NEW YORK: Luckin Coffee, the ambitious startup that is challenging Starbucks in the race to dominate China’s growing coffee culture, filed for a US initial public offering.
The Beijing-based company applied to list American depositary shares on Nasdaq under the ticker LK. The coffee unicorn is said to plan to raise around US$300 million in the IPO, Bloomberg News reported in February.
Last week, Luckin raised US$150 million from BlackRock and other investors at a valuation of US$2.9 billion.
Luckin is spending millions of dollars a year opening outlets to unseat Starbucks as China’s top coffee company.
Since its inception in June 2017, Luckin has quickly expanded into 2,370 stores in 28 cities, with backing from investors including Singapore sovereign wealth fund GIC and China International Capital.
By the end of this year, Luckin aims to become the largest coffee network in China in terms of number of stores.
Starbucks, which entered China 20 years ago, has dominated the market with more than a 50% share in 2017.
The company has more than 3,700 outlets in the country and is also expanding at break-neck speed, opening a new store roughly every 15 hours. It’s aiming to have 6,000 sites in China by 2023.
China may become an increasingly important market for coffee retailers due to the country’s low per-capita consumption of the beverage and rising middle-class affluence, Bloomberg Intelligence analysts wrote in January.
Coffee consumption is estimated to grow by roughly 3% a year through 2023, according to Euromonitor.
Luckin, with a focus on convenience and affordability, is seeking to lure urban office workers who don’t need the big plush spaces offered by Starbucks.
Many customers are initially attracted to the coffee chain by its free vouchers, and the company plans to keep investing heavily in discounts and deals.
Luckin’s outlets are cashless and designed for fast pick-up as well as delivery, with an app that rushes out deliveries in about 18 minutes.
The company has a partnership with internet giant Tencent Holdings. Starbucks only launched delivery in August, under a partnership with Alibaba Group Holding.
Chasing the entrenched rival has been costly. Xiamen-based Luckin said it’s burning through US$130 million a year and may continue to see losses in the future.
The company reported a net loss of US$241.3 million for 2018, on total revenue of US$125.3 million.
Credit Suisse, Morgan Stanley, CICC, and Haitong International are the underwriters for the IPO.
Luckin plans to use proceeds for general corporate purposes, which may including store expansions.