Why Kopi Kenangan makes more sense than Luckin Coffee

This article was originally published on Momentum Works’s Chinese language blog hosted on WeChat, translated and adapted for TLD here. 

Just as Luckin Coffee is firing its CEO and COO, Kopi Kenangan in Indonesia announced a new founding round of US$109 million, led by Sequoia again.

Because of Covid-19 and PSBB, Kopi Kenangan’s business is certainly severely affected. The funding is a big confidence booster, even if it is not for the regional expansion expressed in the release, but to weather through this prolonged storm.

Currently Kopi Kenangan operates 324 stores in Indonesia, a quite significant cost base.

As we have explained in an earlier article (in Chinese – use Google Translate please), although many have regarded Kopi Kenangan as a Luckin clone, the two operate in very different markets with drastically different consumer habits and behaviour.

In Indonesia the love of kopi is profound, from the kopi susu (milk coffee) at street stalls to express roast in premium malls – people in all social classes drink coffee.

On the other hand, as a major producer of coffee, Indonesia has a full supply chain, while China mostly imports beans.

A large coffee chain can be quite profitable, even if nobody uses app to order their coffee. In Indonesia, unlike in China, you integrate into payment apps, not the other way around.

Many plantations have tried to build their own coffee chains – however many of these efforts are half hearted and lack significant investment. Often, owners seem to be pretty happy to keep the size boutique.

From seed round in 2018, Kopi Kengnan has been favoured by Sequoia in Series A and B rounds. With strong cash at hand, it can expand with much less pressure.

And it will sell more boba.