China’s Luckin Coffee opens first high-end store as it takes on Starbucks

China’s Luckin Coffee is taking direct aim at Starbucks’ high-end roastery chain with a new flagship store in the country’s south that sells premium drinks.

It’s Luckin’s first major departure from its original strategy of operating budget-priced coffee kiosks — a move that helped the company overtake Starbucks in terms of the number of storefronts in China.

Now, with the US company selling off most of its struggling China business to a local investment firm, Luckin is proving it’s more than made a comeback from fraud allegations in 2020 that forced it to delist from the Nasdaq.

The Chinese company on Sunday officially opened its two-floor Luckin Coffee Origin Flagship in Shenzhen on the border with Hong Kong.

In contrast to Luckin’s typical offerings priced at roughly $US1 or $US2 ($1.40 to $2.80) for an Americano or latte, the flagship store has nudged prices slightly higher for a range of pour-over and cold brew coffee drinks. Customers can choose beans from Brazil, Ethiopia or China’s Yunnan province, as Luckin taps into the geographical sourcing “origin” theme popular with Starbucks and other coffee companies.

The new store also sells several specialty drinks such as a “tiramisu latte” with a pastry on top, according to posts on Chinese social media platform Xiaohongshu. Users have started posting about one to three hour waits for the drinks since the store’s soft launch on January 20.

The 420sqm store signals how intense the competition in China has become for Starbucks. Back in 2017, the US-based coffee giant chose Shanghai for its second-ever Reserve Roastery “megastore”, after launching the premium store concept in Seattle three years earlier.

But as coffee has taken off in China, traditionally a tea-drinking market, Starbucks has run into a slew of competitors from boutique cafes to chains such as Cotti Coffee and Manner — which often sell drinks at half the price as Starbucks.

Luckin reported revenue of $US1.55 billion for the three months ended September 30, 2025, a nearly 48 per cent increase from a year earlier.

That’s just for the company’s self-operated stores, which account for well over half of Luckin’s China locations and most of its handful of overseas stores. The new Shenzhen location is billed as Luckin’s 30,000th store. The company reported a total of 29,214 stores worldwide as at September 30.

In contrast, Starbucks has just over 8000 stores in China and around 16,900 in the US, its biggest market.

The Seattle-based coffee giant reported a 6 per cent year-on-year increase in China net revenue to $US831.6 million for the three months ended Sepember. 28. Comparable same-store sales, a standard industry metric, was just 2 per cent, but improved to 7 per cent for the quarter ended December 28.

Starbucks did not share China net revenue for the latest quarter. The company expects to close a deal in the spring to sell 60 per cent of its China business to Boyu Capital, while retaining a 40 per cent stake. When the deal was announced in November, Starbucks said it values its China business at $US13b, including future licensing fees.

Luckin, whose shares still trade over-the-counter in the US, had a market value of around $US10.46b.

Re-listing and expansion plans

Late last year, Luckin’s chief executive Jinyi Guo hinted at plans to re-list the company in the US. He did not specify a date. Founded in late 2017, the company achieved a $US2.9b valuation just 18 months later and listed on the Nasdaq in May 2019. But about a year later, Luckin said it discovered much of its 2019 sales were fabricated, leading to the stock’s delisting.

The Chinese coffee company continued to operate many of its stores — and kept its name and logo.

Luckin also jumped to attract consumers through a slew of timely collaborations — with premium spirits brand Moutai, the Minions cartoon characters and the hit video game Black Myth: Wukong just days after it surged in popularity.

What sets Luckin apart has been its ability to build a robust pool of private user traffic through its smartphone ordering app, said Mingchao Xiao, founder of Zhimeng Trends Consulting. Rather than placing orders with a counter clerk, Luckin customers select and pay for drinks directly through an app.

China’s coffee market is still in a period of rapid change, Xiao said. He added that young consumers today are more willing to try different experiences, and seek emotional fulfillment, which can be met through cross-industry brand collaborations.

Like many Chinese companies, Luckin is also ramping up its global expansion.

Last summer, Luckin opened its first US stores in New York City. It debuted its 10th store in the city on February 6.

Luckin also has 68 stores in Singapore after it entered the market nearly three years ago, and 45 jointly operated locations in Malaysia.

CNBC