Eugene Gologursky/Getty Images for Fast Company
- Starbucks CEO Brian Niccol said Chinese competitor Luckin Coffee is encouraging product innovation.
- Niccol said the brand’s app-only structure isn’t right for Starbucks.
- Luckin recently opened its first stores in the US, bringing the rivalry to Starbucks’ home turf.
Starbucks CEO Brian Niccol didn’t shy away from praising one of his company’s newest rivals during a recent speech.
Niccol shared what he thinks he can learn from Luckin Coffee, a Chinese rival that opened its first US stores earlier this year, while speaking at the Fast Company Innovation Festival on September 16.
Luckin is known for its unlikely flavors — think pineapple cold brew and coconut lattes — and impressively low prices. All ordering happens through an app, making the process impersonal and streamlined.
When asked what he admires about the chain, Niccol pointed to their flavor combinations.
“The one thing that they probably have done a nice job of is just an unbelievable pace of product innovation,” he said. “It sets the tone for, ‘Hey, we cannot be complacent on flavors and drink combinations.'”
Competitors, he said, always “make you better” when it comes to product innovation.
Yet Luckin’s entirely digital business model contrasts with Niccol’s focus on the in-person experience. In July, Starbucks announced that it’s phasing out its mobile order-only stores, and Niccol talked about enhancing stores’ physical comfort at the Fast Company conference.
“They’ve done an interesting job on how they’ve turned the app into the only way you can interact with that business,” Niccol said about Luckin. “It’s a different approach. I don’t think it’s the right approach for us.” A Starbucks spokesperson declined to comment on Luckin’s strategy and pointed to Starbucks’ focus on “convenience, connection, and craft.”
Niccol said that Starbucks was having a “nice recovery” in China and that stores in the country have different flavors than those in the US — he said he recently had a rose dew latte at a store there. In July, the company announced that it’s seeking a local partner to help run its Chinese stores.
On an earnings call that month, Niccol said he thinks there will be “thousands of more Starbucks in China.” Starbucks lowered the price of some drinks in China this summer, putting it more in line with Luckin.
Niccol has been working on his “Back to Starbucks” campaign as CEO for just over a year, and has implemented new strategies to tackle everything from long waits to a glitchy app to staffing issues to declining sales. Year-over-year, the company’s stock is down more than 12%.
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