Local Café giants of China are preparing an American expansion

Chinese drinking channels redefine the cultivation of coffee in the country-and now they are trying to win customers in the United States and beyond.

Luckin Coffee, the largest Chinese coffee chain, has developed aggressively in China and exceeded Starbucks on the continent, with more than twice as many points of sale.

Following an accounting fraud scandal which forced the Nasdaq -based company in 2020, Luckin organized an improbable return with original flavors and steep discounts – as low as $ 1.40 per cup during a war of previous prices with a Cotti Rival coffee.

Wall Street’s debacle did not alleviate Luckin’s ambitions in the United States, where it is still negotiating over the counter. After venturing into Singapore, Hong Kong and Malaysia, Luckin should take his biggest jump to this day with plans to open a branch in the Lower Manhattan.

The movement reflects Cotti, which has just opened outlets in Brooklyn and Manhattan. Founded in 2022 by former Luckin leaders who were ousted on the scandal, Cotti also grew up quickly in China and abroad, with stores in places ranging from Southeast Asia to Dubai and California.

“New York is probably culturally the best test field for an international brand to develop, in particular a Chinese,” said Danilo Gargiulo, principal analyst of Bernstein, citing the diversity of the city and the large base of young consumers. “But it is also the most saturated, one of the most competitive markets.”

Chinese channels combine budgetary prices with unusual flavors that often blur the border between coffee and bubble tea – shaking in purists but extremely popular at home. Luckin said his alcohol -infused latte developed with the main manufacturer of Moutai alcohols in China, sold more than 5.4 million cups on his first day in 2023, generating more than $ 13.7 million in sales. The company launched 119 different articles in 2024 only.

Luckin has developed its activities around technology, allowing customers in China to order and obtain deliveries via the omnipresent WeChat application of the country, replacing the traditional coffee experience by hyper efficiency. The company also manages major roasting operations and transformation of coffee beans in China to help reduce costs.

The question is whether it will work in America.

Luckin and Cotti did not respond to requests for CNBC comments. During a call for results in April, the co-founder of Luckin, Guo Jinyi, said that the company planned “to adopt flexible and tailor-made models” to develop regularly abroad. The slowdown in growth and intense competition in China have prompted companies to seek opportunities beyond its borders.

From electric car manufacturers to food delivery platforms, large -scale Chinese companies often follow a familiar strategy: burn money, grasp the market share, worry about profits later. This helps them grow quickly, but can exasperate world competitors.

In the latest sign of growing competition in China, Starbucks said on Monday that it would drop the prices of dozens of drinks in the country on average of $ 0.70 this summer.

In New York, Cotti sells drinks for 99 cents to new customers who download its application. Over time, analysts believe that Luckin and Cotti will always be cheaper than Starbucks in the United States, but the gap will be narrower than in China.

Manhattan can share the love of major Chinese cities for efficiency, but companies are faced with New York salaries and may need to accept additional payment options, adding to costs, said Allison Malmsten, Chinese strategy director at Daxue Consulting. Prices on Chinese companies can further erode their advantages of the supply chain, she added.

“There is a long list of things that could potentially increase the price,” said Malmsten.

If Luckin’s beginnings in New York are successful, the company could venture further. Heytea – A Chinese channel known to garnish its teas with foamy cream cheese – landing in New York at the end of 2023 and has since spread to Boston, Seattle and Los Angeles.

Despite the tensions between Washington and Beijing, generation Z and young Americans tend to perceive China differently from older generations, which can associate Chinese products with a lower quality, according to Malmsten. Chinese channel negotiation coffee could also appeal to New Yorkers faced upwards all, grocery products with coffee beans.

However, cafes flowing on thinner margins need volume, according to analysts. This means attractive a wider range of customers.

“If it is perceived as being only a tourist or exotic adventure, then it will not be part of your daily consumption, it will not be part of your morning routine,” said Gargiulo de Bernstein.