Lattes Replacing Tea in China?

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Founded only in 2017, fast-growing  Luckin Coffee ( LK is already China's #2 player, with 2,370 stores serving 4.4 million customers monthly. Luckin is on pace to surpass Starbucks to become the largest coffee chain in China by the end of the year. 

While tea and juice remain the non-alcoholic beverages of choice in China, according to Statista, Luckin believes its app-based, cashier-less pick up store model will win out for convenience over traditional coffee shops.

Here are three other things you need to know about Luckin Coffee.

1. The Chinese coffee market is $8 billion, which grew 31% in 2018 and is expected to grow at a 26% CAGR through 2023.

2. Luckin is heavily discounting its coffee as it rolls out stores, to attract and keep customers. Thus far, 54% of its customers return to repurchase more coffee. It sells an average of 3.7 items/customer/month, including three freshly brewed coffees.

3. While currently unprofitable due to discounting, Luckin believes that over time it can gain operating leverage due to the efficiency of its cashier-less, high turnover stores.

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The article Lattes Replacing Tea in China? originally appeared on IPO investment manager Renaissance Capital's web site renaissancecapital.com.

Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital's research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital's Renaissance IPO ETF (symbol: IPO) , Renaissance International ETF (symbol: IPOS) , or separately managed institutional accounts may have investments in securities of companies mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , IPOs
Referenced Symbols: LK

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