Luckin Coffee just the tip of Starbucks' China woes

A spin-off or joint venture with a local partner is essential for the iconic American coffee chain's survival.

- Shuli Ren

As Starbucks' new chief executive officer Brian Niccol engineers a business turnaround, what to do with its operations in China must be on the top of his mind. The American coffee chain is exploring strategic options, including a possible stake sale. China is becoming a drag. The country accounts for less than 10 per cent of revenue, even though nearly 20 per cent of its outlets are located there. In the September quarter, same-store sales tumbled 14 per cent from a year earlier, even worse than the 6 per cent decline in the US.

Much media focus has been on home-grown brand Luckin Coffee, which has staged an amazing comeback after being delisted from the Nasdaq for accounting fraud in 2020. Luckin's 9.90 yuan (S$1.80) coffee is taking away business from Starbucks' basic drinks, just when the Chinese economy is weak and consumers are wary of spending.