Chinese coffee chain Luckin Coffee sues Starbucks for market monopoly

Updated 2018-05-17 12:01:59

Luckin Coffee, a rising Chinese coffee brand, released an open letter on Tuesday, accusing Starbucks of unfair competition and market monopoly in the Chinese market. The company also decided to file a lawsuit against the international coffee tycoon.

In the open letter, Luckin pointed out that Starbucks had monopolized markets in some areas by asking some commercial property owners not to rent its nearby shops to other coffee brands, including some famous coffee chains and some other cafes whose brand name contained "coffee".

A staff member who claims to be the lawyer for Luckin Coffee stated that Starbucks forced the contractors not to rent locations near a Starbucks café to some well-known coffee brands, including Costa, Pacific Coffee and Mann Coffee as well as shops which earn a 30 percent monthly revenue from coffee beverages.

The company also stated in the letter that Starbucks had constantly put pressure on its suppliers by asking them to make options between the two companies. Luckin Coffee cited from some of its partners that Starbucks had asked them to stop providing equipment, packaging services and ingredients to the company. Even, a few of its partners had already informed Luckin Coffee to terminate their contracts.

Luckin deemed that the Starbucks's monopoly had impeded the development of the coffee industry in China and had violated the anti-monopoly law in the country.

However, Starbucks responded later on Tuesday that it had no intention to take part in any kind of market promotion with other brands. It added by saying that "we welcome orderly competition, mutual improvement, constant innovation, continuous improvement of quality and service to create real value for Chinese consumers."

This issue has raised widespread awareness on Chinese social media and triggered a heated debate among netizens.

"Starbucks has signed this kind of exclusive contracts early before, which cannot be regarded as monopoly since some other coffee brands like Costa, Mann Coffee would do the same. So it's highly likely that Luckin Coffee just wanted to hype its brand by criticizing Starbucks, in a bid to expand its own business and raise its status in the coffee industry," commented a user @JeffreeWang on Weibo, China's equivalent of Twitter.

"Competition is welcomed in any industries since it will only benefit the consumers," said another Weibo user @Teli_LY.

Founded by Qian Zhiya, former COO of UCAR, a Chinese ride-hailing app, Luckin Coffee has opened 525 stores in 13 cities in China, serving 1.3 million customers with 5 million cups of coffee during its four-month soft launch.

Targeting the young white collar market, Luckin Coffee shows its ambition to compete with the traditional coffee brand, Starbucks, which has over 3,000 outlets across the country in more than 130 cities and serves more than six million customers every week, by offering cost-effective coffee drinks and the convenient takeout services. Luckin Coffee has also reportedly poached staff from Starbucks since December last year by giving three times higher salary for the same position, according to Beijing Business Today.

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