Luckin Coffee brews up strong comeback

Luckin still has more to do to regain the market's trust.

By LU Yibei, MA Yue, ZHAO Xiaojuan


Over the past year, coffeehouse chain Luckin Coffee’s net income has almost doubled, as has the number of franchise stores and customers. In April, a new coconut milk latte sold more than 660,000 cups on its first day.

GUO Jinyi, the current chairman, is the new boss and has been with Luckin since the early days. During the 2020 financial scandal, Guo became chairman and immediately started closing down loss-making stores, including a fifth of the company’s stores in Beijing. After a year of stagnation, CAO Wenbao, who had worked for Mcdonald's for 18 years, became the head of operations.

Since 2021, Luckin has stopped a lot of promotions and focused on private traffic, targeting marketing to retain customers. In Q4 2021, Luckin served 16 million customers, nearly double the number in Q1.

Luckin is desperate for funds and in April 2021, received US$250 million (1.7 billion yuan) from Centurium Capital and Joy Capital. In January this year, Centurium became the actual controller of Luckin with 33.9 percent of the shares and 57 percent of voting rights.

Luckin is committed to producing a stream of innovative products. No one will be buying a coconut latte this time next year. The company will have come up with plenty of amusing trivialities by then. Luckin invests more effort in packaging new products than the products themselves. By April 20, stores had run out of the cup sleeve for Yeyun Latte. 

Location is important, and office lobbies the choice. In low-tier cities, Luckin franchisees make a gross profit of over 20,000 yuan each month. In smaller cities, customers are more likely to visit Luckin than Starbuck, mostly because of lower prices, but also because they feel more comfortable in an environment created for the domestic market.

Although Luckin creates trending products, its brand image remains vague. What is Luckin’s brand value? What is the message it is trying to convey? These problems are hard to avoid in the long term.