Luckin Coffee is already giving Starbucks a run for its money in China. Now, it’s hoping to take the fight for coffee drinkers to a new international market.
The Chinese coffee giant opened two new stores in Kuala Lumpur, Malaysia’s capital city, on Thursday. It’s Luckin’s second international market after Singapore.
Luckin is entering Malaysia through a franchise deal with local company Hextar Industries. Three more stores are slated to open by the end of the month, followed by a further 200 stores over the next few years.
The chain is expected to copy its successful China playbook of promotions and steep discounts in Malaysia. To commemorate the launch, Luckin priced its beverages as low as 2.99 Malaysian ringgit ($0.67). A Starbucks Americano costs about 11 ringgit ($2.50).
Luckin’s turnaround and expansion
Luckin’s international forays are further proof that the Chinese coffee chain is turning the corner from its accounting scandal a half-decade ago.
The Chinese coffee brand was kicked off the Nasdaq exchange in 2020 after admitting it had inflated sales by over $300 million.
Luckin continued to expand despite that, and had more outlets than Starbucks in China by 2022. The chain’s revenue overtook Starbucks’ Chinese revenue by the following year. Luckin also started its overseas expansion in 2023 with its first Singapore outlet; it now has 45 stores in the city-state, according to its latest quarterly filing.
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The chain reportedly plans to continue its expansion in Southeast Asia and even to launch in the U.S., aiming for cities with large Chinese student and tourist populations like New York. Luckin has acknowledged that it’s “actively evaluating opportunities in the United States and other markets.”
Yet Luckin concedes any international business is not likely to be profitable in the near term. Its Singapore business has not earned a profit in the first nine months of 2024.
Luckin’s Singapore revenue hit 91.4 million yuan ($12.6 million) over this period, but expenses were almost double, totaling 167.7 million yuan ($23.2 million). The company said its international business “will need to reach significant scale” before it can achieve profits.
Luckin earned 2.1 billion yuan ($289 million) in net income for the first nine months of 2024.
Starbucks’ international woes
Starbucks reported $784 million in China revenue for the quarter ended September 2024, a 7% decline year on year. The U.S. coffee chain is fighting a tough battle against domestic chains like Luckin, Manner Coffee, and Cotti Coffee, a new chain set up by Luckin’s founders.
Yet Starbucks is also struggling in Malaysia owing to its status as a U.S. brand. Consumers are boycotting the brand because of perceptions that it is pro-Israel. Berjaya Food, which operates the country’s Starbucks franchise, has suffered several straight quarters of pretax losses. Revenue dropped 50% year on year in the third quarter of 2024.
The U.S. coffee chain has fervently denied any connections to Israel and the Israeli government, on the part of the company itself and former CEO Howard Schultz. Starbucks has not had a presence in Israel since 2003.
