Luckin Coffee is finally entering the U.S. — starting with New York City. Will Luckin be able to challenge Starbucks in its own backyard?
Many mistake Luckin’s product as simply coffee. It is not – Luckin is more like an ecommerce company.
Tune in as we explore:
- Luckin’s platform-like model, and how it turns its coffee stores into mini fulfillment centers;
- Why Luckin launched in New York, unlike Chagee in Los Angeles;
- How Luckin’s digital DNA gives it a global edge;
- What challenges Luckin may face, particularly in terms of organisation and people
Also available on Spotify and Apple Podcast
Featured materials:
Luckin Coffee enters Malaysia with an unconventional partner, TheLowDown
Luckin Coffee lands in New York: Can it take on Starbucks at home?, TheLowDown
E86: Luckin Coffee opens 20,000th store, The Impulso Podcast
Coffee in Southeast Asia, Momentum Works
[AI-generated Transcript]
[00:00:00] Sabrina: Everyone and welcome to the Impulso Podcast by Momentum Works. So Luckin just announced Luckin didn’t announce Luckin is going to open two stores in the US
[00:00:09] Jianggan: kind of announced. They announced on Instagram. Instagram. So they had this
[00:00:12] Sabrina: Instagram post that they’re gonna open two stores on 30th June in New York City.
[00:00:19] Sabrina: Both outlets in New York? Yeah. Two outlets in New York. So this is the first,
[00:00:22] Jianggan: this is uh, 75 5. Broadway. Broadway, sixth Avenue, both in Manhattan, right.
[00:00:28] Phyllis: Yes.
[00:00:29] Jianggan: Okay.
[00:00:30] Phyllis: So,
[00:00:30] Jianggan: so I think, uh, I think from last year we, we knew that, uh, that they were squarely focused on, on the US market. And, um, uh, I mean, the company has been in Singapore for two years, right?
[00:00:39] Jianggan: I mean, you guys see the Luckin outlet downstairs? Yes.
[00:00:43] Sabrina: We were contemplating buying Luckin this morning.
[00:00:45] Jianggan: Did you manage to buy it?
[00:00:46] Sabrina: No, we, we, we didn’t feel like drinking coffee. We just want the water. You have a huge much, you have a
[00:00:52] Jianggan: huge Starbucks like logo here, which, uh, you want the prop water, which shows your all, but, uh, no product placement, no placement.
[00:01:00] Jianggan: But, uh, but I think, uh. I think 60 stores in Singapore after two years. Yes. Um, I presume they’re profitable. So, and uh, and last year they went into Malaysia, but they didn’t go on their own joint
[00:01:13] Phyllis: venture. Right?
[00:01:13] Jianggan: Yeah, they, I think they, is it joint venture or a master licensee? It’s like
[00:01:17] Phyllis: a master licensee.
[00:01:18] Phyllis: Yeah,
[00:01:18] Sabrina: I think it was a master license. So we have an article about that. We wrote about their entry into Malaysia. So there’ll be linked in the show notes down below if you guys are interested to check it out.
[00:01:26] Jianggan: So, and, and, and of course, uh, France from rest of Southeast Asia are asking that, okay, when we lucky in going to Indonesia, go into like this country, that country.
[00:01:35] Jianggan: But, uh, but clearly I, I think, I think the interesting in all these countries, otherwise. They would not spend all the efforts to, to fight that legal battle for their co, for the copycat in Thailand. Um, initially they lost, but I think eventually it appeared that they won and they got back their logo and brand.
[00:01:52] Jianggan: So, which means that they’re interested in those markets. Mm-hmm. But, um, but I think at luck in leadership is, uh, squarely focused on the US market.
[00:01:59] Sabrina: But it makes sense, right? ’cause obviously the US is a huge coffee market. Starbucks
[00:02:04] Jianggan: has like, what, how many?
[00:02:05] Sabrina: 17,000, I think seven. About 17 K stores in the US alone.
[00:02:09] Sabrina: Starbucks, yeah. Yeah. Starbucks.
[00:02:11] Jianggan: And it’s, it’s almost like two thirds or more. Two thirds of their revenue. Yeah. I think something like that, as
[00:02:14] Sabrina: of their latest financial statements is about 60% of their, maybe more than 60% of their revenue, 69%
[00:02:19] Jianggan: associated off their
[00:02:20] Sabrina: revenue. But it’s interesting ’cause. I think we are talking about this a couple episodes back about Cha’s IPO and their launch in the US as well, right?
[00:02:28] Jianggan: Cha’s? The Chinese tea brand that is, which tries to be Starbucks of tea.
[00:02:32] Sabrina: Yeah, so there are a couple of videos. We have one as well where we talk about how CHA is kind of like the Starbucks of tea. So what’s interesting is Cha chose to open in LA whereas Luckin chose to open in New York City. Mm-hmm. And not just Luckin, so Coffee.
[00:02:45] Sabrina: Coffee, which is Lakin’s competitor in China. That was started by the. Ex CEO that got kicked off Lockin,
right? Yes. Yeah.
[00:02:52] Sabrina: So they also opened in New York City.
[00:02:55] Sabrina: Why so why do you think they chose the different open in different LA and New York are big cities. They are more diversified cities, big Asian population, right?
[00:03:05] Sabrina: So it’s, well I guess for chat matters more. I dunno why it met for Luckin. ’cause coffee appeal to a lot of people.
[00:03:13] Jianggan: I think so. Why New
[00:03:15] Sabrina: York?
[00:03:16] Jianggan: I think LA has a, has a, has a large ethnic Chinese population. Mm-hmm. So, so I think, um, I think it’s probably easier to find people to work for you. It’s easier to, to appeal to the initial set of customers.
[00:03:28] Jianggan: But we look at Lockin, they went straight to New York, and of course New York is where, I mean, I think the coffee culture is kind of defined, right? Mm-hmm. So we, we, we look at TV and stuff and they always talk about like, coffee shops in New York, coffee houses in New York, et cetera. So, so I think they are targeting the mainstream consumers in New York.
[00:03:45] Sabrina: They’re not just going for like. The, maybe the Chinese audience that already knows
[00:03:50] Jianggan: that, that, but they’ll be too small. Right. It’s like, that’s true. A few million people, but they’re scared, scattered across the country. So, so as a coffee brand, uh, you’ll probably go for the mainstream.
[00:04:00] Phyllis: I think the way Lakin operates also.
[00:04:02] Phyllis: It also fits New York. ’cause like when we think of the average New Yorker, you think of like quick, efficient, you want things done very fast. Right? So
[00:04:09] Jianggan: And you hold a couple, yeah, walk in the street, you
[00:04:13] Phyllis: be able to log in and walk down the street. So it, it imagines the bike. That’s ’cause
[00:04:16] Sabrina: it’s a very commuter city as well.
[00:04:18] Sabrina: Yeah. Like you’ll take the train and then you walk through office. But the way they launch in New York is quite cute. Right. So they haven’t officially opened their stores yet. Yeah. But they had sort of like some food trucks that were, they announced on their Instagram as well. They had some food trucks that were kind of like.
[00:04:32] Sabrina: Going around the city. Different areas of the city, right? Yeah. The different areas of the city. I think it’s,
[00:04:37] Jianggan: and they have influencers posting, uh, yeah, in free coffee
[00:04:40] Sabrina: actually. It’s really just this one influencer, like
[00:04:43] Phyllis: we
[00:04:43] Sabrina: see these a lot. If you go to TikTok, I think there’s a couple more. So there’s a couple of videos.
[00:04:48] Sabrina: Essentially they’re giving out free coffee free. Put bags. Yeah. But I
[00:04:52] Jianggan: think, uh, I think this is pretty standard like, uh, mythology of the expansion, right? You drive up interest first. Mm. You get a bit of brand awareness when the store opens, so it will not be cold. Yes. Uh, you generate hype and the
[00:05:05] Sabrina: queues are quite long as well.
[00:05:06] Jianggan: Free coffee.
[00:05:08] Sabrina: Yeah, that’s true. Who wouldn’t queue for free coffee?
[00:05:10] Jianggan: See, I mean, free, free coffee is not only a Singapore thing and anywhere you go, people love free stuff. Yeah,
[00:05:16] Phyllis: we don’t have free coffee here in Singapore. The kid launch Coffee. Coffee. You
[00:05:19] Jianggan: used to have like free milo in schools. Oh, the Milo Trucko has something similar, right?
[00:05:24] Jianggan: I mean, it sort of, it sort of implants the Milo brand into your mind. I feel
[00:05:27] Phyllis: like that’s the smartest thing they ever did because like after that, when they come out with the Milo truck sachets, it was completely sold out in all end D Cs across the island. NQC
[00:05:37] Jianggan: is the government owned, uh, supermarket chain, which is everywhere in Singapore.
[00:05:41] Sabrina: My Milo trap. Like my dnce. Yeah. That’s why.
[00:05:45] Jianggan: But anyway, so I think, I think back to Lucky in the us, um, they probably spend a lot of time preparing for this launch because, uh, same as what we discussed about Michen going to Brazil, et cetera. So it’s a, it’s very large market and uh, it’s a market where things are quite different from China, I would say.
[00:06:02] Jianggan: Mm-hmm. So. You deal with, I think different consumer base, different competitive landscape, uh, different kinds of, uh, sort of retail landscape as well. And uh, also at the end of the day, uh, you have, uh, different labor issues, right? Mm-hmm. I’m not sure you’ve been following the news that, uh, I think there’s a union of Starbucks, like, uh, price does who are trying to harm more people.
[00:06:23] Jianggan: To send into Starbucks, to, to, to, to help the new stores unionize.
Oh,
[00:06:28] Jianggan: yeah. So, so I, I, I think this is an issue that Latin has never dealt with in China.
[00:06:33] Sabrina: That’s true. So it’ll be, so it’s, um, if you guys are interested, we do have an article that we wrote on our block, the Lowdown that will be linked in the show notes below.
[00:06:42] Sabrina: But something interesting I think that you mentioned in the article is that, of course, the difference between luckin and all these other coffee stores that we are seeing all these more traditional coffee chains, is that. Lockin works more as an e-commerce company.
[00:06:55] Jianggan: It is. It is because, um, everything’s digital.
[00:06:57] Jianggan: All the touch points with consumers are digital. You have to
[00:06:59] Sabrina: order purely from the app. No. Yes,
[00:07:02] Jianggan: yes. I mean, no barista sign at you, you know, asking your name and stuff and, uh, so everything’s done on a map and you go to the store to pick it up and you scan a code to get a coffee. Right. So if you think about the people working in the lock-in store, they are.
[00:07:16] Jianggan: Um, they’re manufacturing. I mean, they’re, they’re, they’re like, essentially, ’cause they’re just
[00:07:20] Sabrina: making a cup of coffee, right? There’s no customer service. A
[00:07:23] Phyllis: factory line.
[00:07:23] Jianggan: They’re, they’re, they’re, they’re like, uh, yeah, they’re like a production line. Right? So, so people just don’t, just, just. I mean turning like the, the raw materials into coffee.
[00:07:32] Jianggan: Mm-hmm. And you just go and, uh, fetch coffee. It’s like a fulfillment center. Yes. So maybe that fits into Trump’s vision of brain manufacturing back to the us You see the manufacturing coffee,
[00:07:41] Sabrina: but it’s a, but it’s a Chinese company bringing back to the us. Yeah. That, that’s even better.
[00:07:49] Jianggan: Chinese companies bring the manufacturing back to the US bringing
[00:07:51] Sabrina: the manufacturing professor.
[00:07:52] Sabrina: So you mentioned in the article that. Obviously this gives, um, luck in an itch when they are expanding, I guess expanding into the US as well as expanding into different categories. So, and unlike players like Chati, right, where it’s still a lot more complicated to make an order,
[00:08:07] Jianggan: I think, I think, I think Charty is already much more digital compared to other key chains.
[00:08:11] Jianggan: But at the end of the day, um, it’s not, how would I say, I mean, if you think about Luckin, it’s um, it’s a platform. It is a platform which controls all the digital touch points with the consumers. It’s a platform which controls all the store operations. It’s a platform which allows new products to be launched into the, into the stores, and the inventory has been managed very efficiently.
[00:08:32] Jianggan: I mean, you talk about all like a hundreds more than a hundred, like new products launched into Lae Yes. Locking, uh, stores every year. And, um, I mean, if, if you think about a traditional sort of a company, how are they able to do that efficiently? I mean,
[00:08:47] Phyllis: they can’t keep up.
[00:08:49] Jianggan: Sending the goods effectively to,
[00:08:51] Sabrina: to so many different stores.
[00:08:52] Sabrina: Like, it’s
[00:08:52] Jianggan: like of 24,000 stores as of end of March, I think. Yeah. And, uh, to so many, I mean, anticipated inventory levels and stuff. That’s why I think you see lots of new products. They’re seasonal. They’re not like no, added to the permanent menu because it’s securing the supply and everything. So,
[00:09:08] Sabrina: but I feel that’s one thing that I’ve.
[00:09:10] Sabrina: Feel is different about lockin that they launch seasonal products, right?
Mm-hmm.
[00:09:14] Sabrina: But when a product starts does really well, they edit to their main menu very even. Quickly, very quickly.
Mm-hmm.
[00:09:20] Sabrina: So like the butter latte that we like to drink, it also started as like a seasonal product ’cause it’s their collaboration with the butter bear.
[00:09:26] Sabrina: So
[00:09:27] Phyllis: the context is, in China we had this little butter latte and we loved it. And then when we come back to Singapore, it wasn’t here. And then one day it appear as a seasonal product. Mm. And within like two months, I think less than two months, within a month, it became a permanent product on the menu.
[00:09:42] Jianggan: So, which means when they de, when they de designing a product, uh, they would probably secure the supply to, to make sure that if the product, um, gets, uh, good response for consumers, which they will know because I mean, they know exactly each touch point.
[00:09:53] Jianggan: I mean. They know exactly who is ordering what. Mm. So, and they have the ability to actually organize the supply chain on a permanent basis.
[00:10:01] Sabrina: Yeah. Oh, that’s true. That must be you’re collecting data, but at the same time, making sure that if I wanna make this permanent, I both have the supply chain.
[00:10:08] Phyllis: It’s not just about the collection of the data, it’s like how they use it and how quickly they can, and also I think,
[00:10:14] Jianggan: I, I think for some their products it’s probably, um, see it doesn’t have like fresh fruit or whatever.
[00:10:19] Jianggan: Mm. So, which the supply chain is much harder to, to organize and, um. But if, if it’s a platform like this, which can organize things, uh, in a very efficient way, in a very cost effective way, and you, you, you, you can think of like, uh, adapting this into other categories of drinks or something else, but probably it’s not their focus now.
[00:10:39] Jianggan: Their focus is still just expanding, mainly coffee, many coffee and also expanding the stone network. And once they have reached the situation point where they can’t grow the, the footprint anymore, it’s a. Is is a time which they probably go to like, you know, add more categories onto, onto the offering.
[00:10:54] Jianggan: Mm-hmm. Mm-hmm.
[00:10:56] Sabrina: I think they are. I mean, they, they still have room to grow, right? They’re like the fifth or six largest FMB chain by a number of stores now.
[00:11:01] Jianggan: Yes. But, uh, but I think if you think about the US right? I think the US will be a huge market for them once, I’m sure the ambition will probably be around two 20,000 stores in the us.
[00:11:10] Sabrina: So what do you think will be the biggest challenges that. Biggest challenge that lain will face in the us. ’cause like you said, it’s such a different market from China. Labor issues would be one.
[00:11:19] Jianggan: Well, I, I, I think, I think, I think politics wise, if they can spin the story right. I bring manufacturing back to is, but that, that’s a joke.
[00:11:25] Jianggan: That’s the new tech line. That’s a joke. Anyway, so, um, so I think, um. I think, I know that the leadership is very committed to this market, so it’s not, I mean, so we, we use this framework, pop leadership, right? People, organization, uh, product leadership to analyze, uh, market entries of, uh, of these large Chinese companies.
[00:11:45] Jianggan: So I think the leadership is very determined. Mm-hmm. Um, I think the product, they have a superior product, uh, and they have polished a system of, uh. I mean the policy platform, basically. Mm-hmm. A digital platform. Uh, I think in terms of people and organization, this will probably be the biggest challenges.
[00:12:04] Jianggan: Right. And so, uh, they, their, their current people, are they able to handle like, you know, multiple markets? Mm-hmm. Especially US market, which is big and different. Mm-hmm. So in, in that way, explained why they did, uh, Singapore launch first. I mean, Singapore is a small market. Yeah. And it’s,
[00:12:21] Sabrina: I would say more similar
[00:12:23] Jianggan: to China.
[00:12:24] Jianggan: China, not really to the us.
[00:12:26] Sabrina: Then the US is to China.
[00:12:28] Jianggan: I don’t know. I think in multiple aspects it’s uh, um, you
[00:12:32] Phyllis: mean terms, the labor, labor force mean there are people there, no unions, right? Organization, yeah. Unions
[00:12:38] Jianggan: just mentioned for NTC Union not, but they do welfare. They don’t, they don’t, they don’t, they don’t hug with, uh, with the employers.
[00:12:46] Jianggan: But anyway, that’s, that’s diff different topic. Um, I, I think, um. I think doing that in Singapore is similar to doing that in Hong Kong, right? Mm-hmm. So it’s, it’s a relatively small setting which allows you to test, okay, is my organization able to run a parallel like market, which different from my own? Am I able to prioritize enough resources?
[00:13:07] Jianggan: Am I able to develop an operate as separate product? Am I able to sort of, um, build a hybrid team because you have some. Executives in from China because they know the business model inside out. And you’ll need to hire like local executives who can help you find better locations and manage the local employees, et cetera.
[00:13:24] Jianggan: Uh, but translate that into us is a much bigger challenge. Right. So, um, so how does that organ organization fit into such a large undertaking? Uh, I’m, I’m sure that learning fast, uh, it’s is a big challenge and, uh, I’m sure they’re aware of it and, uh, are willing to sort of, uh, uh, take efforts to address it.
[00:13:41] Jianggan: That’s why they, they’re, they’re in the US market, right?
[00:13:43] Sabrina: I mean, they must have thought about, they must have given this some thought before they decided to expand in the us. Uh,
[00:13:48] Jianggan: of course, it’s, it is a big commitment. I mean, contrary to what many people say that, I mean, you just, uh, is going to market. I, I, I think these guys have done lots of, lots of strategic thinking before doing that.
[00:13:57] Jianggan: Yeah.
[00:13:58] Sabrina: So if you guys are, any of you are based in New York and you’ve seen a Luckin store or you went to the popup, you can let us know your thoughts down below of what you think of Luckin Coffee. Whether or not you would consider buying it again, if it’s not free, it’s not bad. I think it’s 99 cents for the first.
[00:14:13] Sabrina: First time. Yeah. Nine 9 cents for your first cap to download the app. Actually, that’s like 10% of a Starbucks coffee. Really? That’s, man. Okay. My Starbucks coffee is $9. Yes.
What do you buy?
[00:14:22] Sabrina: Caramel Alfred.
It’s not a coffee.
[00:14:28] Jianggan: Okay. But, but, uh, what’s interesting, when, when that news came out, that lockin app went online, the US and they, they, they’re selling the first cup of coffee for like 99 cents.
[00:14:37] Jianggan: A friend of mine who, who grew up in the US but moved to Asia and, uh. Like 10 years ago. And of course his mindset is probably still stuck in the US in the past. He said, oh, when I was still in the us and everything. That’s 99 cents will write 99 with the same sign. Mm-hmm. And now look at the AS $0.99. It must be sign of inflation.
[00:14:56] Sabrina: Was it 99 cents when they launched in Singapore? Oh, it was 0.99. [00:15:02] Jianggan: 0.99.
[00:15:04] Sabrina: Inflation. Yes. Yeah. 99 cents. Don’t feel. I don’t know it. I feel it would be
[00:15:09] Phyllis: weird to just see this symbol. No, because it simple. My 9 cents is 99. But if you put zero, 0.99 point,
[00:15:16] Sabrina: that’s true. That’s true. Psychology thing. So thank you guys for tuning into another episode of the Impost podcast.
[00:15:21] Sabrina: We hope that you guys enjoyed today’s episode, and if you did, do like our video as well as subscribe to our YouTube channel to stay up to date on the latest happenings in trends in tech, new retail, and the broader digital economy. Thank you, and bye-bye.
[00:15:33] Jianggan: Bye-bye.
The post Luckin Coffee brings manufacturing back to the USA?| Impulso E123 first appeared on The Low Down - Momentum Works.
