The Chinese Coffee Giant Taking on Starbucks

Summary

Podcast Summary: The Chinese Coffee Giant Taking on Starbucks

Podcast Information:

• Title: The Journal
• Host/Author: The Wall Street Journal & Spotify Studios
• Description: The most important stories about money, business and power. Hosted by Ryan Knutson and Jessica Mendoza.
• Episode: The Chinese Coffee Giant Taking on Starbucks
• Release Date: July 30, 2025

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Introduction

In the July 30, 2025 episode of The Journal, hosts Andie Minoff and Hannah Meow delve into the competitive landscape of the U.S. coffee market as a prominent Chinese coffee chain, Luckin Coffee, makes its debut in New York City. This episode explores Luckin's rapid ascent in China, its challenges, and its ambitious efforts to challenge Starbucks on its home turf.

Luckin Coffee's Entry into the U.S. Market

Andie Minoff begins the episode with a firsthand account of visiting Luckin Coffee’s new locations in Manhattan:

"[00:06]... Luckin Coffee is a giant coffee chain from China. [...] The only way to order at Luckin is through its app..."

Minoff describes the seamless, app-driven experience Luckin offers, highlighting its emphasis on technology and customer incentives:

"[00:52]... the app gave me a coupon which made my drink only two bucks... within a minute or two I got a ping that my order was ready."

Currently, Luckin operates two stores in Manhattan, signaling its cautious yet determined entry into the U.S. market.

Origins and Rise in China

Hannah Meow provides a comprehensive background on Luckin Coffee’s origins and meteoric rise in China:

"[04:04] Starbucks arrived in China in 1999... Chinese consumers embraced coffee and eventually a homegrown competitor to Starbucks emerged—Luckin."

Founded in 2017 by entrepreneurs from a Chinese ride-hailing company, Luckin positioned itself as a tech-savvy challenger to Starbucks. Jenny Tian, one of the founders, emphasized the need for a native Chinese coffee brand:

"[04:17]... the Chinese market isn't only gonna have Starbucks, we should have our own coffee brand."

Luckin's strategy centered around a robust mobile app, efficient store operations, and aggressive promotional tactics, including a plethora of coupons and discounts to attract and retain customers.

The 2020 Accounting Scandal and Recovery

Luckin’s rapid growth, however, was marred by a significant setback. In 2020, the company was embroiled in a major accounting scandal:

"[07:03]... Luckin Coffee is that Chinese company that was supposed to be a Starbucks killer. It turned out the CEO fabricated around $300 million worth of sales last year."

The revelation forced Luckin to delist from the Nasdaq and file for bankruptcy. Despite these challenges, Luckin demonstrated remarkable resilience:

"[08:12]... they were trying to repair the reputation of Chinese companies. That's how bad the Luckin scandal was."

By 2023, Luckin had made a stunning comeback, surpassing Starbucks to become the top-selling coffee chain in China, shrinking Starbucks’ market share from over 40% to just 14% by 2024.

Starbucks' Current Challenges in the U.S.

With Luckin now stepping into the U.S. market, Starbucks faces its own set of challenges. Hannah Meow and Andie Minoff discuss the operational inefficiencies Starbucks is grappling with:

"[11:31]... mobile orders are a crucial part of Starbucks business... the workers in the cafes are trying to manage the in-person orders and also mobile pickup orders."
"[12:05]... customization can lead to longer wait times."

Starbucks’ high pricing strategy is also under scrutiny:

"[12:29]... those drinks are still relatively pricey... customers feel like, you know, this cup of coffee is costing six to eight dollars."

In response, Starbucks has appointed a new CEO, Brian Niccol, aiming to restore the classic coffeehouse experience:

"[13:05]... Brian Niccol wants to go back to basics. He's focused on bringing back that classic coffeehouse vibe."

Strategies of Luckin vs. Starbucks

The contrasting strategies of Luckin and Starbucks form the crux of this competitive narrative. While Starbucks emphasizes a premium, experience-driven approach, Luckin leverages technology and cost-efficiency.

Hannah Meow highlights Luckin’s tech-centric model as a potential advantage:

"[14:00]... Luckin has figured out mobile ordering. Luckin embraces the grab and go model."

Meanwhile, Starbucks doubles down on its traditional strengths:

"[14:44]... Starbucks said that the company is doubling down on what customers love. A warm and welcoming coffeehouse with high quality beverages crafted by a skilled barista."

Despite Starbucks' dominance with 17,000 stores nationwide, Luckin’s strategic use of promotions and rapid expansion hints at a possible shift in the U.S. coffee landscape.

Future Prospects and Conclusion

As Luckin begins its U.S. journey, the episode underscores the uncertainty and potential of this rivalry. While Starbucks remains entrenched in its home market, Luckin’s proven ability to rapidly scale and adapt presents a formidable challenge.

Hannah Meow speculates on Luckin’s ambitions:

"[16:07]... Luckin launched its first two stores, [...] we can expect to see more in New York, in the US..."

The episode concludes with a cautious optimism about Luckin’s potential to disrupt Starbucks, leveraging its technological edge and aggressive growth strategy.

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Notable Quotes:

• Jenny Tian on Luckin’s Mission:
  "[04:17] the Chinese market isn't only gonna have Starbucks, we should have our own coffee brand."

• Andie Minoff on User Experience:
  "[00:52]... within a minute or two I got a ping that my order was ready."

• Brian Niccol on Rebranding:
  "[13:21]... we are trying to bring back that classic coffeehouse vibe."

• Hannah Meow on Luckin’s Comeback:
  "[08:21] by 2023, it had surpassed Starbucks as the top selling coffee chain in China."

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This episode of The Journal offers an insightful exploration of Luckin Coffee’s strategic maneuvers and the evolving dynamics of the global coffee industry. As Luckin aims to replicate its success in China within the competitive U.S. market, listeners gain a comprehensive understanding of the challenges and opportunities that lie ahead for both Luckin and Starbucks.

Transcript

[Andie Minoff]

I am here in front of Luckin Coffee in Manhattan on Broadway. Yesterday I went to check out one of the newest coffee spots in New York City. It's called Luckin Coffee and it's a giant coffee chain from China. Out on the sidewalk, signs touted a special deal for first time customers like me. But there was a bit of a learning curve. Looks like I need to download an app first. Let me do that. The only way to order at Luckin is through its app and they are saying that one of their best sellers is this iced coconut latte, which frankly sounds really good. It is really hot out here today, so let's do that. The app flagged a coupon which made my drink only two bucks. All right, order received. And I have a new coupon actually. Next drink is 40% off. Within a minute or two I got a ping that my order was ready. I walked in, scanned my phone and just like that I was out the door. Honestly, I'm not going to get a ton of coffee flavor, but it's 95 degrees, it's cold, it's icy, I don't hate it. There are just two Luckin coffee shops in the US right now, both in Manhattan. But the chain's proven that it can grow fast. It took just six years for Luckin to become the top selling coffee chain in China, dethroning a coffee giant. You're probably more familiar. Starbucks. And now Luckin has arrived in the US On Starbucks home turf. Welcome to the Journal, our show about money, business and power. I'm Andie Minoff. It's Wednesday, July 30th. Coming up on the show, the competition brewing between Starbucks and Luckin Coffee. This episode is brought to you by Intuit QuickBooks. Do you own a business that's ready to thrive? It's time to let Intuit QuickBooks take things like unpaid invoices and tracking expenses off your plate so so you can take things to the next level. Intuit QuickBooks is a powerful AI driven all in one business solution that can help with day to day tasks like invoicing expenses and taxes. Manage and grow your business all in one place. Intuit QuickBooks your way to money. Get 90% off for 3 months limited time only terms and conditions apply. Ryan Reynolds here for Mint Mobile. With the price of just about everything going up, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is apparently a thing Mint Mobile Unlimited Premium Wireless. Get 30, 30, get 30, better get 20, 20, 20, better get 20, 20 better get 15. 15, 15, 15. Just 15 bucks a month. Sold. Give it a [e-mail] Switch upfront payment of $45 for three month plan equivalent to 15 per month. Required new customer offer for first three months only. Speed slower after 35 gigabytes of networks. Fizzy taxes and fees extra. See mint mobile.com Our colleague Hannah Meow has been writing about Luckin Coffee, and she says the brand's meteoric rise in China might never have happened without Starbucks. The American chain was instrumental in creating a coffee culture in the country.

[Hannah Meow]

Starbucks arrived in China in 1999. It opened its first cafe in Beijing. And this was before China was even part of the World Trade Organization. So this was early days in terms of China's development. And Starbucks really spread cafe culture in this country, where tea is more so the traditional beverage of choice.

[Andie Minoff]

Chinese consumers embraced coffee and eventually a homegrown competitor to Starbucks emerged. Luckin. The chain's Chinese name roughly translates to auspicious luck.

[Hannah Meow]

It was 2017 and these entrepreneurs from a ride hailing company decided to start Luckin to challenge Starbucks. If you go back and look at some of the press from the early days, there was, you know, an interview that one of the founders, Jenny Tian, did with Chinese state media and they basically said, you know, the Chinese market isn't only gonna have Starbucks, we should have our own coffee brand.

[Andie Minoff]

And Luckin's founders, being kind of tech people, brought a techy twist to the Starbucks business model.

[Hannah Meow]

Exactly. They built everything around a mobile app and their idea was to, to have these really efficient stores where you can order your coffee on this app, pick it up and go. And also they integrated coffee delivery pretty early on. So their pitch was that you should get your cup of coffee delivered in less than half an hour.

[Andie Minoff]

Luckin wanted to be fast, efficient, and with the help of a ton of coupons, cheap. One of the brand's key strategies for growth is luring in new customers with all kinds of discounts. And they're using the same playbook in New York. After I grabbed my coffee, I ran into a group of women leaving the store with their drinks. What brought you all to Luckin today?

[Hannah Meow]

Her guys.

[Andie Minoff]

I put them onto a deal and I think they came from like China or something. So now they're doing a lot of promotions to like promote the drinks. So we came here to get the deals. What was the deal? $2 for a drink and like that compared to like, we're in the city. So like $2 for a drink is crazy. And the coupons don't stop there. After your first order, the app gives you another coupon and then another coupon. It's kind of like a tech forward update of the old, like coffee punch card. Like buy ten, get one free.

[Hannah Meow]

Exactly, exactly. But you don't even have to really spend a lot to get a reward.

[Andie Minoff]

You don't even have to get 10.

[Hannah Meow]

It feels almost gamified. It really draws you in and feel kind of addicted to getting more coupons. And it's the bread and butter of what Luckin does in China. And not just Luckin, but lots of other e commerce food delivery platforms in China.

[Andie Minoff]

This formula seemed to work for Luckin.

[Hannah Meow]

They just developed super quickly, opened up thousands of stores, and went public in less than two years. So it was a really enormous rapid ascent for this company.

[Andie Minoff]

But Luckin's rise wasn't all that it seemed. So Luckin Coffee is that Chinese company that was supposed to be a Starbucks killer. It turned out the CEO fabricated around $300 million worth of sales last year. In 2020, a major accounting scandal brought Luckin's momentum to a screeching halt.

[Hannah Meow]

Basically, Luckin had to disclose that more than $300 million of sales were faked.

[Andie Minoff]

Whoa.

[Hannah Meow]

And it was a big deal because Luckin had this really buzzy ipo. It listed on the Nasdaq and basically the revelation of the accounting scandal forced it to delist from the nasdaq. It eventually filed for bankruptcy.

[Andie Minoff]

Luckin removed its chairman and CEO and paid a $180 million settlement. But the company stuck it out. Its new CEO would later tell the Journal that Luckham was trying to redeem itself and not just for its own sake.

[Hannah Meow]

He said they were trying to repair the reputation of Chinese companies. That's how bad the Luckin scandal was.

[Andie Minoff]

And it worked. Luckin staged a comeback. By 2023, it had surpassed Starbucks as the top selling coffee chain in China.

[Hannah Meow]

And by 2024, Starbucks market share in China was just 14%, according to Bernstein Research. And it had been more than 40% when Luckin had just started in 2017.

[Andie Minoff]

So this company really came back from the dead. And not only that. Then superseded Starbucks in China.

[Hannah Meow]

Exactly. Exactly. It's almost like a cat who has nine lives or something. Like, you can't get rid of it. Starbucks cannot get rid of this rival that's just coming for it.

[Andie Minoff]

And now that rival could be coming for Starbucks in the US that's next. This episode is brought to you by Greenlight. Get this. Adults with financial literacy skills have 82% more wealth than those who don't. From swimming lessons to piano classes, us parents invest in so many things to enrich our kids lives but are we in investing in their future financial success? With Greenlight you can teach your kids financial literacy skills like earning, saving and investing and this investment costs less than that. After school treat start prioritizing their financial education and future today with a risk free [e-mail] Spotify greenlight.com Spotify hey guys, it's Ceedee Lamb, wide receiver for the Dallas Cowboys. I'm partnering with Abercrombie this season to tell you all about their viral denim. All you need to know is denim should fit like this. My jeans need to check a lot of boxes fit first, trend second. They need to go with whatever I'm feeling and Abercrombie Denim has it down whether I'm throwing on a tee or putting a whole fit together. Shop Abercrombie Denim in the app, online and in store Luckin is arriving in the US At a tough time for Starbucks. Starbucks, of course, achieved ubiquity in the US by bringing premium coffee to the masses. But it wasn't just about what was in your cup. Starbucks appeal also had to do with its vibe. Starbucks pitched itself as a place to settle down in a comfy chair, to read, work or chat with friends. What we're selling as a company is much more than a cup of coffee. Here's Starbucks then, CEO Howard Schultz. I think coffee is a great conduit to conversation and social interaction. And we have tried to build our stores in a way that invites people not only to take the coffee to go, but to stay. But lately, the vibes at Starbucks have been a little off. One major pain point has been mobile ordering. Mobile orders are a crucial part of Starbucks business. More than 30% of its pickup orders are placed digitally.

[Hannah Meow]

But also mobile ordering can get quite messy at Starbucks because the workers in the cafes are trying to manage the in person orders and also mobile pickup orders and potentially also drive through orders. So there's just a lot going on. The former CEO Howard Schultz described as potentially like a mosh pit at some points when all the mobile orders come in.

[Andie Minoff]

Starbucks also offers customers a lot of options to customize their drinks, which can lead to longer wait times.

[Hannah Meow]

You can do like caramel Frappuccino, low ice foam, you know, dairy free milk. You know, there's just a lot of factors and when the workers are kind of trying to do all that customization while also taking orders from people inside the cafe, it can create this jam of a situation.

[Andie Minoff]

And even as the customer experience at Starbucks has gotten worse, those drinks are still relatively pricey.

[Hannah Meow]

Starbucks is trying to maintain that higher pricing for the premium customer. And this can create issues for customers when they feel like, you know, this cup of coffee is costing six to eight dollars. What is the premium experience in that?

[Andie Minoff]

And what has all of this meant for Starbucks bottom line?

[Hannah Meow]

It's been a bit of a rough period for Starbucks. It's reported several consecutive quarters of same store sales declines. They poached the CEO of Chipotle and put in a new CEO to try to turn around the business.

[Andie Minoff]

That new CEO Brian Niccol wants to go back to basics. He's focused on bringing back that classic coffeehouse vibe. And he's planning to shutter dozens of Starbucks locations that only handle mobile pickup orders. On an earnings call on Tuesday, he called those mobile only stores, quote, overly transactional and lacking the warmth and human connection that defines our brand. It does sound like kind of a lot of the things that Starbucks has struggled with are strengths for Luckin. I mean, Luckin has figured out mobile ordering. Luckin embraces the grab and go model. Is that in their favor?

[Hannah Meow]

I think it can be a big strength here if you have Starbucks customers who are wanting more of that quick, efficient, low cost experience. And so we'll kind of see how it plays out. I mean, what we've known about the US Economy for some time now is that it's the higher end customers, higher income segments of the population that continue to spend and power the economy. So that could be an advantage for Starbucks model with more of the premium pricing. But you do also have lots of people who are sick of paying so much money for everyday things. So that could play in Luckin's favor as well.

[Andie Minoff]

In a statement, Starbucks said that the company is doubling down on what customers love. Quote, a warm and welcoming coffeehouse with high quality beverages crafted by a skilled barista.

[Hannah Meow]

So it seems like they're trying to draw that contrast with some of the strategy that Luckin is employing. And the size of Starbucks in the US cannot be overstated. It's huge. It's 17,000 stores nationwide. So Luckin with its two stores is really just cracking into the US market.

[Andie Minoff]

So they're not shaking in their boots yet.

[Hannah Meow]

I don't think they're concerned that Luckin is gonna overnight overtake them in this market. I mean, it's, it's Starbucks home market. They've been here forever. But I don't think they would count Luckin out. I mean, Luckin again was this plucky startup in China when it first started and within years it beat Starbucks in China. So there is something to be said about Luckin's ability to really rapidly grab market share.

[Andie Minoff]

And is that Luckin's plan in the US to rapidly grab market share? What has Luckin said about that?

[Hannah Meow]

It hasn't said much about its overall plans, but there are some clues. So when Luckin launched its first two stores, they did post on Instagram saying that this is just the beginning. So we can expect to see more in New York, in the US and also in the stores themselves. They have a store number in each store in the corner of the counter. And it doesn't just say one or two. It says 00001 and 00002. So that could be a hint. That could be a hint that Luckin is looking to open more stores and fill up all those zeros in the US.

[Andie Minoff]

This morning on an earnings call, Luckin called the opening of its first two US Stores a significant milestone. It said the company is taking a disciplined and deliberate approach to the US market. That's all for today. Wednesday, July 30 the Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in today's episode by Heather Haddon. Thanks for listening. See you tomorrow.