LUCKIN Coffee Inc. became China’s dominant coffee chain last year, outpacing the nation’s previous leader Starbucks Corp. in annual sales for the first time.

The Xiamen-based company posted quarterly net revenue of 7.06 billion yuan (US$980 million), representing an increase of 91% from a year ago in a growing and increasingly competitive China market. Net income rose over four times year on year to 296.4 million yuan in the same period.

The latest revenue number in the three months through December brings Luckin’s total sales in 2023 to 24.86 billion yuan, surpassing Starbucks’ comparable annual sales of US$3.16 billion in China, making it the biggest coffee chain in the Asian nation.

Luckin’s earnings include revenue from its still small overseas operations, including 30 stores that opened in Singapore last year, currently Luckin’s only international market.

The rapid rise of Luckin comes as price-sensitive Chinese are increasingly opting for value products. Luckin sells coffee for as little as 9.9 yuan a cup while most Starbucks coffee is priced at more than 30 yuan. Luckin is currently locked in a price war with rival operator Cotti Coffee, with both chains consistently seeking to undercut prices.

Luckin, founded in 2017, looks for rapid expansion across the country to overtake Starbucks and fend off competition from local rivals. More than 8,000 new store opened last year, with over 16,200 stores located in China by the end of 2023, according to its earnings statement released Friday. Starbucks has expanded at a relatively modest pace, with a China store count of nearly 7,000 through December.

Luckin’s expansion is only part of the explosive outlet growth in China, which also sees local players such as Cotti Coffee opening thousands of stores in a short time frame.

China has the most branded coffee shops globally with nearly 50,000 outlets, overtaking the United States after a boom over the past year, according to a report from the World Coffee Portal in December, the Allegra Group’s research arm. (SD-Agencies)