Photo/Xie Hongchen

Dec.24 (NBD) -- Luckin Coffee, a homegrown fledging coffee chain brand that takes on Starbucks, incurred a 857-million-yuan (124.2-million-U.S. dollar) loss in the first nine months of this year with gross profit rate standing at -115.5 percent, according to a financing document.

Facing heavy losses, however, the coffee chain seems to have expected that. Luckin Coffee told NBD that the loss for the whole year apparently will be larger. Providing subsidies is in line with the company's strategy to win greater market share in the early stage and will continue the policy, the coffee chain stated.

Qian Zhiya, founder of Luckin Coffee, previously told NBD that there is no timetable for profitability and the company has prepared for the loss.

Despite heavy loss, its growth in other aspects is encouraging. In less than one year since its founding, the coffee chain brand quickly rose to fame with spokesman of famous actors Tang Wei and Zhang Zhen and the introduction of three WBC (World Barista Championship) winners, better coffee beans and quality coffee machines.

In addition, it has completed two rounds of financing with a total of 400 million U.S. dollars of investment and now is valued at 2.2 billion U.S. dollars.

So far, Luckin Coffee has opened around 1,700 stores across the country and offered over 85 million cups of coffee to 12 million consumers since its establishment.

Calculated based on the 124.2-million-U.S. dollar loss and 12-million consumers of Luckin Coffee, the cost for getting one consumer is no more than 10.4 U.S. dollars, a lot lower than that of many Internet companies, explained Zhu Danpeng, analyst of the food industry. 

The coffee market is not accessible for every player as it has a higher threshold for technology, brands and scale. As the consumer group grows and stabilizes, subsidies will be gradually cut down. The value hidden behind the 800-million-yuan loss should be paid more attention to, Zhu added.

Statistics show that per capita coffee consumption in China is only 5-6 cups, far lower than 734 cups in Europe and 300 cups in Japan and South Korea each year. Even in first tier cities like Beijing, Shanghai, and Guangzhou, average consumption is only around 20 cups.

China's coffee market is at the preliminary stage and is expected to hit 300 billion yuan (43.5 billion U.S. dollars) by 2020 and exceed 1 trillion yuan (144.9 billion U.S. dollars) by 2025.

It is noticed that as a latecomer in the field, the homegrown player is ambitious to compete with Starbucks.

Luckin Coffee sued Starbucks for its exclusivity rights with property owners and putting pressure on suppliers not to work with other brands in May when the coffee startup is still in trial operation. Starbucks say it welcomes fair competition.

In September, Starbucks started coffee delivery service in China through partnership with Alibaba's Ele.me. Luckin Coffee told news portal 36Kr that it launched delivery services in 21 Chinese cities through tie-up with Meituan early this month.

Email: tanyuhan@nbd.com.cn