Luckin Coffee Stages Remarkable Comeback, Overtakes Starbucks In China

Luckin Coffee LKNCY, the Chinese coffee chain, has made a remarkable recovery after a major accounting scandal in 2020. The company has not only survived but has also emerged as a fierce competitor to Starbucks Corporation SBUX.

What Happened: Luckin Coffee, once considered China’s answer to Starbucks, has made a surprising comeback, reported Bloomberg on Thursday. The company’s low-cost lattes have attracted a growing customer base, propelling it to become China’s largest coffee retailer, surpassing Starbucks.

Despite the scandal, Luckin has managed to expand its business to over 18,500 stores, doubling from the previous year. The company has also ventured into smaller cities, where Starbucks has yet to establish a presence. Luckin’s focus on automation, digitization, and cashless, takeout kiosk counters has been key to its success.

Moreover, Luckin’s recent growth has been driven by its expansion into the vast hinterland, where it has developed drinks tailored to local tastes. The company’s shares, which plummeted following the scandal, have risen more than 12 times from their lows, although they are still 63% lower than their 2020 highs on Nasdaq.

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Why It Matters: The recent growth of Luckin Coffee has been significant. In January 2023, the company was reported to be making a strong comeback, less than three years after a major accounting scandal nearly led to its collapse. The company’s business was booming, with shares still trading over-the-counter in New York as it aggressively opened new shops in its home China market.

Despite the scandal, Luckin’s OTC shares have seen a significant recovery. The company’s stock has risen more than 12 times from its lows, although it is still 63% lower than its 2020 highs on Nasdaq.

Price Action: On Thursday, Luckin Coffee OTC shares closed 0.1% lower at $18.34. On the same day Starbucks shares ended the regular session 0.4% higher at $81.47, according to Benzinga Pro data.

Photo Courtesy: Tada Images On Shutterstock.com

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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal