Luckin Coffee Inc. (Nasdaq: LK) announced Monday it will establish a joint venture to launch retail coffee business with a Kuwait-based company in the Middle East and India, seeing its stock up slightly.
The Xiamen-based coffee chain, which sought to outnumber Starbucks' (Nasdaq: SBUX) locations in China this year, signed Memorandum of Understanding with Americana Group with both Chinese and Arab government officials in attendance.
"This collaboration represents Luckin Coffee's first step toward bringing its leading products from China to the world,” Zhiya Qian, the executive officer of Luckin Coffee, said.
Opposite with Luckin’s two-year operating record, Americana Group, serving as the largest integrated food product company in the Middle East was founded in 1964. The group owns 1900 restaurants in 13 markets and 25 food production sites across the UAE, Saudi Arabia, Kuwait, and Egypt.
“We have worked with many leading and revolutionary food and beverage brands over our history and believe that Luckin Coffee's superior products, experience and services will deliver success in these regions,” Kesri Kapur, the chief executive officer of Americana Group, said.
“We look forward to further expanding the freshly brewed coffee market internationally as we realize the incredible growth opportunities available to us through our innovative business model,” Zhiya added.
The Arabs’ preference toward coffee can be illustrated by a classical Arabic Abd al-Khadir ode to coffee, which claims it to be “the beverage of the friends of God.”
There are 9,084 branded coffee shops and counting in the Middle East, with Turkey having the most locations in 2018, according to Allegra World Coffee Portal. Starbucks, Dunkin’ and Coca-Cola-owned Costa Coffee are the three largest chains throughout the Middle East market.
Mr. Kapur said, "We at Americana believe this MoU will revolutionize the food and beverage retail industry in the Greater Middle East and India, regions that provide promising prospects for new retail growth and expansion.
Luckin’s rival, Starbucks (Nasdaq: SBUX), owned 453, 186,166 stores in Turkey, UAE-Dubai and Saudi Arabia respectively in the forth quarter of 2019.
Luckin completed its initial public offering in New York on May 17, raising $561 million. The stock in Luckin was trading up 1 percent, at $20.33 per American depositary share, by midday Monday.