Singapore – After receiving support from Abu Dhabi’s sovereign wealth fund Mubadala ( Mubadala ), Luckin Coffee is re-evaluating its entry into the Persian Gulf market.
Lui Hui, the chairman of Luckin Coffee, said in an exclusive interview with CNBC on Monday that Luckin's senior management team is considering expanding into Gulf countries. Lui Hui is also the co-founder and CEO of Dacheng Capital, a private equity firm (Centurium Capital); Dacheng Capital is the controlling shareholder of this Chinese coffee chain company.
Li Hui stated, "We are currently still focusing on other markets and may enter regions such as the Gulf countries."
At the beginning of September this year, after jointly investing $1 billion with Dacheng Capital, Mubadala became a direct investor in Luckin Coffee. However, neither party has disclosed their respective shareholdings. This sovereign wealth fund, which manages assets worth $385 billion, has invested over $20 billion in China, with its investment targets including the e-commerce giant Shein as well as Dalian Wanda's shopping center business.
Lucky Coffee once planned to open stores in the Middle East and India in 2019, but those plans were never realized. Six years ago, the company was involved in a financial fraud scandal. Investigations revealed that its former executives inflated sales by hundreds of millions of dollars, which led to the company filing for bankruptcy protection in the United States and delisting from NASDAQ. This incident also intensified U.S. scrutiny of Chinese companies seeking to list in the U.S.
Lucky Coffee's CEO, Guo Jin, has stated on a weekly basis to CNBC, that the attractiveness of expanding into the Gulf market lies in the local demand for coffee, which is stable and frequent, as well as the increasing preference among consumers for low-sugar, health-oriented beverages.
With the support of Dacheng Capital, Luckin Coffee has managed to make a significant turnaround and has surpassed Starbucks in sales, becoming China's largest coffee chain brand. This private equity firm, headquartered in Beijing, is also further increasing its investment in the coffee business. In April this year, it acquired the high-end coffee brand Blue Bottle Coffee from Nestle for a reported price of less than $400 million.
Lucky Coffee's shares are still traded on the over-the-counter market, which is less regulated at present, with the company's valuation being around $9.6 billion. Last November, Starbucks valued its China business at over $13 billion in a transaction and sold its controlling stake to the Beijing-based private equity firm Boyu Capital ( Boyu Capital ).
Last year, at an event hosted by the government in Xiamen, where Luckin Coffee's headquarters is located, Guo Jinyi stated that Luckin "is actively advancing the process of re-listing on the US main board." However, the company still needs to obtain approval from Chinese regulatory authorities for the re-listing, and no clear timeline has been mentioned since then.
Lucky Coffee's turnaround has attracted the support of an increasing number of institutional investors. Temasek disclosed in a regulatory document in May that it holds a 6.4% stake in Lucky Coffee and expressed optimism about the management's ability to achieve growth. Meanwhile, Lucky Coffee continues to expand its presence in two Asian markets: Singapore and Malaysia.
However, compared to Luckin's scale in China, its growth overseas remains relatively limited. About a year after entering the US market, the chain had 23 stores in New York City, 150 stores in Malaysia, and 100 stores in Singapore; in contrast, the total number of its stores in mainland China and Hong Kong has exceeded 36,000.
In the second quarter, Luckin's revenue increased by 28.5% year-on-year to 15.9 billion yuan, approximately 2.34 billion US dollars; the average number of monthly trading customers grew by 23% to 112.7 million. During the same period, the chain brand added a net of 2,714 new stores.
