How Did the Luckin Coffee Store Network Reach 7,846?

Luckin Coffee's Q3 2022 revenue rose 65.7% year on year to 3.895 billion yuan, with net profit of 529 million yuan and operating profit of 585.3 million yuan at a 15.0% margin. Monthly transacting customers averaged 25.1 million, up 70.5%. The chain added a net 651 stores, reaching 7,846 locations, and will reopen franchise quotas in lower-tier markets in December.

The total splits into 5,373 self-operated and 2,473 partnership stores, a net gain of 2,175 against the 5,671 stores reported a year earlier. Growth in directly operated outlets has slowed, so the partnership model now carries expansion. Starbucks China's Q3 results rebounded quarter on quarter, and the wider coffee store race keeps drawing crossover players, a pattern that echoes through the history of coffee shop industry competition.

Luckin Coffee's Q3 2022 financial report is out: total revenue for the quarter rose 65.7% year-on-year to 3.895 billion yuan, with net profit reaching 529 million yuan, successfully turning losses into profits. The total number of stores grew to 7,846, continuing to lead the domestic chain coffee track. Meanwhile, Chairman Guo Jinyi revealed on the earnings call that in December, the company will reopen partnership quotas for the lower-tier market, signaling that Luckin, against the backdrop of slowing growth in directly operated stores, is brewing a new round of expansion. Starbucks China's Q3 results rebounded quarter-on-quarter, temporarily holding onto the top spot, but competitive pressure remains undiminished. The coffee track continues to heat up, with crossover players constantly pouring in. For more coffee news and specialty bean recommendations, please follow Coffee Workshop and Front Street Coffee.

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Luckin Coffee disclosed its Q3 2022 earnings report yesterday. Data shows that total revenue for the quarter climbed sharply by 65.7% year-on-year to 389.5 million yuan, while net profit reached 529 million yuan. Under US GAAP, operating profit was 585.3 million yuan, with an operating margin of 15.0%. The average number of monthly transacting customers reached 25.1 million, up 70.5% year-on-year. Overall, Luckin has successfully emerged from its loss-making mire.

In terms of store expansion, Luckin added a net 651 stores in the third quarter. As of the end of the quarter, the company's total number of stores reached 7,846, including 2,473 partnership stores and 5,373 self-operated stores. Compared with 5,671 in the same period of 2021 (1,465 partnership stores and 4,206 self-operated stores), the store scale increased by a net 2,175, further consolidating its industry-leading advantage.

Looking back at the brand's development history, the first luckin coffee store landed in Galaxy SOHO in October 2017, and its China headquarters, Luckin Coffee (China) Co., Ltd., was registered and established in Xiamen in March 2018, with Guo Jinyi as the legal representative. After years of expansion, Luckin has risen to the top in terms of the number of chain coffee stores in China, greatly leading Starbucks' several thousand stores.

In the second quarter of this year, some analysts predicted that Luckin was expected to surpass Starbucks China in revenue in the third quarter and top the domestic coffee market. However, based on current data, Starbucks has temporarily retained the top spot. Starbucks China's performance in the quarter showed signs of recovery, with net revenue of 696 million US dollars (about 4.968 billion yuan). Although it was still declining year-on-year, it grew 29% quarter-on-quarter, and its current number of stores is 6,021.

It is understood that Luckin's total operating expenses in the third quarter were 3.3094 billion yuan, up 40.4% year-on-year. Among these, sales and marketing expenses were 159.3 million yuan, up 64.3% year-on-year, mainly due to the company's continued brand strategy investment through multiple channels and a corresponding increase in advertising spending.

On August 22 this year, Luckin publicly stated that partner recruitment had been suspended, with the resumption time to be announced officially, and emphasized that the company had not developed any sub-brands, and that information circulating online about franchising or agency for Luckin and its sub-brands was false.

However, on this earnings call, Luckin's current chairman and CEO, Guo Jinyi, revealed regarding franchise store expansion plans that in December this year the company will reopen a batch of partnership quotas for the lower-tier market.

From the perspective of store layout, Luckin's density of self-operated stores in first- and second-tier cities has approached saturation. Over the past three quarters, although such stores still increased by nearly a thousand net, the growth rate has fallen back to around 7%, which may be precisely the key reason Luckin decided to restart recruitment of partnership participants in the lower-tier market.

Competition in China's coffee market is only intensifying, and the track continues to attract entrepreneurs from all walks of life, with the number of companies making crossover arrangements rising steadily. Entrants come from every industry. In addition to food and beverage companies, giants such as China Railway, China Post, Huawei, and NIO have also stepped in, jointly pushing up the heat of the coffee track.

Recently, Canadian chain coffee brand Tims China teamed up with e-commerce giant Alibaba Group to bring coffee products to millions of users on Alibaba's online platforms. At the same time, Tims China, which has received investment from tech giant Tencent Holdings, is accelerating business expansion and plans to open 2,750 stores in China by 2026.

At present, Luckin's directly operated stores have covered 60 cities, while franchise stores have spread across more than 230 cities. With the reopening of franchise channels, Luckin is expected to usher in a new round of growth.

Image source: Internet

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