Charles Lu, former chairman and co-founder of the Chinese coffee chain Luckin Coffee, is reportedly planning to launch a new coffee brand in China called “Cotti Coffee”. The name “Cotti” comes from the Italian biscuit “biscotti”, which is commonly eaten as a coffee accompaniment. The brand is said to be an extension of the coffee concept.

Lu is a talented marketer and has wealthy backers, but had his reputation in the U.S. at least severely tarnished during the scandal at Luckin, for which some blamed Lu. If Lu was not complicit, as Chairman of Luckin during the time when the massive fraud took place, he could reasonably be accused of being negligent. But while there’s no love lost in the U.S. for Lu, he still has the support of his network of wealthy contacts in China.

Chinese media company Tech Planet obtained documents from Cotti Coffee dated August 2022, which indicate that the company has a registered capital of $100 million and a core management team comprised of former executives from Luckin Coffee and Chinese car rental companies UCAR and CAR Inc., in which Lu has shares.

The Tianjin-based company will have two store formats: a small 50sqm unit similar to Luckin’s pick-up kiosks and a larger outlet of up to 200sqm for customers who prefer an in-store experience. The main distinction between Cotti Coffee and other coffee brands is that it will focus on full-service dining. Customers can get coffee and biscottis in the morning, meals at noon, snacks in the afternoon and drinks in the evening.

Lu hopes Cotti Coffee will be able to capitalise on China’s growing coffee scene. Coffee culture is rapidly gaining traction in the country, with local coffee chains expanding to take a bigger market share from Luckin and US coffee chain Starbucks, which plans to open 6,000 outlets in the country by the end of 2022. According to a report by Chinese monitoring and research company iiMedia, the coffee industry is expected to continue growing at a rate of 27.2%, and the Chinese market will reach 1 trillion yuan (circa US$145b) in 2025.

After fabricated sales of up to $340 million were discovered in April 2020, Lu was ousted from Luckin Coffee. In May 2020, the company replaced its senior management team and was delisted from the Nasdaq in June of the same year.

Over the past few months, Luckin Coffee has recovered, surpassing 7,100 stores in its home market in August 2022 and reporting second-quarter solid revenues of $493m.

Lu’s first venture after leaving Luckin Coffee was in August 2021, when he opened Quxiaomian, a noodle restaurant. The company used the same ordering and delivery processes as Luckin Coffee. He said that Quxiaomian would try to replicate Luckin’s rapid growth across China. However, after only three months of operations, the company’s expansion was halted.

Shortly after the stint, Lu introduced the catering-related “A-Bite Workshop” startup project. A few months later, reports of store closures started to surface, and the project has since been abandoned.

Photo from The Wall Street Journal

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