The world's leading merchants and processors of agricultural goods Louis Dreyfus Company (LDC) and domestic coffee chain operator Luckin Coffee have signed an agreement on Thursday to establish a joint venture to develop a co-branded Luckin Juice business in China, cashing in on the country's fast-growing healthy drinks market.
The business will focus on co-branded orange, lemon and apple juices that are not from concentrate (NFC). Louis Dreyfus will be responsible for the full value chain from its farms to customers at destination, and plans to build its own bottling plant in the future.
It also plans to bottle and brand other fruit and vegetable juices.
Luckin Coffee stores will play an important role as sales outlets, while the business also plans to market its juices via other channels.
"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," said Guo Jinyi, Luckin Coffee senior vice-president and co-founder.
Guo said they are pleased to be partnering with one of the world's largest citrus fruit growers and juice suppliers to launch a co-branded Luckin Juice and continue their ambitious growth plans.
There are strong synergies between the two sides, Guo said. Through the joint venture with LDC, Luckin is extending upstream toward production, giving greater product quality control along the whole process and the ability to offer better products, a better experience and better services to consumers, to further meet their diverse product needs.
"In the future, Luckin Coffee will further reduce costs to meet the needs of broader consumers and increase their consumption frequency," he added.
James Zhou, LDC global vice-president and regional head for LDC North Asia, said the two sides' 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.
Jason Yu, general manager of Kantar Worldpanel China, said the not-from-concentrate juice category has grown 21 percent in the past 12 months, one of the fastest-growing kinds of beverage sectors, reflecting the country's consumers' pursuit of healthy and nutritious lifestyles. This sector also has high potential given the penetration rate is only 6.3 percent, and given the products' higher requirements on manufacturing, transporting and storage.
"Luckin's massive store network can be a boost to their juice's penetration," said Yu. "Luckin wants to provide a wider range of products to its consumers aside from coffee and tea. NFC juice is a natural extension."
Source: China Daily