by Zhao Xiaojuan

Luckin Coffee is expanding its presence in China’s milk tea market, leveraging its store network and pricing strategy to attract customers beyond its core coffee business.

On March 9, the company announced that daily sales of its newly launched freshly-brewed jasmine tea drink had exceeded 1.67 million cups. Promoted by actress Liu Yifei, the product features ads of her picking and brewing jasmine tea in Hengzhou, Guangxi, a key jasmine-producing region.

Luckin is making a strong push into the “light milk tea” category, led by tea chain Chagee. On March 3, it launched a 9.9-yuan (US$1.40) promotion, distributing five billion discount vouchers—five times more than its August 2024 campaign for jasmine milk tea.

The strategy highlights Luckin’s ambitions. Over two years, it has issued 600 million discount vouchers to attract new customers. Liu Yifei’s endorsement has fueled engagement on social media, where fans share branded merchandise like shopping bags and collectible cards.

Luckin emphasizes its supply chain advantages, stating it has designated 100 mu (6.7 hectares) of jasmine fields in Hengzhou as an exclusive sourcing base. It also introduced a “Three 100” standard—100% freshly brewed tea, 100% dairy fat, and around 100 calories per cup. New product labels display calorie, protein, and tea polyphenol content, an approach Chagee pioneered to position itself as a health-conscious brand.

Luckin’s pricing strategy is yielding results. With highest single-day sales of 1.67 million cups, the new drink has surpassed 15 million cups. It competes directly with Chagee‘s signature jasmine milk tea, “Boya Juexian.”

In August, Luckin named Liu Yifei its global brand ambassador and tea promotion officer. Its jasmine milk tea, sometimes called the “9.9-yuan Boya Juexian,” set a record, selling 44 million cups in its first month and bringing in new customers.

Luckin’s Q3 2024 financials showed 79.85 million monthly active consumers, up 36.5% year-on-year, with cumulative transaction users surpassing 300 million.

Competition is intensifying. iiMedia Research estimates China’s new-style tea market will reach 3.5 trillion yuan in 2024, growing at 6%, but slowing to 1.5% by 2028. Leading tea brands like HeyTea, GuMing, ChaPanda, and Mixue, as well as coffee rivals Starbucks and Cotti, have all introduced light milk tea offerings.

Industry analysts say Luckin’s discounting is backed by its store network and supply chain. Wang Zhendong, chairman of Shanghai Feiyue Investment Management, noted that Luckin has a significant lead in store count and distribution. However, its growth potential is limited as lower-tier markets near saturation, and international expansion remains uncertain.

With 20,000 stores and cost efficiencies, Luckin is using competitive pricing against Chagee and others. Light milk tea is now a mature, cost-effective category, making it easier to replicate. While Luckin has pioneered coffee innovations like coconut latte and Maotai-flavored latte, its milk tea approach emphasizes affordability over originality.

Wang warned that tea and coffee have overlapping customer bases, meaning milk tea could cannibalize coffee sales rather than expand the market. However, Luckin’s sustained investment suggests it views light milk tea as a long-term strategy rather than a seasonal trend.

Luckin’s latest earnings report reinforces this momentum. In 2024, it recorded 71.8 million monthly transaction users, up 48.5% year-on-year. It added over 100 million new users, bringing its total customer base to 334 million. Total beverage sales reached 3 billion cups, a 55% annual increase.

With discounts, celebrity endorsements, and supply chain integration, Luckin is strengthening its position in China’s competitive milk tea market while maintaining its coffee leadership.