Chinese investors circle Costa as Luckin-style coffee model goes global

by LI Ye

Chinese investors are circling Costa Coffee, with Centurium Capital—a major shareholder in Luckin Coffee Inc.—said to be weighing a potential bid that could bring China's fast-coffee playbook to Western markets.

People familiar with the matter say Centurium Capital is evaluating options as The Coca-Cola Company, which acquired Costa for £3.9 billion in a deal agreed in 2018, is reportedly considering is reportedly considering a sale of the chain's global store operations. Centurium did not respond to Jiemian News' request for comment.

For over a decade, coffee culture in China was shaped by Western chains such as Starbucks and Costa, whose spacious, premium "third place" stores became symbols of modern urban lifestyle—places to work, meet clients or socialize. But the model has since lost momentum. As Costa's footprint eroded and Starbucks restructured its China strategy, domestic operators—led by Luckin Coffee—have surged ahead and begun to expand overseas, potentially reshaping global competition.

Costa's China presence has shrunk to around 341 stores, down from roughly 459 when Coca-Cola acquired the chain. Globally, Costa operates about 4,000 outlets, most of them in the UK. In fiscal 2023, the company generated more than £1.2 billion in revenue, up 9 percent year on year but still below 2018 levels, slipping to a £96,000 pre-tax loss after posting £2.46 million in profit the previous year.

Luckin, by contrast, has expanded at breakneck speed. Back in 2018, when the company was still considered a startup, CEO GUO Jinyi argued that coffee in China must be "cheap and convenient" to unlock mass demand. Seven years on, that strategy has not only become the dominant domestic model but is now influencing global chains—a rare case of reverse innovation, where Western brands increasingly study China rather than the other way around.

A key advantage of China's coffee and tea operators lies in their approach to product innovation. Industry executives told Jiemian News that Luckin digitizes every ingredient and flavor attribute—assigning numerical values rather than using words like "sweet" or "aromatic"—allowing its R&D teams to track taste trends algorithmically. Some insiders say Luckin now innovates at the raw-material level, redesigning ingredients themselves while Western brands rely mainly on recombining existing components.

The model is powered by a tightly integrated supply chain optimized for speed, cost and scale. Luckin's compact pickup stores cut labor and real estate costs, while centralized procurement and automation drive efficiency. Analysts say this formula could prove even more competitive in Europe and the United States, where labor and rents are significantly higher.

Western chains are adapting. Costa UK has recently accelerated its to-go formats and expanded its mobile membership system—moves that mirror the fast-coffee approach pioneered in China—though its innovation cycle remains slower. Larger Starbucks- and Costa-style stores also face mounting pressure amid rising rents, wages and global coffee prices.

Whether Centurium Capital would pursue a Costa bid independently or through Luckin Coffee Inc. remains unclear. A Luckin-linked bid could allow the Chinese chain to enter Europe without the costly, time-consuming process of building a new retail network, instead upgrading or co-branding Costa outlets to accelerate market penetration.

The reports come as Luckin considers a return to the U.S. main board. At a recent forum, Guo said the company is "actively preparing" for a U.S. relisting. Luckin later told Jiemian News that while it continues to monitor U.S. capital markets, it has no confirmed timetable, adding that its priority remains expansion and operational execution.

Luckin is also pushing overseas expansion. On June 30, the company opened its first two U.S. stores in Manhattan, offering iced Americanos US$1 cheaper than competitors and launching a US$1.99 promotion. All stores use fully digital ordering systems with minimal staffing. By September, Luckin had five U.S. stores.

By the end of Q2 2025, Luckin operated 89 overseas stores across the United States, Singapore and Malaysia, in addition to 26,117 stores in China. Quarterly net revenue rose 47.1% year on year to 12.36 billion yuan (about US$1.7billion), while GAAP operating profit climbed 61.8% to 1.70 billion yuan, lifting its operating margin to 13.8%.

Challenges remain. Overseas supply chains may struggle to support Luckin's rapid product cycle, where a drink can move from concept to launch within weeks. Mature markets in Europe and the U.S. also limit the dramatic increases in store density that characterized Luckin's domestic growth. If Costa becomes the first major Western chain to undergo a China-led restructuring, it would mark a symbolic turning point: the export of a Chinese retail system built on digitalization, speed and cost discipline.