Luckin Coffee Looks To Expand Into Vending Machines

China expansion

China-based Luckin Coffee is going to set up vending machines where customers will be able to purchase hot beverages and snack products, the company said Wednesday (Jan. 8).

The company is seeking even more of a piece of the Chinese coffee market since overtaking Starbucks as the country’s biggest coffee retailer.

Luckin founder and CEO Qian Zhiya said the reason for the new branching-out is that the company will be able to be closer to their customers and move in ways not restricted by license approvals, according to Reuters.

Luckin, which is only three years old, also made other moves this week, launching a share placement and a convertible bond worth a combined $821 million – even though, in the global market, stocks were falling as Iran attacked U.S. troops.

The company had 12 million American depository shares (ADSs) and 4.8 million secondary ones from Centurium Capital, a Chinese private equity firm. They had a close price of $35.11 on Tuesday. Based on that, the deal could raise about $421 million before any over-allotment options are on the table.

Centurium was an early backer of the coffee chain. They’re selling about 20 percent of its holdings, but will still be the largest institutional shareholder in Luckin after the deal is done.

Luckin will also raise $400 million from a five-year convertible bond, carrying a coupon of between 0.5 percent and 1 percent with a conversion premium between 27.5 percent and 32.5 percent, term sheets obtained by Reuters said. Both deals will be priced after the U.S. market closes on Thursday.

That money will go toward more stores and for sales and marketing, Luckin said.

Luckin now has more than 4,500 stores in China. A year ago, it set out to achieve the goal of topping Starbucks, which it has now done. Starbucks has 4,100 stores in the country.

Luckin’s rapid expansion has proved costly, as its expenses hit $232 million last year, tripled from where they were a year before.

Starbucks has seen a slowdown in China as of last year.


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.