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Jan.4 (NBD) -- Chinese coffee chain Luckin Coffee (Luckin) plans to open 2,500 new stores in China this year, aiming to challenge Starbucks.

The total number of Luckin outlets is estimated to exceed 4,500 by the end of 2019.

Luckin co-founder and chief executive Qian Zhiya noted that the company's goal for this year is to overtake Starbucks as the largest coffee chain in China in terms of the numbers of stores and cups of coffee sold.

According to Starbucks' website, the U.S. company currently operates over 3,600 stores in more than 150 Chinese cities.

In May last year, Starbucks revealed it was targeting 6,000 outlets that cover 230 cities by September of 2022, which means opening about 600 new stores every year.

The ambitious challenger Luckin, which stepped into the market only one year ago, was valued at 2.2 billion U.S. dollars after it landed 200 million U.S. dollars in Series B funding round completed in mid-December of 2018.

However, its profitability and business model are still in doubt.

The company reportedly posted a loss of 857 million yuan (125.0 million U.S. dollars) in the first nine months of last year.

As for this issue, Yang Fei, CMO of the company, explained there is no need to worry about loss that Luckin has expected. The start-up now is emphasizing on grabbing more market shares, breaking the market monopoly and pushing coffee prices to a reasonable level.

Luckin has 2,073 directly operated stores in 22 cities and sold a total of 89.68 million cups to 12.54 million customers as of the end of 2018. The three-month repeat purchase rate exceeds 50 percent.

Such dramatic expansion of the Xiamen-based firm is greatly fuelled by the high subsidy and efficient takeaway service.

The company offers various coupons such as one free cup for each user registration, buying two getting one free and even buying 10 getting 10 free.

Besides, orders are guaranteed to be delivered within 30 minutes and those over 35 yuan (5.1 U.S. dollars) enjoyed free delivery.

Luckin's cash-burning marketing approach sparked concerns that the coffee start-up may become the next Ofo which stands on the brink of bankruptcy after using up raised funding.

Though Yang has confirmed subsides will remain as one of Luckin's core strategies in the next three to five years, the company has shown intention to slightly cut subsidies.

The amount for order charged no delivery fee has climbed to 55 yuan (8.0 U.S. dollars) in Beijing and Shanghai last month.

Yang noted that the policy change is a normal adjustment, as consumers now can find one Luckin outlet more easily. Consumers in core areas of first-tier cities can come across one Luckin outlet by 5-minute walk, thus in-store pickup will be a trend.

Data from the coffee firm shows that the proportion of users choosing to pick up products by themselves went up to 61 percent last month, compared to 35 percent in April of 2018.

The fast growing coffee market in China brings lucrative opportunities for players.

It is forecasted that the size of China's coffee market is expected to top 300 billion yuan (43.7 billion U.S. dollars) in 2020 and exceed 1 trillion yuan (145.8 billion U.S. dollars) by 2025.

Competition between start-up Luckin and coffee giant Starbucks is predicted to upgrade in the future.

Seen as a way to cope with challenge from the rival, Starbucks formed a partnership with Alibaba Group last August and launched takeaway service via Ele.me, the food delivery arm of Alibaba. The delivery has been available in 2,000 stores in 30 cities in China, the coffee giant announced on December 14.

Email: zhanglingxiao@nbd.com.cn