In China, Luckin Coffee competes in the mid-to-low end market and with that positioning it has successfully opened its 10,000th store in June surpassing Starbucks as the largest player in the market in terms of number of stores.
However, in overseas markets for example in Singapore, Luckin Coffee targets mid-to-high end market with some of its products priced higher than Starbucks’. Luckin Coffee is hoping to make Singapore its springboard to expanding in other Southeast Asian countries, a very important market for Luckin’s expansion.
According to the International Coffee Organization (ICO), total coffee consumption in Southeast Asia increased rapidly from 8.4 million bags (60 kg per bag) in 1990 to 19.5 million bags in 2012 with an estimated figure of 30 million bags in 2020. The per capita income growth in Southeast Asia is 8% per year with countries like Indonesia, Vietnam and the Philippines expected to double their incomes by 2030. The middle class group in Southeast Asia is also projected to contribute 67% of the region’s population by 2030.
Luckin is hoping to imitate Starbucks in its expansion strategy in Southeast Asia in which it emphasised on its high quality coffee in advertising and marketing activities and providing an elegant coffee store ambience, while at home the brand is just a normal-priced coffee. Eventually, it hopes to position itself as a mid-to-high end brand to the Singapore and the rest of Southeast Asia.
To ensure success, Luckin needs to focus on product differentiation in addition to improving its coffee taste. Not only that, Luckin must be prepared to face strong domestic competition not only from Starbucks but also from other established players like Kopi Kenangan, Fore Coffee, The Coffee House, Cafe Amazon, The Coffee Bean and McCafé amongst others.