Luckin Coffee to take on Starbucks in Hong Kong—will its strategy work?

The coffee market in mainland China is extremely competitive. Luckin Coffee is keeping afloat in this cut-throat environment and has become the leading coffee brand in the market while also expanding its business opportunities globally. This is despite an accounting scandal in 2020.  

The Chinese coffeehouse chain was established in Beijing back in 2017 and is now headquartered in Xiamen, Fujian Province. It is well-known for its various collaborations that have had an impact in China, including the viral success of the Moutai & Luckin partnership.

As of July 2024, Luckin Coffee has expanded to 20,000 stores. This achievement comes just 13 months after the company surpassed the milestone of 10,000 stores, demonstrating its rapid growth. In fact, nearly 10,000 new locations have opened in a single year.

Recently, the brand is planning to open six to seven new stores in Hong Kong, marking a step in its efforts to grow beyond its home market. One of its new locations will be in Tsim Sha Tsui situated right next to a Starbucks store, the other in Sheung Wan area is also in close proximity to Starbucks. In the mainland market, Luckin Coffee has surpassed Starbucks both in terms of sales and the number of stores,  posing a significant threat to the US coffee chain’s second largest market worldwide.

Will Luckin Coffee's ambitious expansion model sustain and thrive? To gain insights, Campaign consulted with branding experts throughout the region, seeking their perspectives on Luckin's current achievements and valuable recommendations for the next steps forward.

Martin Roll
Business and brand strategist
Author, Asian Brand Strategy

I believe that Luckin Coffee’s remarkable recovery from its accounting scandal to becoming the leading coffee brand in mainland China can be attributed to several critical factors. These include its Chinese origin, innovative business model, tech-driven operational efficiency, strategic pricing, and deep market localisation. 

Luckin embraced a digital-first approach, leveraging its proprietary mobile app to streamline operations, collect customer data, and personalise user experiences. This tech-driven efficiency allowed Luckin to manage inventory effectively, optimise store operations, and engage consumers through targeted promotions. This was an instant hit with Chinese consumers.

Unlike Starbucks, which has long positioned itself as a premium coffee experience, Luckin adopted a strategy of providing high-quality coffee at competitive prices. This resonated with cost-conscious, younger urban Chinese consumers who value quality but also seek affordability. 

Luckin rapidly expanded its footprint, particularly through smaller, kiosk-style outlets. These 'grab-and-go' locations capitalised on convenience and high-traffic areas, aligning with fast-paced urban lifestyles. 

Despite its reputational challenges during the scandal, Luckin demonstrated exceptional resilience by restructuring its leadership, rebuilding investor confidence, and focusing on operational excellence. This pivot not only stabilised the company but also laid a solid foundation for growth. 

Luckin Coffee’s global expansion

In Singapore, where the coffee culture blends global influences with strong local preferences, Luckin has positioned itself as an affordable, high-quality alternative in a competitive landscape. Its tech-enabled model and competitive pricing have resonated with younger, digitally savvy consumers. However, sustaining this momentum will require continuous innovation, such as introducing localised menu items and leveraging partnerships to increase visibility and customer loyalty in a crowded market.

The launch in Hong Kong underscores Luckin's boldness, but it also raises questions about differentiation and market fit. Hong Kong's consumers are accustomed to Starbucks' well-established brand and premium positioning, and they may perceive Luckin as a budget competitor rather than a direct substitute.

To succeed, Luckin must emphasise its unique value proposition—whether it's convenience, pricing, or innovative products—to carve out a distinct identity.

Furthermore, entering international markets exposes Luckin to complexities beyond consumer preferences. Regulatory frameworks, operational logistics, and supply chain dynamics vary significantly from China, requiring robust infrastructure and localised expertise.

For instance, Luckin’s reliance on technology must align with data privacy regulations in each market, while its supply chain strategy must adapt to ensure consistent quality at scale.

Additionally, Luckin faces the challenge of brand perception. While it has largely repaired its image in China, its international reputation remains tied to the legacy of its accounting scandal. Building trust in new markets will be crucial, and Luckin can achieve this through transparent operations, community engagement, and authentic storytelling that highlights its transformation journey.

As it scales, Luckin must also avoid the pitfalls of overexpansion, which could dilute its focus and strain resources. A measured, market-specific approach—supported by robust market research and a commitment to operational excellence—will be critical for sustaining growth.

Luckin’s bold strategy has proven effective in revitalising its domestic business, but international success will require a delicate balance of maintaining its core strengths while adapting to the nuances of each market. Each market presents unique challenges and opportunities that Luckin must navigate carefully.

If executed strategically, Luckin has the potential to establish itself as a formidable player in the global coffee industry.