Luckin is a company I hadn’t heard of before. It had simply passed me by until the day I saw it in our rankings and asked if anyone had heard of the company before. It’s easy to forget there are thriving organisations which don’t operate in your own market, and it can be harder to keep track of them.
Thankfully @yuchen.xia gave me the footnotes as to why I should care. In short, aggressive, explosive growth. How fast you ask? Try 3,680 stores in two years (McDonalds opened 1,454 stores in the same period worldwide but Starbucks kept pace with Luckin and opened the same number of stores in China.)
The battle between Starbucks and Luckin Coffee in China has been brewing, with both companies driving innovation through their apps and in-store experiences (because coffee is still just coffee.)
But the milk is at risk of going sour now. New fraud allegations (not the first time for Luckin, rumours of pumping their footfall numbers have been ripe for a while now), have put a damper on the share price along with the lockdown in some Chinese provinces.
It seems bad news likes company, with the chairman of Luckin Coffee defaulting on the terms of a $518m loan from Goldman Sachs.
However, the caffeinated and energised Chinese population do not want to see Luckin lose out to the foreign invader Starbucks.
This boost however, according to the TechCrunch article maybe in part related to customers redeeming vouchers over fears of the company going bust, rather than an increase in true full priced sales.
But enough about the news, what do the numbers tell us?
Luckin Coffee on paper is a very strong contender, I expect over the next few days the scores will change depending on the sentiment (affecting momentum) around the fraud. The high quality score means Luckin can afford a few scandals as long as they don’t have to keep reaching for the cheque book. Surprisingly, even with a global pandemic being served up, the company is cheaper than average looking at the value. However, this is all up for change if the future cashflow is adjusted.
Do you think Luckin Coffee is a lucky pick? Will we see Luckin showing up on the UK highstreet anytime soon?
We’ll watch the stories closely and see how it impacts the long term outlook.