[Reading level: C1 – Advanced]
Luckin Coffee filed for bankruptcy protection in the U.S. in 2021, but it took just a few years to recover and even dethrone Starbucks as China’s leading coffee chain.
Luckin Coffee, headquartered in Xiamen, a port city in southeastern China, was established in 2017 and quickly grew as a domestic rival to Starbucks in China.
However, its rise was derailed in 2020 when investigations revealed that around 2.2 billion yuan ($337.31 million), or half of its 2019 sales, had been falsified, Reuters reported.
The scandal led to its delisting from Nasdaq and subsequent filing for bankruptcy protection in the U.S. in 2021. While many believed it was over for the firm, it has remarkably rebounded in its home market of China.
By 2022, Luckin had surpassed Starbucks in the number of stores across the country. The next year, it reported an annual revenue of 24.9 billion yuan (US$3.48 billion), beating Starbucks’s China revenue of $3.16 billion for the first time, according to Fortune.
It now firmly sits at the top of China’s coffee market with over 21,000 stores nationwide as of September.
In the third quarter, its total sales surged by 41.4% year over year while its quarterly revenue reached $1.452 billion, Business Insider reported.
Luckin Coffee’s rapid growth is fueled by its hybrid operating model, which combines self-operated stores with franchise partnerships to reduce capital demands. This strategy allows it to expand fast and achieve high store density, with outlets in almost every neighborhood, according to Forbes.
It operates a grab-and-go model, where customers order from the app and pick up their orders at the store, unlike Starbucks’ focus on creating cozy spaces for socializing.
Luckin further distinguishes itself with its competitive pricing, selling coffee for $1.4–2.75 per cup by leveraging significant discounts and smaller store layouts.
In contrast, Starbucks coffee in China generally starts at $4.1, a price point that has turned away consumers amid a tough job market.
The American coffee giant, which entered China in 1999, is facing slumping sales and growing competition from local brands in the market, its second largest globally with nearly 7,600 stores as of September.
During the quarter ending September 29, Starbucks experienced a 14% decline in comparable store sales in China, primarily due to an 8% drop in average ticket size and a 6% decrease in transaction volumes.
Its global comparable store sales and total sales also fell by 7% and 3%, respectively.
Other than Luckin, it has many other rivals in the market, including coffee chains Cotti Coffee and Manner, and even Chagee milk tea brand.
Brian Niccol, who just became Starbucks’ CEO in September, has been shaking up the company’s leadership, including at its China arm, in a bid to steer the business back on track.
The firm has said it was seeking help in China to improve its declining sales, the South China Morning Post reported on Thursday.
It has reportedly considered selling a stake in its business and has assessed interest from prospective investors, including private equity firms in China.
Starbucks stores in China have also been taking a page out of Luckin’s playbook by offering discounts and mobile ordering services.
The company is making its most popular coffee choices more accessible to consumers through 30% discounts or two-for-one coupons, all while keeping its listed prices intact.
Nonetheless, this growing reliance on discounts could eventually push the company into a price war, something that its China CEO claimed in January it had no intention of engaging in.
But Luckin’s success was driven by more than just discounts. It has taken digital innovation beyond simply accepting online orders, and has integrated automation and digital management into its operations. Its system can, for example, detect and dispatch orders when certain ingredients are running low, according to Bloomberg.
This allows Luckin stores to operate with minimal staff, effectively reducing costs. Their new employees can also be trained in just two to three days, a stark contrast to the weeks required for Starbucks staff, according to industry insiders.
The chain frequently introduces new creative beverages, such as the brown sugar boba latte inspired by Taiwanese bubble tea. This has been a driver for its sales growth.
These innovations have transformed Luckin from a budget-friendly copycat to a market trendsetter and leader, prompting some consumers to question whether Starbucks’ higher prices are justified.
“Luckin Coffee is one of the great turnaround stories in Chinese business history,” Shaun Rein, founder of China Market Research Group, told Financial Times.
Years after getting delisted, the Chinese coffee chain is now looking to bring its affordable beverages to the U.S. market, with plans to target cities with significant populations of Chinese students and tourists.
“Many people thought they were dead, but underlying the fraud was a company with great technology and decent coffee at a competitive price,” Rein said. “Now, it is coming after Starbucks on its home turf.
Source: https://e.vnexpress.net/news/business/companies/luckin-coffee-from-filing-for-bankruptcy-to-outselling-starbucks-in-china-4819405.html
WORD BANK:
file for sth /faɪl/ (v): nộp đơn xin cái gì
bankruptcy protection /ˈbæŋ.krəpt.si prəˈtek.ʃən/ (n): bảo hộ phá sản
dethrone /diˈθroʊn/ (v): vượt qua, xoán ngôi
headquartered in somewhere /ˌhedˈkwɔːtəd/ (adj): có trụ sở tại đâu đó
establish /ɪˈstæb.lɪʃ/ (v): thành lập
rival /ˈraɪ.vəl/ [C1] (n): đối thủ
derail /ˌdiːˈreɪl/ (v): đi chệch đường ray, chệch hướng
investigation /ɪnˌves.təˈɡeɪ.ʃən/ [B2] (n): cuộc điều tra
falsify /ˈfɔl·səˌfɑɪ/ (v): làm giả
delist /ˌdiːˈlɪst/ (v): hủy niêm yết
subsequent /ˈsʌb.sɪ.kwənt/ [C1] (adj): sau đó
rebound /ˌriːˈbaʊnd/ (v): phục hồi
surpass /sɚˈpæs/ [C2] (v): vượt qua
revenue /ˈrev.ə.nuː/ [C1] (n): doanh thu
surge /sɝːdʒ/ [C1] (v): tăng mạnh
year over year (adv): với cùng kỳ năm trước
quarterly /ˈkwɔːr.t̬ɚ.li/ (adj): quý
fuel /ˈfjuː.əl/ [B1] (v): thúc đẩy
hybrid operating model (n): mô hình vận hành kết hợp
franchise /ˈfræn.tʃaɪz/ (v, n): nhượng quyền
density /ˈden.sə.t̬i/ (n): mật độ
outlet /ˈaʊt.let/ (n): cửa hàng
cozy /ˈkoʊ.zi/ (adj): ấm cúng
socialize /ˈsoʊ.ʃə.laɪz/ (v): giao lưu
distinguish itself /dɪˈstɪŋ.ɡwɪʃ/ (v): tạo sự khác biệt
competitive pricing /kəmˈpet̬.ə.t̬ɪv ˈpraɪ.sɪŋ/ (n): giá cả cạnh tranh
leverage /ˈlev.ɚ.ɪdʒ/ (v): tận dụng
layout /ˈleɪ.aʊt/ [C1] (n): thiết kế
turn away sb (v): khiến ai quay lưng
amid sth /əˈmɪd/ [C1] (pre): trong bối cảnh gì đó
tough /tʌf/ (adj): khó khăn
slump /slʌmp/ (v): giảm sút
comparable store sales (n): doanh số tại các cửa hàng tương đương
average ticket size (n): giá trị đơn hàng trung bình
transaction volume /trænˈzæk.ʃən ˈvɑːl.juːm/ (n): khối lượng giao dịch
other than (pre): ngoài cái gì ra
shake up sth [C1] (v): thực hiện những thay đổi đột ngột
in a bid to V (pre): nhằm làm gì
steer sth back on track (v): đưa cái gì trở lại đúng hướng
stake /steɪk/ (n): cổ phần
prospective /prəˈspek.tɪv/ [C1] (adj): tiềm năng
private equity firm (n): công ty cổ phần tư nhân
taking a page out of / from sb/sth (v): sao chép cách làm của ai
keep sth intact /ɪnˈtækt/ [C2] (v): giữ nguyên
integrate /ˈɪn.t̬ə.ɡreɪt/ [C1] (v): tích hợp
dispatch /dɪˈspætʃ/ (v): gửi đi
a stark contrast to sth /stɑːrk/ (n): sự khác biệt rõ rệt so với cái gì
industry insider (n): chuyên gia trong ngành
beverage /ˈbev.ɚ.ɪdʒ/ (n): đồ uống
inspired by sb/sth /ɪnˈspaɪrd/ (adj): lấy cảm hứng từ
budget-friendly (adj): giá rẻ
copycat /ˈkɑː.pi.kæt/ (n): bản sao
trendsetter /ˈtrendˌset̬.ɚ/ (n): người định hướng xu hướng
prompt sb to do sth /prɑːmpt/ (v): khiến ai phải làm gì
justified /ˈdʒʌs.tə.faɪd/ (adj): hợp lý
turnaround /ˈtɝːn.ɚ.aʊnd/ (v, n): sự lội ngược dòng
fraud /frɑːd/ [C2] (n): vụ gian lận
decent /ˈdiː.sənt/ [B2] (adj): tử tế, tốt
home turf (n): sân nhà
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