Luckin to Explore Juice Market After Coffee and Tea, Co-Branding With Louis Dreyfus

Luckin is expanding into the production of juices in collaboration with a Dutch global merchant.
Belinda ZhouSep 27,2019,06:55

Luckin Coffee Inc. (Nasdaq: LK) announced to launch its juice series with Dutch merchant firm Louis Dreyfus Company, seeing its stock drop 1.7% intraday Thursday.

The Xiamen-based Starbucks' (Nasdaq: SBUX) challenger said it has signed an agreement in Singapore today with Louis Dreyfus Company to establish a joint venture to develop Luckin Juice.

“We are pleased to be partnering with one of the world’s largest citrus fruit growers and juice suppliers to launch a co-branded Luckin Juice and continue our ambitious growth plans,” Jinyi Guo, the senior vice president and co-founder of Luckin, said in the statement.

Under the agreement, not from concentrate or NFC orange, lemon and apple juices constitute the product portfolio. Compared with from concentrate juices, commercial juices labeled “NFC juice” are been pasteurized without being concentrated.

Luckin acts as the sales channel, while Louis Dreyfus Company covers the chain from its farms to customers and plans to build its own bottling plant with other fruit and vegetable juices in the future.

“This fits perfectly with our corporate strategy to move further downstream toward the end consumer, in particular through partnerships, and with our growth ambitions in China,” James Zhou, the global vice president and regional head for North Asia of Louis Dreyfus Company, said.

Luckin said it is extending upstream toward production and aims to reduce costs as well as increase consumption frequency in the near future, according to the statement.

The coffee chain was reportedly delving into China's to-go tea market as soon as October and recruiting new business partners to kickstart the Xiaolu, or "deer," tea sales, according to Chinese news site Luckin didn’t ask for up-front franchise fees and the trademark, however, was illegally copied by fake websites, which charged franchisees more than 10,000 dollars.

It’s not the first step Luckin has taken to grow overseas. The company announced its partnership with a Kuwait-based  Americana K.S.C.C. in the Middle East and India in July. The cooperation in coffee business with the largest food provider in the Middle East sent its stock jump more than 6% on that day.

Shares in Luckin were trading at $20.03 per American depositary share, down 1.7% at Thursday afternoon.