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China’s Luckin Coffee plans US launch in comeback from fraud scandal

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China’s Luckin Coffee plans US launch in comeback from fraud scandal

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China’s largest coffee chain, Luckin Coffee, is planning to enter the US market and undercut rivals including Starbucks with its low-priced drinks, marking a comeback for the company after a fraud scandal that resulted in its Nasdaq delisting and a $180mn fine.

The Xiamen-based company is laying the groundwork for a US launch as early as next year, building out its supply chain and customising its technology for the market, according to two people with knowledge of the matter.

The expansion comes nearly five years after it was exposed for inflating revenues after raising $645mn in a US initial public offering in 2019. The fraud led to a wave of investor lawsuits and the company being booted off the main Nasdaq exchange.

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Luckin’s annual revenue of Rmb24.9bn ($3.5bn) exceeded Starbucks’ in China for the first time in 2023, though Starbucks has fewer outlets and its sales per store in China tend to be higher. The company’s revenue rose 35 per cent in the second quarter of this year to Rmb8.4bn, with Rmb871mn in net income.

In July, Luckin said it opened its 20,000th store in the country, while Starbucks has just over 7,300 locations. The Seattle-based company’s China slowdown is coming as sales are falling in the US, with the number of transactions declining by a tenth in its latest quarter. Brian Niccol, the company’s new chief executive, has said his priority is reviving US growth.

Luckin will target cities with large numbers of Chinese students and tourists such as New York, the people said. The company has been running advertisements during NBA games to build name recognition ahead of its planned launched, added one of the people.

Luckin wants to leverage its experience selling affordable coffee in China and undercut US incumbents by selling drinks priced around $2 or $3, the people added.

Luckin Coffee declined to comment.

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“Luckin Coffee is one of the great turnaround stories in Chinese business history,” said Shaun Rein, founder of China Market Research Group. “Many people thought they were dead, but underlying the fraud was a company with great technology and decent coffee at a competitive price.

“Over the past three years, Luckin has grabbed massive market share from Starbucks in China,” he added. “Now, it is coming after Starbucks on its home turf.”

Since the scandal, Luckin has overhauled its top management, kicking out the founder Lu Zhengyao, who Luckin alleges was responsible for the fraud. Lu did not respond to a request for comment.

Beijing-based private equity group Centurium Capital, an early investor in the company, became its controlling shareholder after acquiring the founder’s stake.

Luckin has been building out its supply chain as it prepares for the US launch and an expansion in south-east Asia. This year, it opened a $120mn roasting plant with an annual roasting capacity of 30,000 tonnes in Kunshan in the eastern province of Jiangsu.

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Luckin will have to adapt its cashless business model to the US market, said experts. Customers in its China stores have to order through an app, which offers discounts for group purchases and collects a wealth of data on consumer behaviour.

“The customer service experience here is just so different,” said Sharon Zackfia, a US-based consumer analyst at investment bank William Blair. “Starbucks kind of owns this market.”

The US coffee market is fiercely competitive. Besides Starbucks’ nearly 17,000 US stores, coffee-and-doughnuts chain Dunkin’ has more than 9,500 locations. New York-listed Dutch Bros has about 900 drive-through coffee outlets after expanding by a fifth in the past year. Meanwhile, coffee is sold everywhere from McDonald’s to convenience stores.

“Luckin faces a new challenge in the US, which is very saturated. Whereas in China it is opening up new markets with its coffee, bringing new consumers to the drink, in the US, the consumers already know what coffee is and have expectations,” said John Zolidis, founder of investment adviser Quo Vadis Capital.

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Top Drug Regulator Is Fired From the F.D.A.

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Top Drug Regulator Is Fired From the F.D.A.

Dr. Tracy Beth Hoeg, the Food and Drug Administration’s top drug regulator, said she was fired from the agency Friday after she declined to resign.

She said she did not know who had ordered her firing or why, nor whether Health Secretary Robert F. Kennedy Jr. knew of her fate. The Department of Health and Human Services did not immediately respond to a request for comment.

The departure reflected the upheaval at the F.D.A., days after the resignation of Dr. Marty Makary, the agency commissioner. Dr. Makary had become a lightning rod for critics of the agency’s decisions to reject applications for rare disease drugs and to delay a report meant to supply damaging evidence about the abortion drug mifepristone. He also spent months before his departure pushing back on the White House’s requests for him to approve more flavored vapes, the reason he ultimately cited for leaving.

Dr. Hoeg’s hiring had startled public health leaders who were familiar with her track record as a vaccine skeptic, and she played a leading role in some of the agency’s most divisive efforts during her tenure. She worked on a report that purportedly linked the deaths of children and young adults to Covid vaccines, a dossier the agency has not released publicly. She was also the co-author of a document describing Mr. Kennedy’s decision to pare the recommendations for 17 childhood vaccines down to 11.

But in an interview on Friday, Dr. Hoeg said she “stuck with the science.”

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“I am incredibly proud of the work we were doing,” Dr. Hoeg said, adding, “I’m glad that we didn’t give in to any pressures to approve drugs when it wasn’t appropriate.”

As the director of the agency’s Center for Drug Evaluation and Research, she was a political appointee in a role that had been previously occupied by career officials. An epidemiologist who was trained in the United States and Denmark, she worked on efforts to analyze drug safety and on a panel to discuss the use of serotonin reuptake inhibitors, the most widely prescribed class of antidepressants, during pregnancy. She also worked on efforts to reduce animal testing and was the agency’s liaison to an influential vaccine committee.

She made sure that her teams approved drugs only when the risk-benefit balance was favorable, she said.

The firing worsens the leadership vacuum at the F.D.A. and other agencies, with temporary leaders filling the role of commissioner, food chief and the head of the biologics center, which oversees vaccines and gene therapies. The roles of surgeon general and director of the Centers for Disease Control and Prevention are also unfilled.

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Supreme Court is death knell for Virginia’s Democratic-friendly congressional maps

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Supreme Court is death knell for Virginia’s Democratic-friendly congressional maps

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The U.S. Supreme Court refused Friday to allow Virginia to use a new congressional map that favored Democrats in all but one of the state’s U.S. House seats. The map was a key part of Democrats’ effort to counter the Republican redistricting wave set off by President Trump.

The new map was drawn by Democrats and approved by Virginia voters in an April referendum. But on May 8, the Supreme Court of Virginia in a 4-to-3 vote declared the referendum, and by extension the new map, null and void because lawmakers failed to follow the proper procedures to get the issue on the ballot, violating the state constitution.

Virginia Democrats and the state’s attorney general then appealed to the U.S. Supreme Court, seeking to put into effect the map approved by the voters, which yields four more likely Democratic congressional seats. In their emergency application, they argued the Virginia Supreme Court was “deeply mistaken” in its decision on “critical issues of federal law with profound practical importance to the Nation.” Further, they asserted the decision “overrode the will of the people” by ordering Virginia to “conduct its election with the congressional districts that the people rejected.”

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Republican legislators countered that it would be improper for the U.S. Supreme Court to wade into a purely state law controversy — especially since the Democrats had not raised any federal claims in the lower court.

Ultimately, the U.S. Supreme Court sided with Republicans without explanation leaving in place the state court ruling that voided the Democratic-friendly maps.

The court’s decision not to intervene was its latest in emergency requests for intervention on redistricting issues. In December, the high court OK’d Texas using a gerrymandered map that could help the GOP win five more seats in the U.S. House. In February, the court allowed California to use a voter-approved, Democratic-friendly map, adopted to offset Texas’s map. Then in March, the U.S. Supreme Court blocked the redrawing of a New York map expected to flip a Republican congressional district Democratic.

And perhaps most importantly, in April, the high court ruled that a Louisiana congressional map was a racial gerrymander and must be redrawn. That decision immediately set off a flurry of redistricting efforts, particularly in the South, where Republican legislators immediately began redrawing congressional maps to eliminate long established majority Black and Hispanic districts.

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Explosion at Lumber Mill in Searsmont, Maine, Draws Large Emergency Response

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Explosion at Lumber Mill in Searsmont, Maine, Draws Large Emergency Response

An explosion and fire drew a large emergency response on Friday to a lumber mill in the Midcoast region of Maine, officials said.

The State Police and fire marshal’s investigators responded to Robbins Lumber in Searsmont, about 72 miles northeast of Portland, said Shannon Moss, a spokeswoman for the Maine Department of Public Safety.

Mike Larrivee, the director of the Waldo County Regional Communications Center, said the number of victims was unknown, cautioning that “the information we’re getting from the scene is very vague.”

“We’ve sent every resource in the county to that area, plus surrounding counties,” he said.

Footage from the scene shared by WABI-TV showed flames burning through the roof of a large structure as heavy, dark smoke billowed skyward.

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The Associated Press reported that at least five people were injured, and that county officials were considering the incident a “mass casualty event.”

Catherine Robbins-Halsted, an owner and vice president at Robbins Lumber, told reporters at the scene that all of the company’s employees had been accounted for.

Gov. Janet T. Mills of Maine said on social media that she had been briefed on the situation and urged people to avoid the area.

“I ask Maine people to join me in keeping all those affected in their thoughts,” she said.

Representative Jared Golden, Democrat of Maine, said on social media that he was aware of the fire and explosion.

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“As my team and I seek out more information, I am praying for the safety and well-being of first responders and everyone else on-site,” he said.

This is a developing story. Check back for updates.

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