LDC and Luckin Coffee collaboration boasts expanded sustainable coffee supply chain in China

06 Jan 2020 — In a bid to fuel a growing footprint of coffee shops across China, Dutch agricultural commodity merchant Louis Dreyfus Company (LDC) and China’s Luckin Coffee have laid the foundation stone for their joint venture coffee roasting plant in Xiamen. The facility boasts an annual production capacity of 30,000 metric tons and is expected to start production by mid-2021, with an anticipated annual production capacity expansion of 40,000 metric tons set to be added in a second phase of construction.

The strategic partnership will continue to strengthen LDC’s business presence across China, facilitating development further downstream, highlights Michael Gelchie, Chief Operating Officer of LDC. “We are pleased to be advancing in our alliance with Luckin, which has proved successful in developing a broad customer base in the Chinese coffee market. This is through the use of cutting edge technology and an innovative business model,” he says.

“This joint venture will also enable a more robust, transparent and sustainable coffee supply chain to provide great tasting, high quality and convenient coffee to Chinese consumers,” he adds.

Situated on a 35,000 m2 plot of land, the state-of-the-art plant will be equipped with the “latest environmentally-friendly technology” for coffee cleaning and roasting, including the roaster’s exhaust air cleaning and smoke elimination. 

“LDC is among the world’s largest merchandizers of green coffee beans, with a diverse product and regional portfolio. This is in line with Luckin’s focus on high-quality coffee beans and diversified product flavors to meet consumer needs,” says Jinyi Guo, Senior Vice President and Co-Founder of Luckin Coffee. 

“Through this coffee roasting joint venture, Luckin extends upstream closer to the raw materials and production. This gives greater product quality control and enhances the ability to offer better products and services to consumers, together with providing a better coffee experience,” he adds.

Building upon these developments, Luckin has since invested in online marketing technology to reach customers outside of the coffeeshop. The company’s smartphone app and presence on other third-party platforms offers customers a 100 percent cashier-less environment. Its store network is comprised of pick-up stores, relax stores and delivery kitchens, which help to maximize customers convenience and broader delivery coverage.

This coffee roasting joint venture project is part of a strategic cooperation between the two companies, which also includes a joint venture to develop a juice business, signed last September.

“Each company brings specific expertise that will enable the joint venture to better manage the challenges right to the end consumer,” Murilo Parada, Global Head of the Juice Platform, told FoodIngredientsFirst. He identified bottling, marketing and traceability as some of the challenges that monitoring a full value chain poses. 

Meanwhile, James Zhou, LDC Global Vice President and Regional Head for LDC North Asia, envisions this joint venture in juice as a “true win-win situation”.

“Our areas of expertise are totally complementary, with LDC’s know-how in managing a sustainable juice value chain and Luckin’s knowledge of the Chinese consumer, marketing and digital platform know-how, and established consumer base,” he concludes. 

By Benjamin Ferrer

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