Here’s how Starbucks and Luckin fare in terms of price, menu and atmosphere.

• Luckin Coffee, which has put up a strong fight against Starbucks in Asia, is looking to the US.
• The Chinese coffee brand, known for its deep discounts, recorded a strong third quarter.
• Analysts say Luckin is a force to be reckoned with.

Luckin Coffee does waging a mighty battle against Starbucks in Asia. Now it plans to bring that rivalry to the US.

Here’s where things stand: Starbucks is trying to pull itself out of its rut. In the quarter ended September 29, Starbucks reported a 7% decline in sales globally. In China, the company’s revenue fell 14% compared to the same period last year, to $783.7 million.

In August, it appointed Brian Niccol as its new CEO. Niccol said his plan Reversing the coffee chain involves faster ordering, adding a human touch to the ordering process and positioning the brand’s points of sale as ‘third spaces’.

Luckin reported a strong third quarter. Revenue increased 41.4% year over year and quarterly revenue was $1.452 billion. The chain is known for its aggressive deals, unusual flavors like a Big Cheese coffee drink and mobile ordering.

Both brands are well established in Singapore, with multiple outlets in the city-state’s Central Business District. On a recent weekday around lunchtime, I stopped at both a Luckin and a Starbucks to see how they compared in price, menu options and atmosphere.

Luckin vs. Starbucks

I started at Luckin Coffee.

When I walked in, I saw people at the takeaway counter waiting for their drinks. Others sat at tables drinking coffee.

But most customers seemed to be in a hurry, ready to grab their drinks and go.

To order a menu item from Luckin, customers must download the brand’s app and place their order digitally. Employees at the counter do not take orders.

The app was easy to use, although I did get numerous pop-ups for coupons. Since I was a new user, every drink was on the menu was half as much for me.

The most expensive drink on the menu was an Iced Oat Shakerato, listed at 8 Singapore dollars, or $6. With the discount it cost me SG$4.

There were at least five orders waiting for me to pick up. Still, my drink was ready within five minutes and I was able to pick it up as soon as I scanned the QR code on my app. I didn’t have to talk to a single person during the entire process.

Then I walked about 30 yards to the nearest Starbucks, which had a large seating area. Some people in business attire attended lunch meetings there, while others hung out on their laptops.

The barista was friendly when I asked about the most expensive drink on their menu. It turned out to be one of their seasonal holiday drinks.

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I chose the Salted Pretzel Cocoa Oatmilk Latte, which came to SG$10.20.

Unlike Luckin, there was no one in line. I was out with my coffee in three minutes, a drink the size of an air vent topped with crushed pretzels, a little faster than Luckin’s.

Overall, Starbucks’ most expensive drink was more expensive than Luckin’s. Luckin had more customers, so the wait time was a little longer than Starbucks.

The battle for coffee dominance

Luckin Coffee was founded in Beijing in October 2017. In 2021, it filed for bankruptcy in the US after the consequences of a accounting fraud scandalrevealing that it had faked nearly half of its 2019 revenue of approximately $732 million.

Today it has 21,343 stores worldwide.

Luckin launched its first international stores in Singapore in March 2023, and the city-state now has more than 40 outlets. Now it is looking to the US market for expansion opportunities.

“We are also actively evaluating opportunities in the United States and other markets,” Luckin wrote in its third-quarter earnings report.

Representatives for Luckin Coffee did not respond to a request for comment from BI for this story.

Starbucks has 40,199 points of sale worldwide – almost twice as many as Luckin. Of these, 7,596 stores are in China, an increase compared to 6,806 a year ago.

When asked for comment, a Starbucks representative in China referred to comments made by Niccol and the brand’s chief financial officer, Rachel Ruggeri, in their Q4 numbers.

In the call, Ruggeri said sales in China were “under pressure due to increased competition and a soft macro environment that impacted consumer spending.”

Luckin isn’t Starbucks’ only increasing competition in the US. It also struggles with names like Dutch Bros. and 7 Brew.

“There are concerns about speed of service and operational complexity, and new menu innovation is lacking,” RJ Hottovy, head of analytics at Placer.ai, told BI about Starbucks.

“The decline in visits at Starbucks also comes at a time when other coffee and beverage chains are seeing increases in visits year over year, reinforcing the failure of new product innovations to connect with consumers,” he added.

Analysts say Starbucks should be concerned about Luckin Coffee

Luckin’s pricing and focus on technology give the company an edge over Starbucks, consumer analysts say.

David Yu, an NYU finance professor, told BI Luckin “all about technology.” By comparison, he said Starbucks’ use of technology, such as ordering through its app, is “pretty weak.”

Yaling Jiang, a Chinese consumer research expert behind the newsletter “Following the Yuan,” published an article Monday about Starbucks’ performance in China. In it, Jiang said Starbucks has consistently failed to “meet Chinese consumers’ changing perception of product price.”

Nirgunan Tiruchelvam, a consumer and equity analyst at Aletheia Capital in Singapore, told BI that he thinks Luckin “has an edge over Starbucks right now” because of its novelty.

However, he said Luckin may still be in an uphill battle in the US.

“Luckin Coffee’s plans in the US may not go as smoothly as you might expect because the US is a very complex market, where Starbucks is much better entrenched than in Asia,” Tiruchelvam said.

He said it is also cheaper to set up outlets in Asian markets than in the US.

“The cost of expansion, in terms of the cost of rolling out a point of sale versus the payback period, is actually much more challenging in the US than in Asia,” Tiruchelvam added.

Yu echoed these sentiments, saying aggressive discounting is not a sustainable approach for Luckin.

“I always say that discounting is never a good long-term strategy. It can be used effectively for short-term purposes,” he said.

However, Starbucks’ increasingly expensive price tag has created an “opening” for Luckin, Yu said.

“So I think this is good timing for Luckin’s perspective if they are willing to aggressively discount and lower prices to acquire customers,” Yu added.