Luckin’s Business Model: A Disruptive Innovation? (part 2)

In China, some market conditions are different. A low number of coffee shops compared to the population, especially in large towns, and the boost in coffee consumption (at two-digits) in particular out of home.

The hot coffee delivery is, therefore, a new opportunity to satisfy the large coffee demand.

At the moment, there is no available data to see if the delivery system will be appreciated by customers, the fact is that the giant coffee chain Starbucks is also moving towards signing a partnership with Alibaba, China’s largest online retailer, to launch delivery services in September. The new deal will see Starbucks integrate a “virtual store” in online shopping and payment apps.
The hot coffee delivery model, launched by the Chinese company Luckin, is fueling the debate among operators: May this new model change coffee habits?

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Luckin and the Hot Coffee Delivery Model (part 1)

As explained by Qian Zhiya, Luckin Coffee founds its business model starting from some weak points of coffee shops in China: high prices and lack of presence. “In western countries, the price of a cup of coffee consists of only 1/1,000 of people’s monthly income. In contrast, it is almost 1/100 for people living in China”. “Also, the number of coffee shops in the mainland is very limited. As opposed to Taiwan, where the population of 23.5 million enjoys over 5,000 CITY CAFE shops (a brand launched by 7-Eleven), there are only 300 Starbucks stores in Beijing, a city populated with 29 million people”. Find out more about Luckin.

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Focus on: The German Market for Professional Coffee Machines

Germany is the largest market in Europe for professional coffee machines. The demand for machines continues to increase thanks to new investments and the opening of new activities (e.g. coffee shops, bakeries serving coffee and coffee corners). In 2016, sales grew by 3.8% and are expected to increase by 4% on average in the next three years. [Sign in to continue]

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European Coffee Market Sales Increase in 2016

Preliminary results on the European coffee markets show that the consumption in EU28 increased by 6.4% in quantity in the twelve months ending November 2016.

The CoffeeBi analysis highlights that this result is due to the overall increase in coffee sales in the second part of 2016. In the first six months, consumption in EU28 stood at +1% (compared to 1st semester 2015).[Sign in to continue]

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Korea: The Coffee Republic

Everyone, I suppose, knows the song “Gangnam style” the K-pop single by the South Korean rapper Psy that on December 2012 became the first YouTube video to reach one billion views. Well, this song satirized “a classy girl who know how to enjoy the freedom of a cup of coffee”. In these words, all what is going on in South Korea: Coffee has become a powerful indicator of class status symbol. Moreover, coffee is the number one beverage in the country (53% of the total drink market) and has even surpassed the demand for “kimchi”, South Korea’s national dish (according to a study by the International Business Times).

On average, the study showed, South Koreans drink coffee 12.2 times per week; they eat “kimchi”, a mix of fermented vegetables that has been a part of the Korean diet since the 1500s, 11.9 times per week and white rice only 6.9 times per week. To drink a fresh bean coffee is not always cheap. In Seoul, a “cup of Joe (COJ)” is more expensive than in the U.S. (about $3.80 against $2.25 on average).[Sign in to continue]

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