Matthew Brennan from China Channel joins us to discuss the coffee wars in China between the upstart, Luckin Coffee and Starbucks Cafe. We discuss the origins of the company and the strong management team led by Jenny Qian which brought the startup to its current stage. We discuss how Chinese consumers are now using Luckin Coffee and why they are different and poised to give Starbucks a ride of their lives in China. Last but not least, we discuss the coffee wars in China as part of the proxy war between Alibaba and Tencent and why it will likely to catapult Luckin Coffee outside China for regional expansion.

Here are the interesting show notes and links to the discussion (with time-stamps included):

  • Matthew Brennan, Co-founder of China Channel and host of China Tech Talk podcast (chinachannel.co, @mbrennanchina , Linkedin, Wechat:Yowdy-CQ) [0:18]
    • Since our last conversation, what have you been up to? [0:25]
    • How did TechCrunch Shenzhen go? [0:52]
    • I know that you have covered the scandal of Mafengwo with Boyuan and John in your podcast, what are your thoughts on fake reviews or user growth in China tech startups as a whole? [1:38]
  • Luckin Coffee vs Starbucks in China [3:39]
    • To begin with, what is the history behind Luckin Coffee as who founded the company? [4:03]
      • The management team led by Jenny Qian, CEO and former co-founder of UCAR, a ride-hailing service and a few veterans from UCAR.
    • What is the current mission and vision of Luckin Coffee? [5:31]
    • How does customers access Luckin Coffee, through their app or physical stores (also thru mini-program as mentioned by Matthew in the show)? [6:10]
    • What distinguishes Luckin Coffee from Starbucks? Where do you think that their competitive advantage is and how do they change the coffee landscape with retail and delivery? Luckin Coffee price it to one third of Starbucks coffee at the current moment and opening 50 stores per week and hopes to reach 2K stores as compared to 3.5K stores by Starbucks in China. [10:02] 
    • Who are now the investors behind Luckin Coffee other than Tencent? GIC, the sovereign wealth fund in Singapore. [14:27]
    • Is Starbucks really under threat by Luckin Coffee? How will they fend off against Luckin? [15:01]
    • Why the unit economics on coffee is better than bicycle sharing. [17:50]
    • Luckin Coffee going upstream against Starbucks given their new marketing messaging in their current stores. [18:59]
    • Starbucks has partnered with Alibaba, and Tencent has invested in Luckin Coffee, is this another showcase of proxy war between Alibaba and Tencent beyond retail and other areas? [20:01]
    • Does any startup who want to succeed in China need to take sides between Alibaba and Tencent given the current coffee, smart retail, ecommerce and logistics wars? [21:36]
    • Can Luckin Coffee’s model be exported to overseas to give Starbucks a real challenge outside China? Southeast Asia but Singapore will be the first port of call. [23:38]
  • Closing [25:10]

Producer’s note: This podcast is recorded in late Nov 2018, and hence you will not hear some of the latest updates on Luckin Cafe, including their recent fundraising round (source: SCMP). We should also point other sources such as Quartz and Technode which have done a fair deal of reporting on this China startup. 

Podcast Information:

The show is hosted by Bernard Leong (@bernardleong & weibo) and are sponsored by Ideal Workspace (Twitter, Facebook and LinkedIn) with their new Altizen Desk (Twitter, Facebook, Medium). Sound credits for the intro music: Taro Iwashiro, “The Beginning” from Red Cliff Soundtrack and this episode is edited by Carol Yin, and co-produced by Carol Yin and Bernard Leong.