- Luckin Coffee is planning its overseas reboot in Singapore
- It plans to open 10 stores by the end of April, adding to its 8,000+ stores in China
- Experts believe it will face stiff competition, but could drive Singapore’s coffee industry forward
IT HAS been nearly three years since Luckin Coffee settled charges of fraud and accounting irregularities. The Chinese coffee chain, which had boldly laid out its aim to overtake its main rival Starbucks, came close to imploding in December 2020 after it was found to have fabricated sales to deceive investors.
Yet in spite of a tarnished reputation and a $180 million hole in its finances, Luckin was clearly not going to disappear forever. Its Nasdaq listing may have been a disaster, but in China it continued to thrive. It operates over 8,400 outlets across the country (some 2,000 more than Starbucks) and between 2021 and 2022 saw a return to profit, as annual revenue jumped by 54% to $1.9 billion.
Now, it has set its sights once again on international expansion, this time in Singapore. The company announced last week that it would build on its two-store “trial” in the country by opening ten stores by the end of April. Luckin CEO, Guo Jinyi, who took over from Charles Lu shortly after the accounting scandal was revealed, said the brand would “inject new vitality” into the Singaporean coffee shop market.
According to Bero Coffee Singapore’s head of specialty, Fadhly Effandi, Luckin’s choice of Singapore as its overseas debut is a sensible one.
“Singapore is one of the leading coffee-consuming markets in the region,” he says. “Unlike our neighbours, who are mostly both coffee producing and consuming countries, there is a far more exponential increase of coffee consumption year on year – a factor that attracts coffee companies like Luckin to set up operations.”
Singapore: An evolving coffee market
Although Luckin’s doomed venture in the US must still sting, its new strategy for overseas growth has an air of positivity around it.
Singapore, which is traditionally a tea-drinking nation, has seen its coffee industry flourish in the last few years. Between 2021 and 2022, coffee consumption grew nearly 6% to 95,000 60kg bags, with growth driven by a combination of international and domestic brands, such as Huggs Coffee.
For Luckin, the time appears to be ripe, as a growing cohort of coffee consumers look for new places to top up their caffeine levels. Fadhly believes it could also help shape the future of Singapore’s coffee culture and trends.
“In a fast-paced urban environment like Singapore, Luckin’s adaptation of online and cashless platforms, and using premium coffees further embodies Singaporeans’ need for convenience and quality,” he explains. “Luckin embraces the available and readily accessible technology to push the coffee culture in Singapore towards a more digital front.”
Unlike the US, Singapore and China have maintained a long-standing and close relationship, which is likely to bolster the chances that Luckin’s move is a success. A recent survey by the Pew Research Centre found that a majority of Singaporeans prefer stronger economic ties with China over the US, while 64% expressed a favourable view of China in general.
However, not everyone believes Luckin’s second attempt at overseas expansion will be as seamless as the company probably hopes. Joel Lee, who worked as managing director of a Singaporean specialty chain, says brand loyalty plays a strong role in Singapore’s coffee market – and Luckin will have to prove itself first.
“The coffee chain landscape in Singapore is actually quite saturated so Luckin will have to do more than just being a cookie-cutter chain to win the hearts of customers here,” he says.
“It will definitely put pressure on other players like Starbucks and Coffee Bean – but knowing how discerning the Singaporean audience can be, it will be a challenging entry with initial comments from the customers being quite negative.
“However, with Luckin’s massive backing, I’m sure they will power through. Singapore is probably just a strategic starting point for their expansion to Southeast Asia.”
This view is shared by Fadhly, who adds that while Luckin is unlikely to experience anything close to its failed US operation, it will still have to work hard to carve out a lucrative space. If it does, however, it will almost certainly help transform Singapore into Southeast Asia’s coffee hub – much like Dubai for the Middle East.
“The coffee market in the US is very different from Asia,” he says. “But the downside of Luckin’s expansion is the fierce competition they face with multiple companies that have adopted similar concepts. In other words, the piece of the pie tends to get smaller.
“That said, I prefer to see it as a glass half full situation – it forces companies to produce new creative ideas and concepts to set themselves apart from their peers and, in turn, drive the coffee culture and scene further forward.”