M&A critical amidst Luckin Coffee overseas growth, analyst warns
The brand is set to grow despite price wars, aided by efficiency, profits, and loyalty.
An M&A with a premium brand will be critical for Luckin Coffee to solidify its overseas presence, especially in more mature coffee markets, a report by CGS International Holdings Limited said.
The brand, considered the largest coffee chain in China with a 12% domestic market share by store count, continues to dominate thanks to operational efficiency and strong customer loyalty amid rising coffee demand.
According to China Insights Consultancy (CIC), China’s freshly made coffee market accounted for 13% of the country’s total beverage sales in 2024. Supported by high stickiness and increasing purchase frequency, freshly made coffee is the fastest-growing subsector in the beverage market, with a 19.8% sales compound annual growth rate (CAGR) projected from 2023 to 2028. CIC also forecasts that gross merchandise value (GMV) in tier-3 cities and below will grow at a 25% CAGR over the same period, reaching RMB100b ($14.34b).
CGS International said Luckin’s value-for-money pricing and lower-tier expansion position it well to capture market share in these smaller cities.
Meanwhile, China’s coffee sector is expected to face a tough price war that could trigger consolidation. Luckin is expected to continue growing thanks to tighter cash flow for smaller rivals, standardised operations with strong margins, and loyal customers.
As of Q3 2025, the company operates 118 overseas stores, mainly in Southeast Asia, driven by growing demand for freshly made coffee.
The region’s coffee culture, rising consumer spending, urbanisation, and digital adoption have all supported this growth. Consumers are shifting from instant to freshly made coffee, attracted by higher quality and diverse flavours.
A young, trend-savvy population and an expanding middle class continue to boost discretionary spending, whilst dense urban consumption scenarios like office districts and shopping malls, combined with food delivery and digital payments, have lowered barriers to consumption.
The active expansion of both international and local coffee players further educates consumers and expands market penetration, creating strong momentum for Luckin’s overseas growth.
