(Bloomberg) -- Luckin Coffee Inc., a challenger to Starbucks Corp. in the race to dominate China’s growing coffee culture, raised $561 million in an expanded U.S. initial public offering.

The Xiamen-based company sold 33 million American depositary shares Thursday for $17 each, after marketing 30 million shares for $15 to $17, according to data compiled by Bloomberg.

Luckin is spending millions of dollars a year opening outlets to unseat Starbucks as China’s top coffee company. Since its inception in June 2017, Luckin has quickly expanded into 2,370 stores in 28 cities, with backing from investors including Singapore sovereign wealth fund GIC Pte and China International Capital Corp. By the end of this year, Luckin aims to become the largest coffee network in China in terms of number of stores.

It faces an uphill battle against Starbucks, which entered China 20 years ago and dominates with more than half of the market last year, according to Euromonitor. Luckin held only a 2.1 % share in 2018. Starbucks has more than 3,700 outlets in the country and is also expanding at break-neck speed, opening a new store roughly every 15 hours. It’s aiming to have 6,000 sites in China by 2023.

China may become an increasingly important market for coffee retailers due to the country’s low per-capita consumption of the beverage and rising middle-class affluence, Bloomberg Intelligence analysts wrote in January. Coffee consumption is estimated to grow by about 3 % a year through 2023, according to Euromonitor.

Luckin, with a focus on convenience and affordability, is seeking to lure urban office workers who don’t need the big plush spaces offered by Starbucks. Many customers are initially attracted to the coffee chain by its free vouchers, and the company plans to keep investing heavily in discounts and deals.

Luckin’s outlets are cashless and designed for fast pick-up as well as delivery, with an app that rushes out deliveries in about 18 minutes. The company has a partnership with internet giant Tencent Holdings Ltd. Starbucks only launched delivery in August, under a partnership with Alibaba Group Holding Ltd.

Chasing the entrenched rival has been costly. Luckin said it’s burning through $130 million a year and may continue to see losses in the future. The company reported a net loss of $241 million for 2018, on total revenue of $125 million. It lost $82 million on revenue of $71 million during the first quarter.

The offering was led by Credit Suisse Group AG, Morgan Stanley, CICC and Haitong International. Luckin is expected to trade on the Nasdaq Global Select Market under the symbol LK.

--With assistance from Crystal Tse.

To contact the reporters on this story: Liana Baker in New York at lbaker75@bloomberg.net;Yueqi Yang in New York at yyang492@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, ;Clementine Fletcher at cfletcher5@bloomberg.net, Michael Hytha

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