The news: China’s coffee giants are making their way to the US in the hopes of unlocking a lucrative market to offset pressures back home.

• Luckin Coffee is set to open its first US outpost in New York City’s East Village neighborhood.
• Cotti Coffee has opened stores in Manhattan and Brooklyn; the chain also has several locations in California.

The opportunity: Both companies made a name for themselves in China—and beyond—by blanketing cities with stores that offered cheap drinks in a mind-boggling variety of flavors. While Luckin and Cotti are unlikely to expand their physical footprint as rapidly in the US given cost and bureaucratic hurdles, their low prices and extensive menus are likely to resonate strongly with younger consumers who want variety and technicolor flair in their beverages.

• Cotti is offering 99-cent coffees to first-time customers who download its app. Prices for standard coffee drinks like cappuccinos and flat whites are cheaper than at Starbucks—an indication of how it plans to compete against the largest US coffee chain.
• Luckin is also looking to undercut the competition by pricing its beverages from $2 to $3, according to a Financial Times report—although tariffs may force a change in strategy.

Our take: Luckin’s and Cotti’s US launches are a problem for Starbucks, which is already struggling to compete with the companies in China and having a hard time winning over customers at home. Unfortunately for Starbucks, many of the moves it’s making—streamlining its menu, enhancing the in-store experience, leaning into premiumization—run counter to consumers’ current desire for variety, convenience, and value.

That has created an opening for chains like Dutch Bros (and now Luckin and Cotti), which are better positioned to capitalize on emerging trends in the coffee space and can undercut Starbucks on price.

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