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The ultimate coffee battle has begun: Starbucks vs.

Brian Harbour, Morgan Stanley U.S. restaurants and food distributors equity analyst, breaks down Starbucks' competition from Luckin Coffee.

Luckin Coffee Inc. (OTCPK:LKNCY) Q2 2025 Earnings Conference Call July 30, 2025 8:00 AM ET Company Participants Jing An - Chief Financial Officer Jinyi Guo - Co-founder, CEO & Director Nancy Song - Corporate Participant Conference Call Participants Operator Ladies and gentlemen, welcome to Luckin Coffee Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded.

Starbucks (NASDAQ: SBUX) faces its first real competition worldwide due to the growth of Luckin Coffee which has over 24,000 stores in China, Hong Kong, Singapore and Malaysia.

Luckin's early move into the US, along with its growing presence in Singapore and Malaysia, sets up a disciplined, capital-light international expansion strategy that market is not pricing. The company's turnaround from its 2020 fraud crisis reflects strong governance reforms and disciplined execution, restoring investor trust and positioning Luckin as a credible, modern global brand. Its core China business remains the profit engine, with over 24,000 stores and a proven franchise model expected to drive store count past 32,000 by 2025 end while expanding margins.

Luckin Coffee is outperforming the market, driven by scale, tech innovation, and a digital-first retail model that boosts efficiency and customer engagement. Despite price wars, Luckin's long-term supply contracts and massive roasting capacity allow it to maintain aggressive pricing while expanding margins and market share. The company is reshaping Chinese coffee culture, leveraging delivery, digital engagement, and gamified promotions to drive rapid growth in lower-tier cities.

The Chinese coffeehouse is hoping it can create buzz for its brand in the Big Apple.

Starbucks Corp. (NASDAQ: SBUX) sales in China are essential to its future. In the most recent quarter, the U.S. and China together had 61% of the company’s stores worldwide. At the end of the quarter, it had 17,122 stores in the United States and 7,758 in China. However, China has become a problem market. The primary reason is local rival Luckin Coffee, which has 22,000 stores there. The competition for Starbucks is overwhelming. 24/7 Wall St. Key Points: Luckin Coffee, Starbucks Corp.’s (NASDAQ: SBUX) rival in China, has just opened its first U.S. store. Starbucks stock has lagged, and investors are nervous about its prospects. Take this quiz to see if you’re on track to retire. (sponsored) Luckin has just opened its first U.S. store in New York. On its Instagram page, it wrote, “NYC, it’s happening. Our doors are open and Luckin Coffee is taking over the city.” The last thing Starbucks needs is more U.S. competition. It is already up against McDonald’s, Dunkin’ Do

Luckin Coffee stock price continues its strong uptrend as its growth momentum gains steam. LKNCY jumped to a high of $37.27 on Monday, its highest point since April 3, and 117% above its lowest level last year.

Luckin Coffee opened its first US locations Monday in New York City.