ago and is facing challenges from multiple domestic players. It so far has more than 3,600 stores in China, compared with two-year-old Luckin with its 2,370 shops as of end-March, according to its IPO filing. Luckin aims to expand that number to 4,500 this year.