Luckin Coffee files for bankruptcy Does Starbucks breathe?

If Starbucks has a rival in its sights, that’s Luckin Coffe. It is its biggest competitor in a market that for many brands is key both due to its size and value and consistency in consumption: China.

With a reopen rate that any brand would like to have, theories about what Luckin Coffe really is have been diverse. For many, it is a proposition that may actually embarrass Starbucks, while for others it is a bubble created by marketing that seems to have exploded right now.

Luckin Coffee is considered the fastest growing coffee brand in recent years, surprising locals and strangers, it was founded in 2017 and immediately began to open around 500 stores per year in China, so many began to see her with the main rival of Starbucks.

The truth is that in recent days, the well-known Chinese chain of coffee shops filed for bankruptcy and filed for Chapter 15 of the bankruptcy law in New York, according to a Bloomberg report.

This announcement came after it was announced in recent months that the company would have inflated its earnings for 2019, a lack that led it to pay close to 180 million dollars.

The special investigative committee found that the chief operating officer Jian Liu and a group of employees engaged in bad practices to report false information about company sales in the amount of $ 310 million, almost half of the chain’s sales in 2019.

“The Special Committee recommended certain interim corrective measures, including the suspension of Mr. Jian Liu and the employees implicated in the misconduct and the suspension and termination of contracts and deals with the parties involved in the identified fabricated transactions,” Luckin Coffee said in a statement quoted by Business Insider.

From Bloomberg they have indicated that the measure to which Luckin Coffe has now taken “is designed to protect the company from the lawsuits of US creditors, including holders of bonds to which 460 million dollars are owed and shareholders.”

Even with this declaration, it is expected that Luckin Coffee’s cafeterias will remain open, so its operations, for now, will not be affected.

“The company continues to fulfill its commercial obligations in the normal course of its business, including the payment of suppliers, vendors and employees,” the company said in a statement.

Although the clear winner was Starbucks since the scandal last year, with the bankruptcy filing it is clear that the mermaid chain of coffee shops continues to gain ground in a crucial market.

It is enough to understand how the Starbucks business has grown in the Asian region. Only between 2013 and 2018, its revenues in that region grew from $ 1.16 billion to $ 4.47 billion, according to data provided by Statista.

In this sense, the American company expects that this year its sales will grow between 27 and 32 percent in affordable stores in China, since its income in that market grew 7 percent, to reach 814.5 million dollars in the quarter which concluded in September of last year. In fact, the brand is expected to open 600n new points of sale in the Chinese market during this season.