At a Luckin Coffee in New York City’s Gramercy Park neighborhood earlier this month, Anthony Douglas presented a selection of the chain’s coffee drinks and described in detail coffee beans, the roasting process, and the caffeine levels of light and dark roast.
He then walked through some of the chain’s best-selling drinks, including its Cold Brew, Coconut Latte, Velvet Latte and Sea Salt Caramel Latte, and described them in detail as attendees tasted them. “The coffee that I enjoy might be different, and we all like different things,” Douglas said. “There are just different ways that you can express coffee.”
Douglas, an Australian, won the World Barista Championship in 2022. He is a master barista for Luckin, one of several of the world’s top baristas that are working with the Chinese chain, one of the fastest growing restaurant brands the world has ever seen.
The chain, which was only founded in 2017, already has 35,000 locations, the bulk of which are in China but more of which are in other countries. To put that into perspective, 7 Brew, the fastest growing chain in the U.S. last year, was also founded in 2017 and has more than 750 locations. And Luckin did that despite a faked orders scandal and bankruptcy filing.
Luckin has taken that fast-growth mindset to the U.S. It opened its first location in New York City last year, and already has 18 locations there, most of which are small and designed for customers to take their beverages with them. Exactly how many it’s planning there, and whether it will go into other markets, remains to be seen.
But it’s part of a generation of Chinese chains that have established a beachhead in the U.S., with at least some success. That includes the ice cream concept Mixue, which operates locations in New York and Los Angeles. There is also the tea chain Chagee, which now has nine shops and recently cited the early success of those units.
Luckin’s strategy is a fascinating one and is unique even in a U.S. coffee market that is loaded with a rapidly growing number of competitors. The chain is pushing to make its business ultra-convenient, which is a big reason for the rapidly growing number of stores, which enable delivery and takeout orders.
And it has deliberately kept its pricing low, aided by a business that is heavily tech focused. Customers don’t order from a barista but download an app and order that way. The process is slick. We discovered this visiting a location in Singapore, where we tried, and failed, to order from a counter.
The lack of counter ordering, in theory, keeps workers focused on making coffee and not taking orders from consumers. That could in theory keep its prices low, which could help the chain gain business from a U.S. consumer pushing back over prices. Luckin greets new customers with an aggressive discount deal.
After that, its prices appear roughly comparable, albeit moderately cheaper, than Starbucks and Dunkin’. Luckin’s Iced Coconut Latte—the chain’s best-selling product—is priced at $6.45, which is cheaper than Starbucks’ Toasted Coconut Latte, at least in the same neighborhood.
At a Luckin Coffee tasting event in New York City. | Photo courtesy of Luckin Coffee.
The event at Luckin in New York was aimed at highlighting the chain’s quality, which is a key, motivating factor.
In the U.S., Luckin is going after a market that is far more mature when it comes to coffee than China. Two-thirds of Americans consume coffee daily. As a whole, Americans consume nearly five times as much coffee as they do in China, even though China has four times the population as the U.S.
International coffee brands have generally struggled to gain a true foothold in the U.S. The Canadian chain Tim Hortons has been unable to come even close to the success it’s had in its home market and has now been passed by much-younger brands Dutch Bros and 7 Brew. The European chain Costa Coffee has largely focused on kiosks with its U.S. development.
The U.S. is home to giants Starbucks and Dunkin’, which have established themselves as habitual destinations and which both have growth plans of their own. Dutch Bros and 7 Brew are growing quickly, as are numerous smaller chains like Scooter’s, Black Rock Coffee Bar, Better Buzz and many others. Ten coffee chains last year grew by at least 20%, according to data from Restaurant Business sibling company Technomic.
The U.S., in other words, is very competitive.
In touting its quality, Luckin is clearly hoping to establish its bonafides as a true destination for coffee in such a tough market.
“Since the beginning of the year, we have focused on strengthening Luckin Coffee’s positioning as a professional coffee brand by continuously upgrading our bean flavor profiles and overall coffee experience,” Jinyi Guo, CEO of Luckin, told investors in late April, according to a transcript on the financial services site AlphaSense.
Of course, none of this is even mentioning some of the other factors that might make this market more challenging, notably real estate and the potential need to explore options like drive-thrus. But the company must first convince consumers that its lower-priced beverages are every bit as good as the many other chains that are growing here.