A fight brewing: Luckin targets Starbucks for China’s coffee crown

Luckin’s caffeine-fueled growth has come at the expense of profits. (Reuters)
Updated 04 January 2019
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A fight brewing: Luckin targets Starbucks for China’s coffee crown

  • The firm has expanded at breakneck speed, propelled by a focus on technology, delivery, and heavy discounting, even at the cost of mounting losses

BEIJING: Chinese coffee startup Luckin is aiming to open 2,500 new stores this year and overtake Starbucks as the largest coffee chain by number of outlets in the world’s second-biggest economy, it said on Thursday.

The firm, which only officially launched its business at the start of last year, has expanded at breakneck speed, propelled by a focus on technology, delivery, and heavy discounting, even at the cost of mounting losses.

“What we want at the moment is scale and speed,” Yang Fei, Luckin’s chief marketing officer, told reporters on Thursday at a presentation in Beijing.

“There is no point talking about profit,” he said, adding that subsidies to lure more users would
be an important part of the firm’s strategy for the coming few years.

Luckin said that it was targeting a total of more than 4,500 stores by the end of 2019, which would take it past Seattle-based Starbucks, which has long dominated China’s coffee scene and has more than 3,600 stores in the country.

Luckin’s caffeine-fueled expansion is in stark contrast to Starbucks, which opened its first China store in 1999 and has spent two decades reaching its current store count.

The US chain, which spearheaded the growth of a coffee culture in China, started to see competition rise from smaller peers over the last 18 months, though Luckin has stood out as the most aggressive competitor.

But Luckin’s rise has not come cheaply. The company recorded a loss of more than 800 million yuan ($116.34 million) last year, which its chief marketing officer said was in line with expectations as it pushed to expand.

Luckin, backed by Singapore sovereign wealth fund GIC and China International Capital Corp, opened more than 2,000 locations in the past year, gaining a valuation of $2.2 billion after raising $200 million in a funding round last month.

The firm’s CEO, Qian Zhiya, told Reuters last year that Luckin aimed to outnumber Starbucks
in China.

Reuters previously reported that Luckin was also in early-stage talks with investment banks about an overseas initial public offering.

The firm, however, declined to answer questions about IPO plans on Thursday. 


Tunisia to almost double gas production this year

Updated 18 January 2019
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Tunisia to almost double gas production this year

  • The project will be jointly owned by Austria’s OMV and Tunisian National Oil Company ETAP
  • It will include investments of about $700 million

TUNIS: Tunisia will almost double production of natural gas to about 65,000 barrels of oil equivalent per day this year, the industry and energy minister, Slim Feriani, told Reuters on Friday.
The country’s gas output will jump from 35,000 barrels of oil equivalent per day (boed) when the southern Nawara gas field comes onstream in June, Feriani said.
“We will raise our production by about 30,000 barrels of oil equivalent when the Nawara project in the south will start,” Feriani told Reuters in interview.
This project will be jointly owned by Austria’s OMV and Tunisian National Oil Company ETAP with investments of about $700 million.
Feriani also said Tunisia was seeking to attract about $2 billion in foreign investment to produce 1,900 megawatts (MW) of renewable energy in three years. “We will start launching international bids for the production of renewable wind and sun energy. We aim to produce 1,900 MW by investment of up to $2 billion until 2022,” he said.
This would represent about 22 percent of the country’s electricity production.
PHOSPHATE
Tunisia also plans to raise production of phosphate from 3 million tons to 5 million in 2019, he said.
Raising the output will boost economic growth and provide revenue to revive its faltering economy, the minister said.
Phosphate exports are a key source of foreign currency reserves, which have dropped to levels worth just 82 days of imports, according to Tunisia’s central bank.
Tunisia produced about 8.2 million tons of phosphate in 2010 but output dropped after its 2011 revolution. Annual output has not exceeded 4.5 million tons since 2011.
Feriani said lower production has caused Tunisia to lose markets and about $1 billion each year.
Phosphate exports were hit by repeated protests in the main producing region of Gafsa, where unemployed youth demanding jobs blockaded rail transport.