Chinese coffee chain upstart Luckin Coffee has signed an agreement with Louis Dreyfus Company (LDC), a European food processing company, to sell Luckin Juice in China through a joint venture (JV).
Why it matters: Known as China’s Starbucks challenger, Luckin is expanding aggressively across product categories and overseas markets.
- After adding snacks and fruit-based beverages, the Xiamen-based company announced plans this month to spin off its tea-based beverage line known as Xiaolu Tea, or “Fawn Tea” in English, as an independent operation.
- The company has been growing at a breathless pace and is still loss-making. Expansion to more product categories will add to financial pressures on the US-listed company.
- The deal appears to have been in discussions for months. Luckin’s SEC registration statement lays out a plan to build a roastery JV with Louis Dreyfus Company Asia. As part of that agreement, Louis Dreyfus will purchase Class A shares equal to $50 million at the initial public offering price.
“Through the joint venture with LDC, Luckin is extending upstream toward production, giving greater product quality control along the whole process and the ability to offer better products, a better experience and services to consumers, to further meet their diverse product needs. In the future, Luckin Coffee will further reduce costs to meet the needs of broader consumers and increase their consumption frequency.”
—Jinyi Guo, Luckin Coffee senior vice president and co-founder, in a statement
Details: The new joint venture will focus on a co-branded, not-from-concentrate orange, lemon, and apple juices, with plans to build its own bottling plant.
- The firm also plans to bottle and brand other fruit and vegetable juices, according to the company.
- Luckin Coffee stores will play an important role as sales outlets, while the business also plans to market its juices via other channels.
- No financial details about the joint venture are disclosed.
Context: Founded in 1851, Rotterdam-based LDC has been active for more than 40 years in China, where it operates across commodities including grains, oilseeds, cotton, sugar, rice, and juice, in nearly every province in the country.