E76 – The Impulso Podcast – Starbucks vs Luckin in China, who is winning?

Both Starbucks and Luckin Coffee recently unveiled their Q1 2024 earnings, eliciting varied market responses.

In China, Starbucks faced a challenging quarter with comparable store sales declining by 11%, attributed to an 8% drop in average ticket sales. Meanwhile, Luckin has stayed committed to rapid expansion, opening over 2,000 stores in Q1, albeit at a slower pace than usual. Who is winning in China’s competitive coffee scene?

Tune in as we delve into the latest results of these two coffee giants, the evolving landscape of coffee consumption in China, and examine the competitive dynamics between traditional giants and agile disruptors in the digital age.

Check out the full episode here:

Also available on Spotify and Apple Podcast.

Featured materials:
Coffee in Southeast Asia, Momentum Works
Sip, Innovate, Repeat: Immersive Workshop, Momentum Works
E63: How does Luckin Coffee open 1000 new stores every month?!, The Impulso Podcast
E65: Will health labels reduce bubble tea consumption?
The Luckin x Moutai partnership that sold 5 mil cups of coffee in one day, ThelowDown

[AI-generated transcript] 

[00:00:00] Sabrina

Hello, everyone, and welcome to Episode 76 of the Imposal Podcast by Momentum Works. So today we’re going to actually be talking about Starbucks and Luckin Coffee because both of them recently released their financials for Q1 2024. And coffee is an industry that we look at a lot, right? And because of this, we’ve actually launched a coffee report, and we also have our SIP Innovate repeat immersion, which is a coffee immersion. So we thought that we would do a short little podcast today and we’re filming it as well So we thought we’d do a short little podcast today just to talk about the latest earnings and results 

 

[00:00:37] Jianggan

And to make sure that people know about Sabrina’s passion for drinks.

She has a cup of bubble tea 

 

[00:00:44] Sabrina

Yes, I was going to buy coffee, but I decided I didn’t need coffee today 

 

[00:00:48] Jianggan

How many cups of bubble tea do you consume each day now? 

 

[00:00:50] Sabrina

One a day. 

 

[00:00:51] Jianggan

One a day. 

 

[00:00:51] Sabrina

Maximum. 

 

[00:00:51] Jianggan

Maximum. 

 

[00:00:52] Sabrina

Yeah. So, Minimum is zero. 

 

[00:00:53] Jianggan

At the beginning of the year, she had a target of maximum 

once a week. Yeah. Okay. 

 

[00:00:58] Sabrina

So, Didn’t work out. 

 

[00:00:58] Jianggan

Did you get, like, daily vouchers from Koi or whatever? 

 

[00:01:01] Sabrina

No. Oh, you know I downloaded the Koi app like a month ago. I spent almost 200 there. Let’s not talk about that. 

So on 30th of April, both Starbucks and Luckin Coffee actually released their 24 Q1 earnings and you can see that the market actually responded quite differently, right?

 

[00:01:19] Jianggan

So we actually charted the performance of both companies in the stock market for the last year, I think. Yeah. So. Of course Luckin is still recovering from their fraud is still in the pink sheet market. It’s over the counter. But I think over the past year, people, I mean, investors have responded quite negatively to Starbucks performance and prospects.

So that has something to do with the consumption power, with the inflation, et cetera, et cetera. And I think Luckin seems to be going a wild ride in terms of performance. But of course I think we can look at actual numbers to see where they are actually focusing on. 

 

[00:01:54] Sabrina

So looking in more detail, I think like you said, Starbucks has been having a difficult time and they actually acknowledged it themselves in their latest earnings call. So their CEO Laxman Narasimhan actually mentioned that it was a difficult quarter, but despite this they remain committed to their disciplined approach to capital allocation as they navigate this complex and dynamic environment and they also specifically called out China Where in China their comparable store sales actually declined by 11% And they credited this to eight percent decline in average ticket So we know that starbucks is having a pretty difficult quarter past few quarters, right?

But of course starbucks is a big company They’re a company that’s been through a lot since they were started in How many years ago? 

 

[00:02:41] Jianggan

1970s? Yeah, 

 

[00:02:43] Sabrina

1970s. So, of course, they also have a strategy, right? They are not going to give up so easily. And they’ve actually introduced this new growth strategy called the triple shot reinvention with two pumps.

 

[00:02:54] Jianggan

So, obviously, any big company, I think Starbucks has like we’ll go through that in a bit more than 38, 000 stores across the world. So it’s a fairly large organization. And you do need some simple strategy and values to communicate to your entire team, your investors, as well as the outside world.

So we’re not going to detail about the triple shot reinvention with two pumps, but we just felt that the names are quite apt for the coffee industry. 

 

[00:03:17] Sabrina

Yes. If you’re curious, I think they talk about it more in their past few earnings calls. So you guys can check those out. 

 

[00:03:22] Jianggan

I think what’s interesting here is the decline in China, they attributed most of the sort of performance declination to the decline of average ticket, which means that I think the consumers are spending less per order or per drink or whatever , at Starbucks. So. 

 

[00:03:38] Sabrina

I think this could be because there’s a lot of cheaper coffee options in China, right?

There’s, I mean, Luckin coffee is one. There’s also Cotti coffee. 

 

[00:03:47] Jianggan:

I’ve been going to China like almost every month, actually every month this year to different cities. So what I do realize is that in some of the smaller cities, you go to Starbucks, it’s actually packed.

Lots of people and people still see this And I mean, in small cities you don’t have many Starbucks, right? I mean, I went to my hometown, a small city of only like 800, 000 people. So there are like five Starbucks. I think each was packed and you do see the delivery riders coming in and out all the time.

So they are pretty busy. But we go to like bigger cities. We go to places like Shanghai, Beijing, Shenzhen, where there are a lot more Starbucks. And some of them look actually pretty empty to me. But on the side, you do see lots of competition. You have Luckin almost everywhere.

Sometimes you have like three Luckin stores in the same mall, and you do have Cotti .

 

[00:04:32] Sabrina

You have Cotti, which almost everywhere you see a Luckin, you might see a Cotti. 

 

[00:04:35] Jianggan

Yes. They have 7,000 or 8,000 stores. So, which means that they have been pretty aggressive in store opening and they have been using a strategy of, okay, you see a Luckin there? there must be a location that Luckin has done some calculations. So I, I might as well open a store. Next to it. So all of this, I mean, there’s Manner, there’s like Peace, et cetera, et cetera. There are lots of players and many of these players are actually pricing themselves actually cheaper than Starbucks.

 

[00:04:59] Sabrina

KFC as well, right? They have a K Coffee. 

 

[00:05:03] Jianggan

I actually kind of like K Coffee because You know you know in China, sometimes you travel right? I mean you go to weird places You take high speed train in the morning and you meet friends. I mean It’s actually not that unexpected if you meet a friend or business contact at 11 p. m for a meeting And what’s the only place that’s open kfc? 

 

[00:05:19] Sabrina

Are you drinking coffee at 11 p. m? 

 

[00:05:23] Jianggan

I am pretty okay with drinking like double espresso at night 

but that’s the only place which is open And especially in the morning, if you want to have a decent breakfast, I mean, that’s the only place to go.

 

[00:05:33] Sabrina

Makes sense. 

 

[00:05:33] Jianggan

Yeah. And besides the coffee’s really cheap. 

 

[00:05:35] Sabrina

Yes. 

It’s less than 9.9 year 

 

[00:05:37] Jianggan

sometimes. Yeah. 

 

[00:05:38] Sabrina

So moving Luckin, we saw that since last year. 

 

[00:05:42] Jianggan

Yeah. Yeah. For the past year

 

[00:05:43] Sabrina

seems to have double store count. So in Q1, they opened about 2,300 stores. Yep. And Q4. In Q4, they opened almost a thousand stores a day.

So we did a podcast about this. Earlier this year when Luckin’s Q4 results were out. 

 

[00:05:59] Jianggan

So they have the capabilities of opening about 1, 000 stores a month and Q1 is expected to be a bit slower because of two reasons, right? First, February’s shorter month and second that you have the whole week of holiday in China’s New Year.

So it’s natural to expect them to be a little bit slower in Q1, but still I think they have maintained a high speed of store opening. One question related to that and people might ask is that, okay, you open so many stores, I mean, do the stores actually make money? And this is something that we’ll discuss in a bit.

I think software stores are pretty cool, right? I mean, this is the 

 

[00:06:35] Sabrina

They’re trying out a new concept. So I think we’ve talked about this quite a lot. Luckin did a collaboration with Maotai last year. 

 

[00:06:42] Jianggan

Last year.

 

[00:06:43] Sabrina

Around mid last year. 

 

[00:06:45] Jianggan

Yeah, so they sold like 5 million cups, 5. 24 million cups a day. 

 

[00:06:49] Sabrina

Yes, and it created a lot of buzz in China, especially on their social media.

And of course, they’ve actually teamed up and opened up a themed multi Luckin store, which looks quite nice. 

 

[00:06:59] Jianggan

Yeah, they’re pretty good at cross marketing with different brands. 

 

[00:07:04] Sabrina

And so of course, like we said, they’ve expanded so rapidly, right? But how profitable are their stores actually? So we broke down a couple of numbers.

 

[00:07:11] Jianggan

This is revenue not profit Revenue. 

 

[00:07:14] Sabrina

Yes So we broke down a couple of numbers based on the number of stores starbucks and Luckin has globally as well as more specifically in China So in China starbucks has about 7 000 stores Whereas Luckin has more than 18 000. So it’s more than double of starbucks 

 

[00:07:30] Jianggan

I remember a few years ago, I asked some executive of Starbucks that, I mean, how many stores do you think China would eventually hold for Starbucks?

And he said eventually probably 15, 000. And I asked him, I mean, what’s time horizon for that? He said 10 years. Starbucks is a company which actually plans for the very long term. They have made a plan. And I vaguely remember in that discussion he said there are two ways to grow Starbucks store count.

First is that there are many, like, small cities where you can have enough people who are affluent and that can support, like, two or three Starbucks stores. And many of the cities, you don’t have Starbucks yet. So that’s, and there are, like, Hundreds of that kind of cities in China. And the second is that I mean in large cities They believe that there are still pockets where they can increase But obviously Luckin took a different approach, right?

Thet’re expanding quite aggressively. 

 

[00:08:22] Sabrina

So interesting and we also look at the revenue in China, so revenue per store in China so also for Starbucks is about 99, 000 US dollars and of course And for Luckin, it’s about 46, 000. So we can see that the revenue for Luckin is still not at the level of Starbucks. But this could be for a variety of reasons, right?

 

[00:08:42] Jianggan

I mean, the price is different. Have you been to 

a Luckin store in China? It’s like most of the stores are bare minimum, right? You have a bar and you have somebody. sitting behind, not even a barista, it’s like a production line worker who’s press the buttons and hands you a drink. So Starbucks is more elaborate, you have people who greet you, and you have a very nice seating area, et cetera, et cetera, and you have the coffee smell, which you don’t necessarily find at Luckin.

 

[00:09:07] Sabrina

And I think Luckin’s cost of operations, because of the way their stores are formatted, is probably much lower than Starbucks as well, right? Compared to the number of baristas that Starbucks needs to have, Luckin just needs. One, two, two staff, maybe, for a small store. 

 

[00:09:21] Jianggan

I think they have done a calculation for the stores that they calculate, I mean, how many cups of drinks they can sell per half an hour, and they use that to allocate how many staff they need to have at a particular store.

I think this is a different philosophy compared to Starbucks. I think we have discussed about that a lot. You can find a lot of literature on our blog, yeah. 

 

[00:09:41] Sabrina

So, another thing that we look at when we look at coffee, which was in our coffee report that you guys can check out is this frappuccino index, right?

So, Jianggan, do you want to explain a bit about what this frappuccino index is? Okay 

 

[00:09:51] Jianggan

we use that to measure a couple of things. First is the consumption power in different cities across the world. And the second is the penetration of international brands. So we used the price of

 

[00:10:01] Sabrina

Caramel Frappuccino.

 

[00:10:01] Jianggan

Caramel Frappuccino. Do you drink that? 

 

[00:10:02] Sabrina

Yes, that’s the only thing I drink. 

 

[00:10:04] Jianggan

That’s the only thing you drink? 

 

[00:10:05] Sabrina

Yeah, yeah, yeah. That’s what I drink. Cause you can find it everywhere. 

 

[00:10:08] Jianggan

From Starbucks? Yeah. Okay, do you like it? 

 

[00:10:10] Sabrina

Yeah, of course I drink it like once a week. I should like it.

 

[00:10:13] Jianggan

Is it a C drink or a D drink? 

 

[00:10:15] Sabrina

I’m pretty sure it’s a D drink. 

 

[00:10:16] Jianggan

I mean C or D is the Singapore Nutri Grade which 

 

[00:10:19] Sabrina

Grades how much sugar and fat Levels. 

 

[00:10:22] Jianggan

Saturated fat. Yeah. Yeah. So most of the drinks that people actually like are probably C and D because of the sugar and fat But anyway, we use this to evaluate, I mean, the two things I mentioned about just now, right, the first is is the consumption power, and the second is the penetration of international brands in a local market. So, we used the New York City number as the baseline, and you can see that the closer each city is to New York City and the better penetrated international brands are in that city, as well as, I mean, the better consumption power of the population there, I mean, of the average population there compared to the New York City.

So we have one city in China in this chart, which is Shanghai. If you just look at this number per se, I mean the methodology you can find in the coffee in Southeast Asia report that we have if you look at it, Shanghai is pretty similar to Singapore and pretty similar to Paris. So, but when you look at GDP per capita, I mean Singapore residents are generally much more affluent compared to residents in Shanghai.

So, which means a couple of things. I mean, first is that, I think even in Shanghai, where things are pretty expensive, I mean, it’s the, like, biggest industrialized city in China Starbucks is still relatively premium. So I know people around us who work for, like, you know, MNCs, who are entrepreneurs themselves, they, they generally have a bigger consumption power, but it doesn’t necessarily represent, like, every single resident of Shanghai.

And the second is that I mean, Shanghai’s GDP per capita is almost three times. the national average of China. So which means that I mean across the nation people who can afford Starbucks regularly will probably not be that much. So there was also a saying from the former prime minister Li Keqiang, who unfortunately passed away last year.

He said that in China there are 600 million people who live on about 1, 000 yuan. That’s like 100, 30, I don’t know, 40. Paycheck per, 

 

[00:12:13] Sabrina

per week? Per month. 

 

[00:12:14] Jianggan

Per month. Yeah, so which shocked like almost everyone that I know. Because, because obviously all the people we know that they, I mean, they’re either affluent or they live in big cities.

And consumption power is very different compared to the national average. So which is probably the reason why Starbucks which sells their drinks at about 30 Yuan per cup has a limit of how many stores they can open versus Luckin, which sells things at much cheaper. 

 

[00:12:39] Sabrina

Do you think that’s why we see Luckin being able to expand so quickly as compared to Starbucks?

Because their drinks, not just Luckin, but of course like Cotti coffee and all the newer coffee stores as well, right? Cause they’re just generally a lot more affordable to your general consumers across China. 

 

[00:12:53] Jianggan

Absolutely, absolutely. So they’re generally more affordable, but that’s not the only factor, right?

And the other factor is that they need to be able to operate efficiently because I mean, managing like tens of thousands of stores and most of them are self operated. It’s not easy. . 

 

[00:13:07] Sabrina

So, and I think it’s interesting because we’ve mentioned this a couple of times before that China isn’t really a big coffee drinking country, right?

There isn’t a huge coffee drinking culture in China. It’s mostly tea and sweet flavored drinks. 

 

[00:13:26] Jianggan

I think so for instance, my mom is in Singapore at the moment. She drinks tea every day. I mean, every morning, the first thing she does is that, I mean, , I went to Hangzhou last week, , somebody gave me this bucket of of fresh green tea just picked like this year and my mom drinks that every day. And you add anything else to the drink, she says it’s too much. It’s either too sweet or too creamy or whatever. She likes tea pure. But I think young people like sweet stuff. 

 

[00:13:54] Sabrina

I think young people, and that’s why you see so many, I mean, there’s so many bubble tea stores.

 

[00:13:57] Jianggan

There’s so many bubble tea stores in China. 

 

[00:13:59] Sabrina

So I think another thing that a lot of these coffee companies look at when trying to grow their revenue and all as well as product innovation, right? So 

 

[00:14:07] Jianggan

we’re quite surprised to see that you know, earnings call of Starbucks, the CEO mentioned that they are launching pearls, the first of more texture innovations.

And of course, I mean, for any agent here.

 

[00:14:18] Sabrina

You know, that pearls are basically like tapioca flour balls that are in your bubble tea. So they get, they have a very like chewy texture. 

 

[00:14:25] Jianggan

Do you like it? . 

 

[00:14:26] Sabrina

Actually I don’t drink pearls. 

 

[00:14:27] Jianggan

There’s no pearls. Okay. 

 

[00:14:28] Sabrina

Yeah. . 

I don’t like it ’cause I don’t like to chew.

Like when I’m drinking things, 

 

[00:14:34] Jianggan

she’s just too lazy. 

 

[00:14:35] Sabrina

Yeah. But it’s something that they mentioned that they would be introducing. They actually mentioned in their earnings call that this is something they’re going to introduce this summer. To test out like different textures. But when I did some Googling, I actually found that in the US they’ve released this sort of coffee popping pearls, so it’s not pearls in the traditional like asian bubble tea sense where it’s like tapioca But it’s more I think it’s more like a coffee jelly. So once you bite into it, it bursts in your mouth 

 

[00:15:04] Jianggan

With the what? Coffee flavor. 

 

[00:15:07] Sabrina

Coffee flavor. And of course, I mean, they also mentioned in their earnings call that one of their Lavender series did really, really well, was one of their most successful launches.

I don’t think this launched in Singapore. I’m not sure where they launched. Maybe only the US. 

 

[00:15:19] Jianggan

But I think since they mentioned that in the earnings call, they are probably taking this very seriously. I think Starbucks actually invests quite a bit in R& D. The difference between Starbucks and Luckin in this regard is, I mean, traditionally, Starbucks does like seasonal drinks, right?

I mean, every couple of months it has new things coming out. Some of them are actually something you look forward to because of the season, some of them are new. 

Yes. But when you look at Luckin they do have a systematic methodology and sufficient consumer data to allow them to launch new products on a constant basis.

 

[00:15:50] Sabrina

Yes, I’m not sure if we mentioned this before, but the way Luckin actually decides how to make a new drink is very interesting, right? Cause they don’t really look at qualitative data. They look at a very quantitative data. So for flavor profiles and their drinks, they number them and that’s how they get, that’s how they determine what are the types of drinks that people like.

 

[00:16:10] Jianggan

So it’s like a druid or a chemist. You just put like different things, different portions into a soup and eventually decide what soup tastes nice and you just serve the people. Yeah. Just to know enough. 

 

[00:16:20] Sabrina

And I mean it works for them, they released 22 SKUs in just Q1 alone. 

 

[00:16:24] Jianggan

Which again says that Q1 is a, is a, is a slow month, right?

Because I think last year or the year before they launched like 1, 013 SKUs in the whole year. So Q1 is still, I think, relatively slow month. And when we look at the things they have launched, they have orange americano, a specific kind of orange latte 

 

[00:16:43] Sabrina

Cherry blossom latte? 

 

[00:16:44] Jianggan

Cherry blossom latte. Sakura latte. Okay, that’s fun. And a special kind of tea from Huangshan mountain Etc. So that lots of like, you know different concepts that they’re testing.

 

[00:16:56] Sabrina

Yes, and another thing that when we’re talking about product innovation, right? Another thing we Jianggan also saw when he was in China is do you want to describe this?

I’m, sorry for people listening on the podcast. You can’t see but we are looking at boxes of capsule coffees that Luckin actually sells in 

 

[00:17:12] Jianggan

supermarkets and you can buy it on e commerce. And I was asking my cousin about this. He said he buys from Luckin because this is the most recognizable brand nowadays.

And I said, 

 

[00:17:23] Sabrina

At the supermarket. 

 

[00:17:24] Jianggan

No, I mean in general. Oh, in general. My cousin doesn’t go to the supermarket. He buys everything in ecommerce. 

So I’m the the boring one who actually went to the supermarket and check out. I mean what’s on the shelf so you do have different types of coffee with Luckin brand and obviously manufactured with different factories across different parts of the country, But yeah, so they do leverage their brand and they do leverage the supply chain to actually Expand their production line to other channels rather than their physical stores 

 

[00:17:57] Sabrina

Did you see other coffee companies doing this?

So like

 

[00:18:00] Jianggan

Everyone does that 

 

[00:18:01] Sabrina

Cotti coffee? Manner Coffee

 

[00:18:02] Jianggan

I haven’t seen Cotti or Manner, but I have seen Tim’s, Tim Hortons Starbucks does that, obviously you see that in Singapore, right? And I think I’ve seen some other smaller, Seesaw Coffee I think has that as well, which is one of the venture funded brands.

So yeah, so I think, I don’t think it’s that uncommon, yeah. 

 

[00:18:19] Sabrina

It’s quite common. 

 

[00:18:19] Jianggan

But it’s just Luckin does that at a scale. 

 

[00:18:22] Sabrina

Cause I think one thing about Luckin is that because everything goes through their app, right? 

Yeah. They have data on what sells and what doesn’t sell. So 

 

[00:18:29] Jianggan

You don’t need app data to show that what sells.

But this, but 

 

[00:18:34] Sabrina

But it makes it easier. 

 

[00:18:35] Jianggan

No, but the app data shows that exactly who is buying what. 

 

[00:18:38] Sabrina

Yes. So they showed that they have, I mean, of course we know their coconut milk latte is their bestseller. They sold 700 million cups in the past three years. 

 

[00:18:49] Jianggan

My God, that’s how much plastic that is. 

 

[00:18:51] Sabrina

Yeah, there’s this like C or D rating, by the way.

I also checked just now. 

 

[00:18:56] Jianggan

so actually two weeks ago there was this article in China saying that, Oh lacking. That is coconut latte, which is the best selling product in China, is collapsing in Singapore because it’s labelled D. But, I mean, whoever wrote the article, you can go and check out what Coca Cola is labelled.

The orange juices, I think it’s D as well. I think most of the drinks that people actually do like are C or D. I think we’ll talk about that specifically. 

 

[00:19:24] Sabrina

Yes, we had a podcast about this as well. Cause I think it’s something Chagee in China, Shanghai is doing. But the one that amused me the most about this is actually the orange Americano.

Because, okay, this is the number one drink that I recommend to anyone. When they are trying Luckin. I’ve never tried it, by the way. 

 

[00:19:40] Jianggan

You’ve never tried it? 

 

[00:19:40] Sabrina

Not the Luckin one. 

 

[00:19:41] Jianggan

But you have tried the

 

[00:19:42] Sabrina

I’ve tried it from other stores, but not Luckin. But I just, I always recommend this.

 

[00:19:45] Jianggan

Do you like it? I haven’t decided.

 

[00:19:48] Sabrina

You haven’t decided? 

It’s a weird, it’s an interesting thing. I feel like it’s an acquired taste. I haven’t acquired the taste. 

 

[00:19:53] Jianggan

But apparently people like it. 

 

[00:19:54] Sabrina

So they sold a hundred million cups in one year. Which is now my answer for every time when I recommend this to someone and they ask me who is drinking orange americano.

I will tell them they sold a hundred million cups in one year. 

 

[00:20:08] Jianggan

I think I was speaking with my sister in law over the weekend and she was saying that she actually loves orange Americano because it’s just this combination of like the sweet taste and a bit of like orange, like citrus flavor plus a little bit, I mean, you can hardly feel it kind of like coffee, right?

 So yeah, I mean, at the end of the day, we are all biased, right? Quite often we see something which is new. We said, okay, who drink that shit? But of course at the end of the day, I mean, data tells, so for these guys, if it sells, it sells. If it doesn’t sell, they will stop it, so. 

 

[00:20:38] Sabrina

They can just discontinue it.

 

[00:20:40] Jianggan

Doesn’t matter, right? 

 

[00:20:42] Sabrina

So speaking of the Luckin app, one interesting metric that I think we found from Luckin’s past reports is that they actually report their average monthly transacting customers, which is not really a metric we see used by F& B players often, right? It’s more often used by tech companies.

 

[00:20:57] Jianggan

I think it’s still debatable whether Luckin is an F& B player or an e commerce company with a physical, physical storefront. And because the cost structure that they try to minimize the rent, they try to minimize the people on the front line, they try to minimize. The city area, et cetera, et cetera.

 So it feels more like, I mean, a company which has a digital touchpoint with the customers and a storefront is the fulfillment, like logistics for e commerce. 

 

[00:21:21] Sabrina

That’s true, because you can’t even order at their storefront, you can only order through the app.

 

[00:21:25] Jianggan

Yeah. So of course they sacrifice, no they don’t sacrifice but they lose some customers that way.

But I think it’s something they choose to make sure that they’re extremely efficient. I think Starbucks is trying to catch up. 

 

[00:21:35] Sabrina

Yeah we see, Starbucks also added this new metric. So they call it the 90 day active Starbucks rewards members. But of course this number is just in the U S so the thing about Starbucks apps is that it’s not.

The same across different countries. So this is just the number they have for their US which is 32. 8 million 

 

[00:21:53] Jianggan

But I do think that as Luckin is expanding globally I think that now they have like 32 or 33 stores in Singapore and they are trying to expand to other markets They will face all these issues, right?

I mean the payment systems if I yeah, I think Starbucks the rewards is I think Starbucks, like the payment card is a store value card. Yeah. Which I think allows them to have one system, but globally you have the different sort of values in stores. Which is annoying because people will say that, okay, why would you have the extra, like step of topping up and spending. But I think for a company of this size with so much history, that is, that digitization will naturally not be as fast as Luckin, which is digital native. 

 

[00:22:34] Sabrina

That’s true. Because I mean, they started as traditional offline sourcers. Right. And now they’re trying to digitize. Whereas when Luckin started, they already knew that they wanted to be very app focused.

 

[00:22:44] Jianggan

Yeah. Digital transformation is drastic different compared to, I mean, digital native. Yeah. 

 

[00:22:48] Sabrina

And it’s very difficult. 

We have a report about that as well. 

 

[00:22:51] Jianggan

Oh my God, we have a report about everything. 

 

[00:22:53] Sabrina

So, but it’s interesting that this is a number that Starbucks is reporting as well, right? I think it really shows, like, their commitment, at least, that they want to let people know that they are trying to provide more touchpoints, not just offline, but online as well, just to make the experience, I guess, smoother?

 

[00:23:07] Jianggan

Yes, I think one thing they can do is probably have a better, like, full time tech team to actually ramp their app quite More regularly in a way because quite often, I mean, you have to go to Barista, Barista will tell you that, okay, for this app it doesn’t work, you have to do this, this, this, this, this, this, and this is an issue which could easily be fixed by tech, but I guess that either their tech team is not big enough or part of that is outsourced, I mean integrated with somebody else, so that’s why they can’t evolve so fast.

Somebody told me that Luckin in the early days at some point in time they had like 900 engineers. for a coffee company. 

 

[00:23:41] Sabrina

Luckin is a very interesting business model. 

 

[00:23:44] Jianggan

It is, it is. 

 

[00:23:44] Sabrina

Just from the way they start and all. 

 

[00:23:47] Jianggan

Alright. 

 

[00:23:47] Sabrina

So, thank you guys for tuning in to another episode of the Impulso podcast. We hope that you guys enjoyed today’s topic and that it was fun for everyone because it’s a more relatable topic, right?

Everybody likes coffee. So, if you did like this episode, do like our podcast and follow us on YouTube, Spotify, or Apple Podcasts. To stay up to date on the latest happenings and trends in tech, new retail, and the broader digital economy.