Watch out Starbucks, China is double trouble with a tea brand and a low-cost coffee rival, after Chagee and Luckin Coffee stepped up their bids to rival the U.S. coffee giant.
As Chinese bubble tea chain Chagee prepares to open its first U.S. store in Westfield Century City in Los Angeles this spring, the company has also filed for a U.S. initial public offering on the Nasdaq.
At the same time, there are reports that fellow Chinese beverage giant Luckin Coffee may now be planning to bring its low-cost coffee to the U.S., initially with a New York store. It will reportedly price drinks between $2 and $3, and aims to launch in cities with large Chinese student and tourist populations.
If Chagee is successful and goes public on the Nasdaq, it will join a decreasing number of Chinese companies that have sought a U.S. listing, as relations between the White House and Beijing continue to remain chillier than an iced tea.
Notably, the long anticipated U.S. IPO for fast fashion retailer Shein failed to materialize amid regulatory and compliance questions from lawmakers and the Gen Z favorite is now planning a London IPO for later this year, although that has not yet completed.
Luckin Coffee IPO
Potential U.S. investors might also be more than a little cautious after the colorful tale of Luckin Coffee’s original listing. The company was founded in 2017 and grew rapidly to outnumber the Starbucks locations in China within two years and then went public on the Nasdaq.
However, in 2020 Luckin disclosed that it had inflated its sales, resulting in its delisting from the Nasdaq. Luckin, whose American Depositary Shares traded on Nasdaq until July 13 2020, subsequently agreed to pay a $180 million penalty to resolve the fraud charges against it.
The company filed for Chapter 15 bankruptcy and emerged from administration during 2022, but without the executives who had been responsible for the original accounting fraud. Since then, it has gone from strength to strength and has overtaken Starbucks – for whom China is its second-largest market – as China’s largest coffee retailer by sales.
The Beijing-based operator opened an extraordinary 6,066 net new stores in China last year to reach 22,284 outlets, 65% of which are company operated. Luckin also opened 21 net new stores in Singapore to reach 51 locations and launched in Hong Kong with five outlets, while in it opened its first store in Malaysia in January.
Chagee Expands In Asia
Chagee was also founded in 2017 and the company has grown quickly to more than 6,400 teahouses across China, Malaysia, Singapore and Thailand, as of Dec. 31 2024. Currently, around 97% of its locations are in its home Chinese market.
Chagee said that it generated net income of $344.5 million from revenue of $1.7 billion in 2024 and the business will use the ticker CHA if its IPO is successful.
Founder and CEO Junjie Zhang said that he created the chain in a bid to modernize tea drinking after being inspired by the success of international coffee companies. According to the company’s website, Chagee wants to: “serve tea lovers in 100 countries, generate 300,000 employment opportunities worldwide, and deliver 15 billion cups of freshly brewed tea annually.”
Zhang told a forum earlier this month on International Tea Day: “In recent years, we have been exploring ways to restore tea-making techniques of 900 years ago using modern technology, thus allowing tea to return to its essence. On the one hand, we are promoting healthier products, and on the other hand, we aim to spread Chinese culture, striving to establish a world-class Oriental tea brand.”
U.S. customers will be able to check it out for themselves soon, as Starbucks faces the prospect of Chagee and Luckin Coffee heating up an already crowded market.
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