Starbucks under fresh pressure as China's biggest coffee chain opens first US locations with $2 drinks
Luckin Coffee, known for its no-frills menu and ultra-low prices, has already given Starbucks a run for its money in its home country of China.
It has now opened its first two American shops this week — both near the campus of New York University. The Big Apple's newest coffee shop opened on Monday.
The chain celebrated Monday's opening with free tote bags with for the first 100 guests and $.99 drinks for early customers.
In China, the no-frills coffee chain has consistently pulled in young shoppers, with aggressive TikTok campaigns and low prices.
Luckin's strategy is clear: keep it simple and cheap. Lattes, matchas, and cold brews go for as little as $2 to $3 — significantly less than Starbucks.
It also has a small assortment of pastries. Diners can order some fruit-forward refresher drinks, too.
In China, the brand has leaned into aggressive TikTok marketing and a grab-and-go model that caters to students and professionals on the run.
The chain has a history of undercutting Starbuck's value. A standard cup of Starbucks coffee will typically cost New Yorkers around $6 to $7.
In China, Starbucks drinks are typically 30 percent more expensive than Luckin's.
Luckin has used its simple, easily-scaled restaurants with bargain basement prices to become one of China's biggest restaurant chains.
By 2019, the brand had overtaken Starbucks as the largest coffee chain in China. It currently operates 22,000 stores in the country, triple the size of the Seattle-based brewer's Chinese locations.
Meanwhile, Starbucks' forray into the Chinese market is appearing to lose steam. The company is fighting off rumors that it was exploring a sale of all its Chinese store locations.
The New York openings also come as Starbucks attempts to mount a sales ressurgence back in the US.
Last year, Starbucks posted declining growth, prompting a wave of changes in the company's restaurants and in the C-suite.
The coffee chain slashed products from its menus, changed its perks programs, and pilfered Chipotle's CEO to become the coffee chain's top boss.
The chain has reintroduced ceramic mugs, slashed some of its complicated menu items, and changed its rewards program to become more competitive
'People love Starbucks, but I've heard from some customers that we've drifted from our core,' Brian Niccol, the new CEO, said during a 2024 earnings call.
'As a result, some are visiting less often, and I think today's results tell that same story.'
In April, the company reported a two percent increase in net sales. But Niccol said the company is still facing headwinds from higher costs and decreasing consumer strength.
Meanwhile, Starbucks might not be the only coffee chain in the Chinese coffee-makers sights.
Luckin's new stores could also lure coffee drinkers away from Dunkin ($2.15 to $3.50 average coffee price) and Tim Hortons ($3 average price).
If it expands westward, the Chinese coffee chain could set its sights on Dutch Bros ($5.25 average price).
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