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Luckin Coffee’s Very Heavy Discount Is Unsustainable, Says Starbucks CEO

Starbucks is undoubtedly one of the biggest beverage based organization in the world and is known for its quality globally. It has a huge presence in China as well with the motive to have 6000 stores in the country by the end of 2000. It is set to face stiff competition from their direct rival, Luckin Coffee, in China though. The CEO of Starbucks, Kevin Johnson believes that their rival’s way of growth in the market is through deals and discounts which are not sustainable in the long run. They may see gains initially but the consistency will be challenged soon. On the other hand, Starbucks intends to have a more balanced and sustainable growth which can survive for a longer period of time.

The main business strategy for Luckin Coffee is majorly by providing convenient pick-ups and otherworldly discounts. Recently, the company even filed for an IPO in Nasdaq, as they plan to go partly public. This plan is also based on the assurance that they will continue their policies for heavy discounts. The competition with Starbucks has definitely heatened up as it announced that it is going to open more stores in the country.

Starbucks opened the first store in China almost 20 years back and intends to add more in 2019 as a part of the ultimate mission of 6000 stores by 2022. On the other hand, Luckin Coffee has already opened 2370 stores within 18 months of its existence and plans to add 2500 more by 2019.

Though Starbucks was successful in crossing the estimates in the quarter, it failed to meet the expectations of Wall Street though. In order to answer the competition, Starbucks added a delivery option in 2100 stores while collaborating with Alibaba and intends to introduce mobile pay and order by the end of 2019 as well. Since a return is guaranteed against investment, their plan is definitely going to last longer than their rivals, Starbucks believes.

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