Chinese coffee shop chain Luckin gets $200m Series B

China International Capital Corporation came in as a new investor. The deal values the company at approximately $2.2 billion, according to a statement.

Luckin raised $200 million in Series A funding in July, with Centurium, a GP established by ex-Warburg Pincus China head David Li, leading the round and contributing $100 million. Joy Capital, GIC and Legend Capital also participated.

The young but ambitious coffee chain wants to challenge Starbucks, which is the clear leader in this space in China with over 3,300 stores and an 80% markets share in China, according to Euromonitor International. In an open letter published in May, Luckin accused the US coffee giant of indulging in monopolistic practices by signing exclusive rental contracts and putting pressure on industry suppliers.

The company hopes to gain market share through a combination of cheaper prices and technology. On average, it charges 30% less than Starbucks for a latte, while customers are encouraged to place orders via app and pay through Tencent Holdings-owned WeChat Pay or a native mobile wallet. Luckin also emphasizes delivery, with many of its outlets dedicated to fulfilling orders placed from outside.

The Series A funding went towards expansion. The company grew from 525 stores in 13 cities in May to 1,700 in 21 cities as of November. It expects to open more than 2,000 outlets by 2019 and also overtake Starbucks in terms of daily volume. The ultimate ambition is to become an "expandable, shelf-less Seven Eleven."

Luckin represents the first significant growth investment in Centurium's debut fund, which reached a first close of nearly $1 billion in June. The GP increased the hard cap from $1.5 billion to $1.98 billion in October. The PE firm is said to be negotiating with numerous potential strategic and financial investors on behalf of Luckin's management to help the company navigate capital markets and establish partnerships.

Luckin was founded by the former COO of Ucar, a chauffeured car service provider that Li invested in while at Warburg Pincus. Ucar was established by the same team as another Warburg Pincus portfolio company, China Auto Rental (CAR).

Specialist coffee shop chains generated sales of RMB22 billion ($3.4 billion) in China last year, and Euromonitor expects that figure to reach RMB28 billion by 2020. Other recent PE and VC investment activity in the space includes a $25 million Series B-plus round for Coffee Box, which started out as a delivery service for Starbucks. The round was led by Qiming Venture Partners.

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• Topics
• Greater China
• Consumer
• Expansion
• Centurium Capital
• Joy Capital
• CICC
• GIC Private
• China
• Growth capital