China's Luckin Coffee to enter Malaysian market with local partner ...

Chinese coffee chain Luckin Coffee Inc is poised to make its debut in Malaysia, local media The Edge reported on Thursday.

Quoting sources, The Edge reported that Luckin Coffee will be roping in a Malaysia-listed company as its local partner with an ambitious stores expansion plan in the next five years. TNGlobal has reached out to Luckin Coffee for comments.

Luckin Coffee’s entry comes at a time when Malaysians are seeing a rising number of local and international coffee chain brands and outlets in the country. Both local and international coffee brands are competing for a larger market share as US brand Starbucks faces ongoing boycott amid the Israel-Gaza war. In China, Luckin Coffee’s home market, the expansion into Malaysia also comes amid a price war in China’s coffee industry which decimated its profit margin.

In September last year, Indonesian coffee chain unicorn Kopi Kenangan told Tech in Asia that it has opened 14 outlets in Malaysia. Its CEO Edward Tirnata said in an earlier interview with DealStreetAsia that he expected to open 25 stores in Malaysia by July and 50 by end of 2023. The coffee chain was launched in Malaysia in 2022. Kopi Kenangan counts Tybourne Capital Management, Hong Kong tycoon Li Ka-shing’s Horizons Ventures, Kunlun, B Capital, Falcon Edge Capital among its backers.

Up-and-coming, Luckin Coffee-inspired Malaysian brand ZUS Coffee is also aggressively expanding its businesses. By the end of 2023, ZUS Coffee would have reached a total of 360 locations in Malaysia, with plans to open 250 more in 2024, ZUS Coffee chief operating officer (COO) Venon Tian told The Star in an interview published in January.

ZUS Coffee’s expansion plan also followed the announcement that Choi Garden restaurant group, led by Filipino billionaire Frank Lao, had acquired a 35 percent stake in the company.

Last month, Luckin Coffee reported its first quarterly loss in two years, with a RMB 83.2 million ($11.5 million) net loss, versus RMB 564.8 million in profit a year prior. The Chinese coffee chain posted a negative operating margin of 1 percent in the first quarter this year as the escalation of a price war in China’s coffee industry dragged the company down despite its 41.5 percent revenue growth compared to the same period in 2023.

Luckin saw a 68.8 percent increase in its total operating expenses, with the company attributing the growth to its “business expansion,” including the opening of new stores and investments in branding and promotional activities. Rival Starbucks meanwhile recorded a decline of 11 percent in comparable store sales in China during the period, Technode.com reported.

Founded in 2017 and headquartered in Xiamen, Luckin Coffee operates 18,590 stores worldwide, excluding unmanned machines, as at March 31 this year, the report added.

Luckin Coffee has 32 stores in Singapore, its only international market, earlier reports showed.

Featured photo credits: Luckin Coffee’s website

Luckin Coffee records first quarterly loss in two years, negative operating margin