How Big Was the Luckin Coffee Net Loss in 2018?

Luckin Coffee posted a net loss of 857 million yuan for the first nine months of 2018, on cumulative sales revenue of 375 million yuan, a gross margin of -115.5%. The company confirmed the full-year loss will be far larger and said spending on subsidies to seize market share is a deliberate, expected strategy rather than a surprise.

A leaked Series B financing plan also projected 2018 full-year revenue of 763 million yuan, rising to 18.5 billion yuan by 2021. For comparison, Starbucks has held a gross margin above 50% for five straight years. The figures surfaced as Luckin reported 1.3 million users in August and about 146,600 daily active app users.

A recently exposed Luckin Coffee Series B financing business plan shows that in the first three quarters of 2018, the brand's cumulative sales revenue was 375 million yuan, but its net loss reached as high as 857 million yuan, with a gross margin of -115.5%, in sharp contrast to Starbucks' gross margin of over 50% for five consecutive years. In response to outside doubts, Luckin officially responded that the full-year loss will be far greater than that figure, and emphasized that spending money on subsidies is an established strategy and that the loss is in line with expectations. This article sorts out Luckin's revenue targets, user data, and the full official response, while also looking at the quality route of its coffee bean and equipment choices, to provide a reference for coffee lovers.

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On December 21, a Luckin Coffee Series B financing business plan obtained by CareerIn, a financial job-seeking and training service provider, was exposed. The document shows that in the first nine months of 2018, Luckin achieved cumulative sales revenue of 375 million yuan, a net loss of 857 million yuan, gross profit of -433 million yuan, and a gross margin as low as -115.5%. By comparison, Starbucks, the company Luckin benchmarks itself against, has maintained a gross margin above 50% for five consecutive years.

According to Luckin Coffee's plans, for a fairly long period in the future, the company will still need to rely on burning money to gain market share. Luckin estimates full-year revenue of 763 million yuan in 2018, and by 2021 that figure will climb to 18.5 billion yuan, equivalent to 24 times this year's amount.

Beijing Business Today reported that Luckin Coffee had 1.3 million users in August. A report released by Aurora Mobile on August 31 pointed out that Luckin Coffee's app had 146,600 daily active users, but did not disclose the number of transacting users.

In response to the above media reports, Luckin Coffee told Sina Tech that the full-year loss will clearly be far greater than this figure. The company said that quickly seizing the market through subsidies is an established strategy, and the current loss situation is in line with expectations.

According to this Series B financing business plan exposed by the media, Luckin Coffee's cumulative sales revenue in the first nine months was 375 million yuan, gross profit was -433 million yuan (gross margin -115.5%), and net loss was 857 million yuan.

The report also mentioned that according to Luckin Coffee's plans, for a fairly long period in the future it will still rely on burning money to exchange for market share. The company expects revenue of 763 million yuan in 2018 and 18.5 billion yuan in 2021, 24 times this year's amount.

Luckin Coffee responded that it can be certain that the full-year loss will be far greater than this figure. Rapidly occupying the market through subsidies is an established strategy, and the loss is in line with expectations.

Luckin Coffee also said that as of now, in less than a year, it has reached 12 million consuming users and sold more than 85 million cups in total. Next, it will still subsidize users in different ways at different times.

The full text of Luckin Coffee's response is as follows:

What can be certain is that our full-year loss will be far greater than this figure. Rapidly seizing the market through subsidies is our established strategy, and the loss is in line with our expectations.

We have always chosen better coffee beans and coffee machines, as well as the world's top supporting suppliers, and have received widespread recognition from customers.

As of now, in less than a year, consuming users have reached 12 million, and total cups sold have exceeded 85 million.

Next, we will still subsidize users in different ways at different times, and on the basis of adhering to high cost performance and high convenience, provide customers with high-quality coffee.

The above content is compiled by CoffeeHunters, a coffee news website.