China’s coffee giant, Luckin Coffee is setting its sights on Malaysia, bringing its popular brews to a market brimming with established brands. This strategic move comes as Malaysians enjoy an expanding array of coffee brands and outlets, particularly as Starbucks grapples with consumer boycotts due to ongoing Middle East tensions.
To establish a foothold in Malaysia, Luckin Coffee is partnering with a local company listed on Bursa Malaysia. This collaboration will support an ambitious five-year expansion plan, aiming to blanket the country with Luckin Coffee outlets. Founded in 2017, the company boasts a massive network of over 18,500 stores worldwide as of 31 March 2024.
Aggressive Growth of Luckin Coffee
Luckin Coffee isn’t shy about growth. In China alone, they opened over 2,340 new stores in just the first quarter of 2024. This aggressive expansion strategy has resulted in a staggering 18,558 stores across the country, with a mix of self-operated outlets and franchised locations. Their dedication to market dominance is evident. Innovation is a key ingredient in Luckin Coffee’s recipe for success.
A prime example is their collaboration with Kweichow Moutai Co Ltd in September 2023. Together, they launched the Jiangxiang-flavoured latte, a unique offering that took the market by storm. This latte became an instant hit, selling a record-breaking 5.42 million cups on its debut day and generating over RMB100 million (RM64 million) in sales. By year-end, the Jiangxiang latte had surpassed 45 million cups sold, exceeding RMB900 million in total revenue.
International Ventures and Financial Strength
While China is their primary market, Luckin Coffee has already dipped its toes into international waters with 32 stores in Singapore. Malaysia represents their second international venture, showcasing their ambition for global expansion. Over the past year, Luckin Coffee’s share price has increased by nearly 7%, reaching US$22.86 as of 18 June 2024. This translates to a market capitalisation of US$7.69 billion. The stock’s price-to-earnings ratio (PER) of 24.6 times reflects investor confidence in Luckin Coffee’s business model and future growth potential.
Chinese private equity firm Centurium Capital holds the largest stake in Luckin Coffee, controlling around 32.4% of the company after converting all class structures into a single class. Other notable shareholders include Joy Capital and Dr Jinyi Guo with significant holdings. Luckin Coffee’s financial performance paints a picture of a robust and efficient company. In the 2023 fiscal year, they reported a profit of US$2.14 billion on revenue of US$26.74 billion. This strong financial standing provides a solid foundation for their expansion into new markets like Malaysia.
Luckin Coffee Poised for Success in Malaysia
With its ambitious approach, innovative beverages, and financial backing, Luckin Coffee is poised to be a major player in the Malaysian coffee scene. They’re sure to shake things up and offer Malaysians a fresh alternative in the country’s vibrant coffeehouse landscape. Luckin Coffee’s entry into Malaysia marks a significant milestone in their international growth strategy, promising to bring new flavours and a unique coffee experience to Malaysian consumers.
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