How did Luckin Coffee pass Starbucks China in revenue?

Luckin Coffee reported second-quarter 2023 net revenue of 6.2014 billion yuan, up 88 percent year on year, passing Starbucks China for the first time. Operating profit reached 1.173 billion yuan at an 18.9 percent margin. Store count hit 10,836, including 7,188 self-operated outlets, making Luckin the first Chinese coffee chain brand above ten thousand stores.

Starbucks China posted about 5.96 billion yuan (US$822 million) for the same April-to-June period. Luckin's growth came from its franchise-with-existing-store policy and a 9.9 yuan weekly reward campaign, which turned scale into consumer pricing. Outside China the low-price approach does not apply, and Singapore stores price above local Starbucks, a point that drew discussion. The gap is not about most expensive coffee beans but about volume and cost control.

In the second quarter of 2023, Luckin Coffee delivered a remarkable report card: total net revenue of 6.2014 billion yuan, up 88% year-on-year, surpassing Starbucks China in revenue for the first time. At the same time, Luckin's total number of stores exceeded 10,836, making it the first domestic coffee chain brand with over ten thousand stores. From the "franchise with existing store" policy to the "9.9 yuan every week" customer reward campaign, Luckin is turning its scale advantage into long-term benefits for consumers. However, in overseas markets, Luckin has not continued its domestic low-price strategy; prices at its Singapore stores are even higher than those of local Starbucks, sparking considerable discussion. This article will take you through a detailed interpretation of the key data and strategic moves behind Luckin's financial report.

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On August 1, Luckin Coffee released its financial report for the second quarter of 2023 (April to June), with revenue surpassing Starbucks China for the first time.

Financial report data shows that Luckin's total net revenue in the quarter reached 6.2014 billion yuan, a sharp year-on-year increase of 88%; calculated under US accounting standards, operating profit was 1.173 billion yuan, with an operating margin of 18.9%, both reaching record highs.

Consistent with the revenue growth trend, benefiting from the push of the new "franchise with existing store" policy, Luckin further accelerated its store expansion in the second quarter. The number of net new stores opened was 1,485, up 15.9% quarter-on-quarter. By the end of the second quarter, Luckin's total number of stores had reached 10,836, including 7,188 self-operated stores.

It is worth noting that Starbucks subsequently also released its latest quarterly financial report. As of the end of June, Starbucks China's revenue for the April to June period was US$822 million, equivalent to about 5.96 billion yuan, up 51% year-on-year. This means that, after setting a record in store count and achieving an overtake, Luckin also surpassed Starbucks in revenue for the first time, becoming China's largest coffee chain brand by scale.

In June this year, with the opening of the Xiamen Zhongshan Road flagship store, Luckin's number of stores in the Chinese market reached 10,000, making it the first domestic coffee chain brand to break through ten thousand stores. At the same time as reaching "ten thousand stores," Luckin launched the "Ten Thousand Stores Celebration" campaign, rewarding consumers with the offer of "9.9 yuan coffee every week."

According to media reports including Yicai, in response to the record-breaking profitability in the second quarter, Luckin Coffee Chairman and CEO Guo Jinyi said that in the second half of 2023 the company will increase investment, focus on customer value, and turn its scale advantage into long-term benefits for consumers.

Guo Jinyi also revealed that since Luckin's 9.9 yuan reward campaign launched in June, the number of consuming users has hit a new high, with the number of consuming users in June exceeding 50 million.

On social media, many Luckin employees complained about work pressure after the anniversary celebration, which also indirectly confirms the extremely high popularity brought by the "9.9 era."

In order to further expand Luckin's market share and brand influence, Luckin has now decided to make the 9.9 yuan campaign a regular offering, lasting at least 2 years. When talking about the impact of the price war on performance, Guo Jinyi admitted that Luckin is capable of keeping profit margins within a reasonable range while controlling cost-effectiveness.

In addition to maintaining the 9.9 yuan discount for the long term, Luckin will also continue to promote overseas expansion. However, in the process of overseas expansion, Luckin has not adopted the same low-price strategy as in the domestic market, which has drawn complaints from many consumers.

According to media reports including Sina Finance, most products at Luckin's Singapore stores are priced between 6 and 8.5 Singapore dollars, equivalent to about 31 to 44 yuan. Its hit product Coconut Latte is originally priced at 8 Singapore dollars, even more expensive than a regular latte at local Starbucks branches. Compared with the local affordable coffee chain brand Flash Coffee, Luckin's prices are about twice as high.

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