International Financial System Wall Street is eyeing Beijing-based coffee chain Luckin Coffee to fuel technology-driven business in China.
According to an article published by Yahoo, analysts from Wall Street are seeing a huge return on investment with China’s second largest coffee chain. The company reached over 50 per cent in the trade back in May, which shows massive growth in the Chinese market.
Since Luckin Coffee’s debut in 2017, it already sold more than 110 million cups of coffee and opened almost 2,370 stores in China. Currently, the company has plans to double its physical stores and aim for the international market. Most of its stores are only ‘pick-up’ shops for convenience and close proximity to customers.
The almost ‘overnight success’ of the company can be traced to its tech-dependency strategy, using big data analytics to study customer’s behaviour. The company also uses a mobile phone application to engage customers and at the same time, drive the mass market.
According to Credit Suisse, the stock trade for the Luckin Coffee was raised to $18 last June 14, 2019.
In terms of numbers, analysts are yet to believe that this company is worth the investment. However, in 2018, there has been a huge downfall in the net sales of Luckin Coffee, with only $125.3 million on the record, while net loss was about $241.3 million.
A recent report shows that this number will likely change, now that the company is developing new strategies and business models.
China is one of the biggest untapped markets in terms of coffee. In Asia, Korea and Japan already have developed a coffee market, while China is far behind. This gives Luckin Coffee great potential for growth and expansion, which the analysts from Wall Street can see.
According to research done by Frost & Sullivan, per capita consumption of coffee in China can increase to 5.5 cups in 2023, from 1.6 cups in 2018.
