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China's upstart coffee chain takes shot at US giant Starbucks

Luckin Coffee gains popularity thanks to quality products and low prices

A barista serves a customer at a Luckin Coffee store in Beijing.   © Reuters

SHANGHAI -- Chinese coffee chain Luckin Coffee is rapidly catching up with its bigger U.S. rival Starbucks, capitalizing on its low prices.

One 34-year-old man in Shanghai, who buys coffee every day, recently switched from Starbucks to Luckin. He said Luckin offers good coffee and he uses the chain often these days because its coffee is cheaper if bought with friends.

Luckin has expanded rapidly over the past year, operating more than 2,000 stores, compared with Starbucks' 3,400 or so. Unlike traditional coffee chains like Starbucks, most Luckin stores only have a cash register and a space where its employees can make the coffee as it specializes in delivery and takeout. It has continued to launch stores at a fast rate by cutting opening costs.

Luckin emphasizes the quality of its coffee beans and milk, including coffee supervised by a barista who won the World Barista Championship. It also focuses on the design of its cups and logo to attract younger customers.

But Luckin has won the hearts of consumers because of its low prices. A Starbucks latte costs 29 yuan ($4.29), while a Luckin latte goes for 24 yuan. With Luckin's "buy two, get one free" offers, however, one can get three lattes for the price of two, pushing down the price of each latte to as low as 16 yuan.

Meanwhile, some Chinese consumers still prefer Starbucks over Luckin. Zhang Xue, a 28-year-old office worker in Shanghai, said she had tried Luckin but she thought Starbucks tastes better. Chinese consumers are tightening their purse strings, due to uncertainty over the country's economy amid the trade war with the U.S., and this provides a tailwind for Luckin. But as incomes rise, more Chinese consumers are now able to splurge on a cup of coffee.

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