BEIJING, September 29 (TMTPost)— Starbucks Coffee Company is embracing increasing challenges posed by its Chinese rival Luckin Coffee.

Credit：Visual China

In response to launch of sauce-flavored latte by Chinese coffee chain operator Luckin Coffee, the popular drink Starbucks CEO Laxman Narasimhan said his company also offers drinks merging coffee with liquor and encouraged Chinese customers to have a taste, the state media China Central Television (CCTV) reported.  Narasimhan told CCTV he welcomes competition because it can expand the market, and consumption will become multi-layered as the market grows. Starbucks will offer what customers want to deliver further growth in China, the chief executive added.

As China’s coffee market has huge room to grow, competition is becoming more heated, accordingly, several Chinese brands are seeking ongoing innovation to attract more consumers, CCTV commented on Luckin’s recent launch. The report noted there are more than 200,000 companies engaging on coffee business in China, and 35,700 companies in the industry emerged in 2022 alone, increasing 38.06% from the previous year.

Luckin Coffee and Kweichow Moutai, China’s top distilled spirit brand well-known as the national liquor, launched their co-branded drink on September 4. The so-called sauce-flavored latte was priced at RMB38.00 (US$5.20) apiece, and customers can get a 50% discount for a limited time if they order it online with a coupon. In China’s traditional distilled liquor Baijiu, sauce, also known as sauce aroma, refers to a flavor that smells similarity to fermented bean pastes and soy sauces. According to Luckin, each cup of the new latte is made with coffee and thick milk that contains alcohol less than 0.5% of overall content. The alcohol content comes from Feitian Moutai, the flagship Moutai offering which has 53% alcohol.

Luckin Coffee said it sold more than 54.2 million cups of the sauce-flavored latte with the sales topping RMB100 million on the first day of its launch. The new drink broke daily sales record of a single offering for the coffee company founded in 2017. That is such an outstanding result compared with previous hits, such as the cheese latte that sold 1.31 million cups on its launch day.

Narasimhan’s recent remark came as Starbucks China Coffee Innovation Park (CIP) started operation and fulfilled scaled vertical integration “from bean-to-top” across one market, a first for the company globally. Starbucks has input a total of RMB1.5 billion (US$220 million) in CIP since the initial announcement in March 2020, and made the project Starbucks’ largest investment in coffee manufacturing and distribution center outside the United States.

“As one of the largest consumer markets in the world, China presents tremendous opportunities for Starbucks. The Coffee Innovation Park highlights Starbucks foresight in elevating the supply chain through digitalization and advancing our sustainability agenda, enhancing our unique competitive advantage as we accelerate our global growth,” said Narasimhan. He vowed that his company will continue to deepen investment and reinforce unwavering long-term commitment to China, its largest and fastest-growing international market. CCTV noted Starbucks now has more than 6,500 stores in China and is expanding its network at an average rate of opening a new store in less than 9 hours.