can even be replicated in their own store networks, since they are constantly opening new stores in overlapping trade areas and diluting existing store sales.  Further evidence was delivered on April 29 when Luckin Coffee, China’s biggest chain, reported its results for the first quarter of 2025.  The company has expanded at breathtaking speed to more than 24,000 outlets. It has been opening stores at a furious pace, with more than 5500 openings over the last 12 months and 1757 net openings in the first quarter of this year alone. This has enabled the company to clock up year-on-year revenue growth of 41.2 per cent, to 8.87 RMB. With stronger gross and operating margins, it swung from a loss of 83.17 million RMB, to a profit of 525.06 million RMB. Same-store sales at company-operated stores (65 per cent of the store fleet and 77 per cent of revenues) were up 8.1 per cent.  Nice as this sounds, it comes from a very low base, since same-store sales in the corresponding period last year were down by more than 20 per cent. With a two-year stack of about -12 per cent, that’s nothing to crow about just yet, although productivity per store has risen in the past year, at a solid pace.  Customer counts are up. There were more than 74 million transacting customers during the quarter. They like what’s on offer, which includes moderate prices and – something that is absolutely essential in the congested coffee retail industry – a differentiated product. Luckin touts particularly exotic brews like its coconut latte and jasmine milk tea, both sourced from the company’s jasmine farms and Indonesian coconut plantations. Luckin has been riding a wave of positive industry drivers, not just since 2022 when Covid lockdowns suddenly became unpopular with the government and in-person dining blossomed. There are so many ways to differentiate and diversify the product, including price, the cafe experience, bean varietals, food, speed and quality of service, and sustainability. High-quality real-estate platforms are readily available across a range of location types, including malls, office complexes and freestanding buildings. Malls are particularly welcoming, due to another accident of history: e-commerce. The gutting of the fashion, accessories and home-furnishing sectors by e-commerce and the conversion of malls from apparel-heavy, transactional beasts to community social hubs has made mall landlords extremely welcoming of cafes. Sometimes, food and beverage constitute as much as 20 per cent of mall space these days.  Cotti: Talk about tribbles Two former executives of Luckin, Lu Zhengya and Qian Zhiya, who were fired by Luckin after a financial scandal, turned around and founded Cotti Coffee three years ago, subsequently embarking on their own extraordinary store expansion. From a standing start in August 2022, Cotti now has roughly the same number of stores in China as Starbucks (around 7500). Cotti also launched a price war with Luckin at the affordable end of the Chinese market, headlined by a coffee selling for just under 10 RMB (about $1.35). Luckin responded, and it was game on. Hostilities still haven’t ceased and Cotti has even indicated that it will stay promotional for a while yet, to make coffee more accessible to more Chinese consumers.  A somewhat inevitable outcome, of course, will be pressure on everyone’s pricing power, margins and bottom line. Starbucks, for one, which is positioned at the premium end of the market, has indicated it will remain steadfast against parachuting into the price conflict, although it has been known to offer coupons.   Starbucks: Still a bit sleepless in Seattle At the same time that Luckin executives were giving their cheerful narrative from Beijing, things weren’t quite so chirpy in Seattle, where Starbucks was releasing its financial results for the same quarter. (Note: for Starbucks, the first calendar quarter of the year is its second fiscal quarter.) Across its global fleet, the company’s sales grew by 2.3 per cent, to $8.76 billion, but were outpaced about fourfold by operating expenses, contributing to a halving of net income, to $384.1 million.  For Starbucks’ international segment, revenues grew by 6.2 per cent, to $1.87 billion, meaning that international now accounts for just over 20 per cent of company revenue. Eight out of Starbucks’ top 10 international markets recorded positive comparable sales growth during the quarter. However, China was not among them.  China’s 7750 stores did pull in $739.7 million, or 40 per cent of the international revenue pot. But unlike Luckin, same-store sales in China for Starbucks plummeted by 11 per cent. Nonetheless, CEO Brian Niccol remained optimistic on the investor conference call: “We’ve got more work to do in the market, but our brand remains strong.” However, tariffs remain a nettlesome problem, and CFO Cathy Smith indicated that the company was tinkering with its supply chain to diversify sourcing for the US market away from China. Despite problems with intensifying competition, nationalism and tariffs, Starbucks is still determined to expand further in the Chinese market. It sees particularly good opportunity in China’s approximately 3000 ‘county cities’, which are essentially just cities that swallowed what were once the counties in which they were located. Maybe so, but out of all this expansion, there is only one sure winner, and that’s the increasingly caffeinated Chinese consumer. Further reading: Analysis: Asian coffee markets are keeping executives up at night