Luckin Coffee: U.S. Expansion Unlikely To Move The Needle

seekingalpha10-31

Luckin aims to undercut Starbucks in the U.S. with low-priced coffee but lacks clear differentiation against other coffee chains.China's coffee market faces overcapacity, with aggressive store ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2479734761?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2177550679/image_2177550679.jpg","is_english":true,"pubTime":"2024-10-31 03:06","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2479734761","market":"sg","top_or_hot":-1,"title":"Luckin Coffee: U.S. Expansion Unlikely To Move The Needle","media":"seekingalpha","content":"<div>\n<p>Luckin aims to undercut Starbucks in the U.S. with low-priced coffee but lacks clear differentiation against other coffee chains.China's coffee market faces overcapacity, with aggressive store ...</p>\n\n<a href=\"https://seekingalpha.com/article/4731028-luckin-coffee-us-expansion-unlikely-to-move-the-needle\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Luckin Coffee: U.S. Expansion Unlikely To Move The Needle</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nLuckin Coffee: U.S. Expansion Unlikely To Move The Needle\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-31 03:06 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4731028-luckin-coffee-us-expansion-unlikely-to-move-the-needle><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Luckin aims to undercut Starbucks in the U.S. with low-priced coffee but lacks clear differentiation against other coffee chains.China's coffee market faces overcapacity, with aggressive store ...</p>\n\n<a href=\"https://seekingalpha.com/article/4731028-luckin-coffee-us-expansion-unlikely-to-move-the-needle\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LKNCY","symbol_name":"瑞幸咖啡","start_time":0,"source_url":"https://seekingalpha.com/article/4731028-luckin-coffee-us-expansion-unlikely-to-move-the-needle","article_id":"2479734761","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2177550679/image_2177550679.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2479734761","pubTimestamp":1730315182,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Luckin aims to undercut Starbucks in the U.S. with low-priced coffee but lacks clear differentiation against other coffee chains.China's coffee market faces overcapacity, with aggressive store expansi","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LKNCY":"瑞幸咖啡","BK4209":"餐馆"},"translate_title":"瑞星咖啡：美国的扩张不太可能改变局面","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"LKNCY":0.9},"content_text":"Luckin aims to undercut Starbucks in the U.S. with low-priced coffee but lacks clear differentiation against other coffee chains.China's coffee market faces overcapacity, with aggressive store expansion and low per capita consumption compared to other countries.Luckin's value perception is uncompetitive in both higher-end and value segments, struggling against brands like Starbucks and Mixue.Expanding in the U.S. may not yield significant traction due to high operational costs and lack of differentiation from existing coffee chains.   SCQBJ-JZ/iStock Editorial via Getty Images  Financial Times reported that Luckin (OTCPK:LKNCY) wants to expand into the U.S. market to undercut Starbucks (SBUX) with its low-priced coffee. The report indicated that Luckin is laying the groundwork in supply chain and technology for a launch early next year. We believe this report is credible, given that Luckin is facing growing competitive pressure amid a consumption downgrade environment in China. However, we are skeptical of Luckin’s ability to succeed, given it lacks clear differentiation against other coffee chains in the U.S. The brand’s value perception is uncompetitive in both the higher-end segment against Starbucks and the specialty coffee chains and in the value segment against Mixue. We note that Luckin’s RMB 9.9 Americano is priced similarly to Cotti Coffee but right between SBUX, which charges RMB 30-35, and Mixue, which prices its Americano 30% cheaper than Luckin at RMB 6.6 in the lower-tier cities, where the majority of the recent store expansion has taken place. The hyper-competitive environment in the coffee chains is unlikely to abide any time soon, given that China’s coffee industry is facing an overcapacity issue where brands have relied mainly on aggressive store expansion (primarily through franchisees) to drive topline growth. We note that in addition to Luckin’s 20,000 stores across China, Cotti has 10,000 locations, which will expand to 40,000 locations by next year. SBUX has 7,300 locations, while Tim Horton has 800 locations. Let’s not forget the 4,000+ McDonald’s and 10,000 locations where KFC (YUMC) sells coffee in China. With the supply side saturated, the demand side is unlikely to keep up, given that China remains a large tea nation. According to Statista, China’s annual per capita coffee consumption is between 10-12 cups compared with the U.S. (330), Japan (280) and Korea (360). The bulls have cited this consumption gap for over a decade as a key case for SBUX and Luckin. Although in larger cities such as Shanghai, where coffee consumption averages 27 cups per year, we do not believe that Shanghai, or any large tier 1 cities, accurately represents China. In fact, we are skeptical that China’s coffee consumption habit will ever reach that of Japan or Korea, given that most Chinese consumers do not have the habit or appreciation of coffee consumption and essentially treat coffee as a beverage. A case in point is that most Chinese coffee drinkers prefer latte over Americano or espresso, given that the milk content dilutes the coffee taste. The preference matrix towards a coffee-flavored beverage positions freshly ground coffee beverages at a disadvantage as they are perceived as less differentiated from other flavored drinks such as milk tea. This greatly magnifies the competitive landscape for coffee chains as they are not only competing against other coffee brands but also milk tea brands. In light of China’s competitive environment, it makes strategic sense for Luckin to expand in the U.S. Currently, Luckin is operating in Singapore as its first international expansion. Similar to the operation in China, Luckin operates entirely cashless and promotes the use of Luckin app for order and pickup. Although Luckin is priced at a discount vs. SBUX, the discount is not material given that an Americano at SBUX costs $5.70 and costs $4.80 at Luckin. Given the higher operational costs, we do not expect Luckin to price their product aggressively against SBUX in the U.S. We are also skeptical whether Luckin will gain meaningful traction within the general population or be targeted mainly at Chinese coffee drinkers. Even so, it is difficult to see the differentiation or value-add Luckin delivers compared with Dunkin Donuts, Krispy Kreme (DNUT), or Tim Hortons (QSR). Although we are positive about Chinese companies expanding overseas, we prefer companies with a clear advantage in China’s domestic market and the potential to capture an overlooked or emerging market for future revenue growth. We are bullish on PDD given its ability to capitalize on the discount e-commerce space, which was non-existent in the U.S. and largely dominated by inefficient offline retailers (see report). We are also positive about Meituan's ability to leverage its delivery leadership to expand into new geographies with its Keeta brand in Hong Kong and the Middle East (see report). However, we do not see Luckin as having a clear advantage in China’s coffee market, and it is unlikely to differentiate itself in the saturated U.S. market.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2479734761"}