A view of Luckin Coffe in Guangzhou, capital of South China's Guangdong Province. Photo: VCG

Chinese chain Luckin Coffee has overtaken Starbucks as the largest coffee chain in China. The development not only highlights the rapid growth of the Chinese coffee market but also underscores the vibrant consumer market in the country.

According to Luckin's financial reports released on Friday, the company's net revenue for the fourth quarter of 2023 soared to 7.06 billion yuan ($980 million), marking a 91.2 percent year-on-year increase and pushing its net profit to 296.4 million yuan.

Luckin Coffee's annual sales for 2023 hit 24.9 billion yuan ($3.45 billion), up 87.3 percent from the previous year's 13.3 billion yuan. The chain brand's performance has outshone Starbucks' annual sales in China, which stood at $3.16 billion, propelling Luckin to the forefront of the Chinese coffee market.

Experts attributed Luckin Coffee's success to its industrialized process, exceptional marketing strategies, and innovative capabilities. Zhang Yi, CEO of iiMedia Research Institute, pointed out in an interview with the Global Times on Monday that Luckin's triumph over Starbucks is a testament to its deep understanding of the Chinese market and consumer preferences.

Luckin Coffee's Chairman and CEO Guo Jinyi commented during a Friday earnings call that while competition in China's coffee industry is intensifying, the market landscape is far from fully developed. He highlighted the accelerated development of China's coffee market and predicted fiercer competition as more brands enter the fray, according to Securities Daily reports.

Analysts noted that China's coffee market is experiencing rapid growth, overtaking the US as the world's largest branded coffee shop market by outlets. The surge is being driven by increasing consumption and presents significant opportunities for both domestic and international coffee brands.

Luckin Coffee's innovative approach to catering to Chinese consumers' tastes has been a key factor in its success. Its collaboration with Kweichow Moutai to launch an alcohol-infused coffee in September 2023 was a hit, with more than 5.42 million cups of Moutai latte sold on its first day. This innovation set a new sales record for the company and showcased its ability to blend traditional Chinese elements with modern coffee culture.

The evolution of coffee in China from being a luxury item to a more accessible consumer product reflects the country's growing openness and rising consumer spending power, Zhang said.

Amid the recovery of consumer confidence and rapid growth in the catering industry, China's retail sales of consumer goods grew by 7.2 percent in 2023, with catering revenue increasing by 20.4 percent, the fastest among all retail categories, according to the National Bureau of Statistics.