China's Luckin Coffee Inc and International commodity merchant Louis Dreyfus Company (LDC) plan to develop a juice business, as the coffee chain expands into new drink categories in its battle with Starbucks Corp.
Luckin and LDC's joint venture will produce and distribute co-branded juices and includes plans to build a bottling plant, the companies said in a statement on Thursday.
As Starbucks and Luckin fight for market share in China, one of the biggest markets for coffee chains, the two companies have been expanding at a rapid pace - focusing on delivery, new products and modern stores to attract customers.
Luckin earlier this month said it would launch tea stores serving freshly-brewed teas, a big factor for the Chinese market filled with tea drinkers, with stores in shopping malls and other commercial locations where guests can spend time than just collect their orders.
The latest venture, building on LDC's juice division that has mainly focused on bulk supplies rather than retail products, reinforces ties between the two companies.
LDC, one of the world's largest bulk suppliers of citrus fruit juices, acquired a stake in Luckin during the Chinese firm's share listing earlier this year and the two are also planning to build a coffee roasting plant in China.
The venture with Luckin in China will focus on co-branded not from concentrate (NFC) orange, lemon and apple juices, and will market products through Luckin Coffee shops and other channels, the companies said.
'A Significant Opportunity'
"China is the fastest-growing NFC market globally and, together, Luckin and LDC see a significant opportunity to offer high quality, sustainably-developed NFC juices to the Chinese consumer," Jinyi Guo, Luckin Coffee senior vice president and co-founder, said in the statement.
The partners expect to launch their juices next year, an LDC spokeswoman added. Financial terms were not disclosed.
LDC, one of the world's biggest crop merchants, has said it wants to increase its presence in food processing and has cited regional partnerships as a way to expand.
It had in recent years earmarked its juice division, which has been affected by consumer health concerns about sugar content, for a possible sale or spin-off as a joint venture.
But the commodity group said this year the juice division was a core business and it was looking for partners to support investments in expanding further down the supply chain.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.