In just one month in 2023, Chinese coffee giant Luckin opened nearly 500 stores in mainland China, demonstrating explosive growth at the outset of the new lunar year.
According to the statistics of new stores added by Luckin Coffee’s WeChat public account, Luckin Coffee added a total of 478 new stores throughout the country in January 2023. By contrast, in the first quarter of fiscal 2023 (October 2022 to December 2022), it opened only 69 stores in China and entered 10 new cities.
Currently, Luckin Coffee is branching out its business from large cities such as Beijing, Shanghai, Hangzhou, Guangzhou and Shenzhen to remote cities in Hebei, Fujian and Xuzhou provinces. On January 30, 2023, Luckin Coffee released the first round of its new retail partner recruitment plans for the year, with this round of recruitment covering 80 cities in 15 provinces across the country. Among these new sites, 33 lower-tier cities were added, including Qinzhou, Jiamusi, Songyuan, Baotou, Tongliao, Panzhihua, Xishuangbanna, Pu’er, and Sanmenxia.
China’s “sinking market”, otherwise known as small Chinese cities (third-tier and below) and rural areas, comprises 70% of the Chinese population. At present, these lower-tier cities are becoming bigger, richer, and more eager to spend. In fact, China economist experts such as Robin Xing expect lower-tier cities to surge from 2.3 trillion USD in 2017 to 6.9 trillion USD in 2030.
As the dragon of rural consumption awakens in China, Luckin, however, is not the only cafe chain eyeing China’s “sinking market”. High-profile brands and coffee contenders such as Starbucks are going all in with their own expansion plans as they seek promising new growth in China’s lower-tier cities.
With the coffee battle now moving into China’s lower-tier cities, only time will tell how Luckin’s ambitious expansion plan will pan out compared to its competition.
