The article was originally published in Chinese by Xu Zhang, translated into English by the MW team.
China’s Luckin Coffee has started to expand globally – with launches in Singapore expected over the coming weeks. Currently, the company is making headlines for opening stores in high-traffic areas, including Ngee Ann City on Orchard Road, Marina Square and Tanjong Pagar’s Guoco Tower.
Anyone who has passed by these locations in Singapore recently would have seen the stores under renovation:
According to local Chinese media, Luckin plans to open a total of 10 stores by the end of April.
Reemerged from the fraud allegations
Luckin shares were delisted almost three years ago for financial fraud. Now the company has reemerged, restructured its debt, and settled its charges with the Securities and Exchange Commission US$167 million.
According to their latest financial results released on March 2, total net revenue totaled US$1.93 billion in FY2022, making the first annual profit. It opened 2190 stores in 2022 and now has a total of 8214 stores – more than Starbucks, which counts about 6000 stores in China.
Seeking new growth, it is foreseeable that Luckin will try to expand overseas. Like many overseas Chinese retail and beverage brands, Luckin has chosen Singapore, despite prior rumors that the company would enter markets such as the Middle East first.
Singapore’s crowded cafe market
Singapore has a rich coffee culture and its cafe market is crowded. It boasts several major players including Starbucks, Coffee Bean, Joe & Dough, Huggs (which interestingly uses Ant Group’s ordering and payment system), Dimbulah, Jamaica Blue, Zus Coffee from Malaysia, PPP Coffee, Tanamera from Indonesia, Dal.komm from Korea, and many others.
Tomoro Coffee, a coffee chain established by J&T Express, has plans to open 50 stores in Singapore this year, while there have been reports about Canada’s Tim Hortons entering the market as well.
And if you look at them closely, there are some obvious differences among the customer base, as well as across different localities of Singapore – something we have previously noted in our Bubble Tea in Southeast Asia report.
Not to mention the abundance of chains offering local style coffee in Singapore such as Fun Toast, Toast box, Yakun, Wang, and Malaysian Oldtown White Coffee (which offers similar flavors). Also, there are numerous food courts with coffee stalls priced below US$1.5.
Our colleague once asked a particularly busy hawker coffee maker how many cups he makes per day – and he said: “just over 800 cups”.
We have also looked at Flash Coffee, which some people in China are calling a copycat of Luckin. Well, we think that if you just observe at one of their outlets for a couple of hours, you will be able to draw your own conclusion.
In short, Singapore’s cafe market is quite different from China’s – the condition of the massive amount of new coffee drinks that propelled Luckin’s growth does not exist in Singapore.
This can be seen in the selections of retail locations and consumer preferences – for example, it is difficult for new coffee brands to secure locations in office buildings (most have already been taken by one or two established brands).
However, there are some unique advantages and benefits Luckin will be able to leverage for its Singapore expansion. For one, there is a significant mainland Chinese population in Singapore, the younger of whom are already very familiar with Luckin. Looking at the comments on social media, people are excited about Luckin’s entry into the market.
Secondly, Xiaohongshu, a Chinese social media platform, has become popular among many young people in Singapore in recent years, and the acceptance of Chinese tea and beverage brands has increased significantly.
Finally, there are many investors who either live in Singapore or pass by several times a year, so there is enough exposure to capital.
A number of Chinese ‘new tea’ brands – from Hey Tea and Nayuki to Mixue and CHAGEE – have already opened stores in Singapore. There should be a lot of knowledge and experience about the local retail market, cost structure and operational details that Luckin can easily tap into.
Will Luckin succeed in Singapore?
We think Luckin, with the right positioning and right product/operational focus, can stir some ripples in the market. One of our friends, who is a veteran in the same market, once said:
“In the end the market will consolidate, Starbucks and few other global players on top tier, and others at the bottom.”
We will see which end of the market Luckin will settle at.