On September 16, 2025, Starbucks CEO Brian Niccol was discussing the "Starbucks Revival Plan" at an event in New York when the moderator suddenly asked, "Chinese chain Luckin Coffee Inc. has rapidly developed with an Uber-based transaction model. Is there anything about this company that you admire?"
Founded less than a decade ago, Luckin Coffee Inc. now operates more stores in China than Starbucks and officially entered the US market—Starbucks' birthplace—on June 30 this year. Within two months, it opened six consecutive stores in New York, from Greenwich Village where students and artists gather, to Midtown's business district, to areas near Wall Street frequented by international tourists. The "little blue cup" is quietly emerging in Starbucks' heartland, sparking speculation about the next phase of the coffee wars.
Can Luckin Coffee Inc. replicate its Chinese-style growth on Starbucks' home turf? And how should Starbucks defend its throne?
**Digital Empowerment: Platform Strategy Beneath the Coffee Facade**
Unlike Starbucks founder Howard Schultz's vision of bringing Italian coffee culture globally through "third space" concepts, Luckin Coffee Inc.'s rapid growth stems from adopting Uber's digital platform model, using mobile apps for online transactions to restructure traditional coffee retail's "people-product-place" relationships.
Customers must complete all ordering and payment processes online, enabling Luckin Coffee Inc. to comprehensively understand consumer data. Based on this foundation, the company implements aggressive subsidy strategies using marketing tactics like "ultra-low first cup prices" and "buy two, get one free" to rapidly capture market share and cultivate user habits.
Leveraging massive data generated through digital transactions, Luckin Coffee Inc. achieved precision operations and extreme efficiency improvements in China. By analyzing consumer behavior, the company can conduct precise site selection, develop hit products, and implement predictive ordering, significantly reducing decision-making uncertainty and operational costs inherent in traditional retail. This data-driven model enables cost structure optimization while maintaining low prices, establishing a foundation for sustainable development.
Unlike Starbucks' "third space" large store model, Luckin Coffee Inc. focuses on small grab-and-go stores, significantly reducing rent and renovation costs while lowering dependence on employee skills through standardized production processes, enabling rapid store network expansion and completing digital restructuring of traditional coffee retail.
As of the second quarter this year, Luckin Coffee Inc.'s global store count reached 26,206, with 26,117 in China, adding nearly 2,000 stores in a single quarter—an impressive growth rate. But can Luckin's Chinese playbook be replicated in North America?
**Localization Challenges: Cultural Barriers and Profitability Struggles**
While visiting the 28th Street store, I encountered out-of-town tourists visiting New York who wanted to try ordering but were turned away by the online-only requirement. After multiple attempts to scan QR codes without successfully logging in, they left disappointed, saying "maybe next time."
Allison Malmsten, Public Research Director at University Consulting Company who has long studied US-China consumer trends, told me: "Chinese chain coffee is highly digitized, with Luckin Coffee Inc. being a prime example. Ordering via phone and picking up in-store works for some American consumers, but not everyone. While it may sound counterintuitive, many Americans still prefer using cash or ordering directly at the counter."
She also noted that US law requires food and beverage merchants to accept cash, and Luckin Coffee Inc.'s positioning as a "tech company" that doesn't accept cash has drawn criticism and may even be illegal in certain areas.
Bernstein's research report in late July calculated that Luckin Coffee Inc.'s first New York stores are currently operating at a loss. Each store's monthly operating costs are approximately $91,600, including $15,000 in rent, $66,400 in labor costs, and about $10,000 in utilities, maintenance, and insurance. Stores need to sell 1,100-1,200 cups daily to break even, but actual sales are only half that. Analyst Danilo Gargiulo stated, "By comparison, we estimate Starbucks typically achieves single-store profit margins above 15%."
**Beyond Value Pricing: What Other Cards Can Be Played?**
Luckin Coffee Inc. US is actively trying to shed its "low-price" label and move toward more comprehensive brand building. Its social media operations combine local cultural hotspots—such as creatively comparing coffee categories with fashion styles during New York Fashion Week—while associating Luckin with "Lucky" to guide interactive topics like "what made you feel lucky today," inviting influencers to shoot short videos at landmark buildings to convey a fashionable, young, and healthy brand image.
In New York, Luckin Coffee Inc. takes measured steps, often opening stores within meters of another Starbucks, but remains extremely restrained in strategic messaging.
CEO Guo Jinyi's statement during the second-quarter earnings call was: "The United States is a highly mature coffee consumption market, and we are still in early exploration stages. Therefore, our strategy will be steady and cautious, focusing on validating US consumer acceptance of our brand positioning, digital ordering experience, product portfolio, and pricing strategy. Through this early phase, we hope to establish Luckin Coffee Inc.'s unique value proposition and customer experience in the US market while building localized operational capabilities to lay the foundation for future large-scale expansion."
**Retail Investor Enthusiasm vs. Institutional Caution: Path to Breaking Through**
The US market represents both opportunity and memory for Luckin Coffee Inc. In April 2020, the company was exposed for $2.2 billion in financial fraud, triggering stock price collapse and Nasdaq delisting, relegating it to pink sheet trading. Many believed the company would exit after bankruptcy liquidation. However, after management and board changes, Luckin Coffee Inc. started fresh and returned to overseas investors' attention five years later.
US consumer retail analyst John Zolidis, President of Quo Vadis Capital, wrote bluntly in a research report following Starbucks' second-quarter earnings: "Why pay high valuations for a company in transition when you can buy a high-growth company at lower prices right now?"
His firm's data models show that Luckin Coffee Inc. exceeded expectations in same-store sales, quarterly revenue, and profit margins. "Long-term, Luckin Coffee Inc.'s ambitions are global. We believe despite having 25,000 stores, the company remains in early growth stages, and investors entering at current levels will receive good returns from this long-term compound growth enterprise."
However, Zolidis admitted to me that while pink sheet-traded Luckin Coffee Inc. has devoted fans among retail investors, institutional investors remain on the sidelines.
"The core is rebuilding credibility, including improving internal controls, clearing up old issues, and ensuring financial reports are truthful and reliable. Finding a US auditing firm is a signal. I think entering the US market with store openings also demonstrates ambitions to become a global company to US regulators and markets."
Zolidis suggests that Luckin Coffee Inc. should prioritize menu innovation and consumer feedback overseas initially, cultivating freshness through high-frequency new launches and building loyalty through consistent execution. "They've done this well in China; in the US market, they need even more localized adaptation."
Starbucks has obviously noticed this competitor.
Facing the moderator's question mentioned at the article's beginning, new Starbucks CEO Niccol first politely acknowledged, "Their [Luckin Coffee Inc.'s] innovation speed is remarkable." He then shifted tone, mentioning that during business trips to China, he specifically tasted Starbucks' innovative signature "Rose Latte" to demonstrate unwillingness to concede in new product development. He also revealed that Starbucks will launch protein cold brew with milk foam in late September and develop gluten-free and high-protein foods, directly targeting American consumers' health needs. Research shows approximately 85% of surveyed Americans hope to increase protein intake in 2025.
This cross-Pacific coffee war continues.
Comments