Why is Luckin Coffee raising delivery prices now?

Luckin Coffee has quietly raised delivery drink prices by roughly 2 to 3 yuan at more than 800 stores across 11 cities, without a prior announcement. The company describes the move as refined management based on differences in store operating costs. Consumers responded on social platforms, and the change came as Luckin Tea returned to stores as an internal product line.

Luckin Tea first appeared as a Luckin Coffee product line in April 2019, then spun off that July to run independently with a franchise model. After the financial fraud incident and the COVID-19 pandemic hurt the brand, directly operated Luckin Tea stores in Beijing were taken back and rebranded, while franchise stores closed as traffic fell.

After a long silence, Luckin Tea has recently returned to the public eye with a brand-new posture, but this time it is not appearing as an independent brand, but rather being reintegrated as a product line within Luckin Coffee stores. At the same time, Luckin has quietly raised the delivery drink prices at some stores without prior announcement, by about 2 to 3 yuan, sparking widespread discussion among consumers on social platforms. The company responded that this move is a refined management measure based on differences in store operating costs, involving more than 800 stores in 11 cities. From an independent brand to a returning product series, from price adjustments to operational strategy changes, what market considerations lie behind this series of moves by Luckin Coffee?

Has it been a long time since everyone saw "Luckin Tea" on the streets? This tea drink series first appeared as a product line of Luckin Coffee on April 10, 2019. In July of the same year, Luckin spun off "Luckin Tea" to operate independently as a new-style tea drink brand and launched a franchise model, quickly covering many cities, among which "Luckin Tea" stores in the Beijing area were directly managed by the Luckin company.

However, with the dual impact on the brand from last year's Luckin financial fraud incident and the COVID-19 black swan event, some industry insiders analyzed that running the dual brands "Luckin Tea" and "Luckin Coffee" in parallel would be difficult, and they held reservations about the prospects of "Luckin Tea."

In August of this year, the previous analysis and predictions were confirmed — the directly operated stores of "Luckin Tea" were taken back by the Luckin company, and multiple "Luckin Tea" stores in the Beijing area successively changed their signage to "Luckin Coffee," while franchise stores were not included in this adjustment. Although they were not taken back by the company, dragged down by the decline in Luckin's brand reputation, franchise stores saw a sharp drop in customer traffic, and many franchisees found it difficult to sustain operations and closed one after another, causing "Luckin Tea" to gradually fade from public memory.

Until recently, "Luckin Tea," which had once reduced its independent stores in Beijing, is reappearing in another form within Luckin Coffee stores. Some observant netizens noticed that the sign of a Luckin Coffee store in a certain Beijing shopping mall had added the label "MIX Coffee X Tea Drinks." In addition to coffee, the store's menu also simultaneously sells new-style tea drinks and is marked with the words "Luckin Tea."

Returning from an independent brand to a product series, is Luckin preparing a new layout? Some analysts pointed out that the value of "Luckin Tea" in the new-style tea drink track should not be underestimated, as it has a relatively complete product matrix and a certain degree of brand awareness. Reintegrating "Luckin Tea" into the Luckin Coffee system can make the product line richer and more complete. In the current coffee market's competitive landscape where "all heroes contend," this move helps enhance the core competitiveness of the Luckin brand.

The return of the "Luckin Tea" product line has also brought another change to this "trial" store — the store's coffee delivery prices are 2 to 3 yuan higher than those of other Luckin stores.

In response, Luckin Coffee customer service staff said that the company will recently adjust prices for more than 800 stores in 11 cities based on customer traffic and sales conditions, with delivery prices for all drinks uniformly increased by 3 yuan, while pickup prices at stores remain unchanged.

Regarding the question of "the same product at different prices," the relevant person in charge of Luckin Coffee also responded. The person said that with Luckin Coffee's scaled development, the company will implement more refined management at the store operation level. Due to differences in operating costs among stores, the company will comprehensively evaluate factors such as rent, logistics, and operating costs, and implement differential pricing according to the actual situation of each store.

It is worth noting that Luckin Coffee did not issue a prior announcement about "delivery price increases at some stores," and netizens from multiple regions on social platforms expressed dissatisfaction, believing this approach is quite "undignified." Everyone generally believes that if delivery prices need to be raised, it should be publicly announced in advance, rather than quietly raising prices directly.

Image source: Internet

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