By ZHAO Xiaojuan

On the evening of January 6, a letter demanding the replacement of GUO Jinyi as chairman and CEO of Luckin Coffee appeared on social media.

The letter, signed by 46 company executives, accuses Guo of interference in the procurement department and destruction of the internal audit system for personal gain, stating that staff who oppose him have been dismissed or allowed to leave the company. The letter says that the quality of raw materials has fallen while the purchase price has risen, at the same time as Guo has greatly increased the procurement budget.

Guo says he has a clear conscience and has asked the board to investigate the letter.

In April, Luckin was found to have 2.2 billion yuan (US$310 million) of fabricated sales in 2019. Since the financial scandal enveloped the company, suppliers have been changed frequently. In July 2020, LU Zhengyao, the co-founder and chairman, and QIAN Zhiya, CEO of Luckin were removed by the board. Guo took over as the chairman and CEO.

An ex-employee who left Luckin four months ago told Jiemian News that the management of stores and raw materials was in chaos. After the scandal broke, the situation was exacerbated by staff departures, extend working hours, and changes to suppliers. In his view, this chaos was not the fault of Guo’s management; the problem has always existed. Another insider told Jiemian News that there had been no large-scale departure of employees.

Guo said the letter originated with Lu and Qian. “Some of those who signed the letter don’t know what really happened,” Guo said in a statement. “They were manipulated by Lu and Qian.”

Guo was once Lu’s right-hand man. A source close to the matter said Lu is now still trying to control Luckin from behind the screen. “Guo has not complied, so Lu wants him out,” the source said.

From April 2020 to November 2020, Luckin Coffee's net revenue from its own 4,000 stores continued to grow. More than 60 percent of the stores were profitable in November. Revenue for the first three quarters of 2020 was 565 million, 980 million and 1.145 billion, all well up on 2019.

WANG Zhendong, director of Shanghai Feiyue Investment Management said, "Luckin will not be hit hard. A conflict at the top of the company should not influence the middle level."