Starbucks Faces Huge Competitor

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By Douglas A. McIntyre Published

Key Points

  • Luckin Coffee Is Becoming Global Force

  • McDonald’s Won’t Go Away

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Starbucks Faces Huge Competitor

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Starbucks (NASDAQ: SBUX) faces its first real competition worldwide due to the growth of Luckin Coffee which has over 24,000 stores in China, Hong Kong, Singapore and Malaysia. That means it has already moved outside its original Chinese footprint. It has opened its first stores in New York which means absolutely nothing to Starbucks, and may never affect it in the US at all. The issue is can Luckin eat into Starbucks international business.

China is Starbucks second largest market, and according to the company, one of its two most important regions. According to its last earnings call, “At the end of Q2, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 17,122 and 7,758 stores in the U.S. and China, respectively.” It had 40,789 stores at the end of the same period. Starbucks has stores in over 80 nations. That may be where it is vulnerable to competition.

New CEO Brian Niccol has announced many changes in the US which range from menus to uniforms to management reallocation. He has said little about how it will defend its business outside the US.

Luckin is now big enough to offer Starbucks a real challenge. In the first quarter of the year, its revenue rose 41% to $1.22 billion.

If Starbucks’ only competition was Luckin, the challenge to its overall global sales would be modest. However, McDonald’s (NYSE: MCD) has both a US and international footprint. It has made market share for breakfast one of its goals. Dunkin’ Donuts has over 14,000 stores in 40 countries.

Investors tend to focus on the US as the key to a Starbucks’ comeback. They are looking at the wrong place.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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