Investors in Luckin Coffee, a Beijing-based company that hopes to topple Starbucks, have grounds for celebration today. Luckin started trading on the Nasdaq, where it opened at $25 a share, well above the company’s IPO price of $17. Shares have since settled around $22.
The 19-month-old company is valued at roughly $4 billion, even though it is far from making a profit. Chinese coffee consumption is expected to balloon to 15.5 billion cups by 2023, from 8.7 billion in 2019, according to Luckin’s IPO filing; the company sees plenty of room for growth.
Luckin’s main offering is its smartphone app, which lets customers purchase coffee for delivery or pickup at nearby locations and gives the company crucial data on regional tastes. (Starbucks’ delivery service only launched in September.) Luckin is also undercutting Starbucks on price: Its coffee sells for for about $3.50 a cup—compared with about $4.80 at Starbucks—and a range of deals incentivize Luckin customers to buy in bulk and refer their friends.
Those advantages have helped Luckin grow from nine stores at the end of 2017 to more than 2,000 today. The company intends to open another 2,500 locations by the end of the year—roughly one store every three-and-a-half hours. Starbucks currently has 3,600 locations in China, but plans to double that by 2022.
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