BlackRock leads $150m round in China’s Luckin Coffee
Chinese coffee shop chain Luckin Coffee has raised $150 million in an extended Series B round at a valuation of $2.9 billion. It was led by BlackRock, which committed $125 million to the deal.
The investment comes only three months after Luckin's Series B, which saw $200 million raised from three existing investors - GIC Private, Centurium Capital, Joy Capital - and new entrant China International Capital Corporation. At that point, the company was said to be worth $2.2 billion.
Luckin started operations as recently as January 2018, but within six months it had secured $200 million in Series A funding. Centurium, a GP established by ex-Warburg Pincus China head David Li, led the round and contributed $100 million.
The company is reportedly seeking a US listing, which could take place as early as May, according to Reuters.
Luckin's expansion plan is based on 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 an 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 company grew from 525 stores in 13 cities in May to 2,073 in 22 cities as of December. It expects to open more than 2,500 outlets by the end of 2019 and also overtake Starbucks, currently the largest coffee shop chain in China, in terms of daily volume. Luckin's ultimate ambition is to become an “expandable, shelf-less Seven Eleven.”
It has previously accused Starbucks of indulging in monopolistic practices by signing exclusive rental contracts and putting pressure on industry suppliers.
Market observers have expressed concern about Luckin's rapid expansion, questioning how long it can sustain the substantial losses incurred in the battle to build market share.
According to Jiemian, a Chinese financial news portal, Luckin sold 85 million cups of coffee in 2018 and its revenue for the first nine months of the year reached RMB375 million. But new store openings and discount offers weigh heavily on the bottom line.
When the net loss for the first nine months was reported to be RMB857 million, Luckin freely admitted the actual number was “way larger.” The company stressed that it was not in a rush to turn profitable and would continue with its aggressive expansion for the next three to five years.
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