Starbucks has a Venti-sized problem in China.

Just one month after the Seattle-based company unveiled a bold plan to triple Chinese revenue and nearly double the number of outlets in the country to 6,000, it was forced to warn that same-store sales growth there would be flat or negative in the third quarter. Now local upstart coffee shop Luckin Coffee has raised $200m in an attempt to compete with it.

Starbucks’ chief executive Kevin Johnson blames weakness in Chinese sales on third-party delivery services clogging up cafés and frustrating patrons.

His competitor, however, has come up with a superior solution to this problem. Luckin Coffee has undercut its US rival on price and convenience. Tapping into Chinese consumers’ love of convenience and delivery, it has dedicated nearly half of its 525 stores to just preparing coffee for delivery.

Starbucks would be wise to do the same. China’s keen taste for coffee is needed to offset tepid sales growth in the US. Plans to shutter 150 US stores next year amid poor revenue growth led to a sharp share price fall at the end of June. Although given that these closures will be in over-caffeinated urban neighbourhoods where the chain is already ubiquitous, the impact will be negligible.

Losing Scott Maw, chief financial officer, is more worrying. The 13 per cent drop in Starbucks’s shares since June 19 has left them trading near a three-year low. Shares trade at 20 times forward earnings. Starbucks is almost a quarter cheaper than Dunkin’ Brands.

Dunkin’ Brands also has plans for supersized growth in China, as does McDonald’s and the UK’s Costa. The Starbucks stumble in China should teach a cautionary lesson. First-mover advantage does not always last.

Starbucks virtually created the mainland coffee shop market over the past two decades and remains the biggest coffee chain with 3,300 outlets. Even so, Starbucks needs to wake up and smell the Luckin Coffee.

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