How Did Luckin Coffee Surpass Starbucks China in 2023?
Luckin Coffee sold over 2 billion units in 2023 and posted total sales of 24.86 billion yuan, about 3.45 billion US dollars, overtaking Starbucks China's 3.16 billion US dollars for the year. The result followed the Moutai sauce-flavored latte, which sold more than 100 million yuan in a single day, and a low-price campaign that fixed 9.9 yuan coffee in many office routines.
The chain also leaned on co-branded products with Lines Dog, Tom and Jerry, and Blue and His Friends, and passed 15,000 stores. Growth now faces pressure as the 9.9 yuan discount is scaled back and store expansion slows, so the next phase depends on whether higher prices can hold onto the customers the discount brought in.
In 2023, Luckin Coffee achieved a historic breakthrough in sales through its co-branded collaboration with Moutai and its sustained low-price strategy, officially surpassing Starbucks China to become the largest coffee chain brand in China. However, with the scaling back of its 9.9-yuan promotional campaign and a slowdown in store expansion, Luckin's future growth faces new challenges. This article reviews Luckin's path to a comeback, analyzes the key factors behind its success, and explores the profit pressures and market strategy adjustments it currently faces.
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For Luckin, a homegrown Chinese coffee chain brand, 2023 was undoubtedly a milestone year. That year, Luckin quickly rose to fame with its sauce-flavored latte launched in partnership with Moutai, with single-day sales exceeding 100 million yuan, introducing the brand to many consumers who previously did not drink coffee.
At the same time, the low-price coffee discount war between Luckin and Cotti that lasted nearly a year embedded the concept of "9.9-yuan coffee" into the daily routines of many caffeine-dependent office workers, and also reshaped the public's perception of coffee price ranges. In addition, Luckin was labeled a "collaboration maniac," with popular IPs such as Lines Dog, Tom and Jerry, and Blue and His Friends all partnering with Luckin, attracting consumers to purchase co-branded products.
The enhancement of brand influence combined with the appeal of discounted coffee to consumers drove Luckin's sales to climb significantly in 2023. According to Luckin's 2023 financial report, its products sold over 2 billion units, with total sales reaching 24.86 billion yuan (approximately 3.45 billion USD), setting a new historical record for revenue scale and significantly exceeding Starbucks China's total sales of 3.16 billion USD. From this perspective, after a full year of effort in 2023, Luckin successfully replaced Starbucks China to become the largest coffee chain brand in China.
Signs such as surpassing 15,000 stores and continuously launching new co-branded campaigns indicate that Luckin is currently in excellent shape, and also convey to the outside world that Luckin's rise to become the new leader in China's coffee market is not merely a matter of luck. But the recent comprehensive scaling back of the 9.9-yuan campaign at Luckin stores seems to suggest that this positive momentum may not be sustainable in the long term.
Judging from Luckin's financial report data, the 9.9-yuan promotional campaign may have caused its marketing expenses to surge, and combined with seasonal factors, the ten-thousand-store celebration discount campaign, and fierce industry competition, profit growth has declined. In order to improve product profit margins, Luckin Coffee adjusted the weekly "9.9-yuan coffee" promotional campaign launched in May of last year, narrowing the scope of coupon usage for most beverages at applicable stores. Currently, only 10 products on the App can still use the 9.9-yuan coupon.
Furthermore, the problems Luckin faces are not limited to the low profits brought by the 9.9-yuan campaign. After opening franchising for special locations, Luckin has entered more hospitals, schools, scenic areas, and other venues, with the number of stores increasing to 16,000, of which self-operated stores exceed 10,000. However, the future Chinese market may not be able to provide enough space for Luckin to maintain such a rate of store expansion. A slowdown in store opening speed means Luckin may no longer be able to rely on scaling up to drive performance growth, and can only increase revenue by boosting per-store income.
Luckin Coffee Chairman and CEO Guo Jinyi stated that competition in China's coffee industry is intensifying, and coupled with uncertain factors such as seasonality, Luckin's subsequent performance may be affected to some extent. But regardless of whether things go well or not, Luckin will still firmly advance its current pricing and development strategy to ensure business growth and market share. At the same time, Luckin has also incorporated overseas store expansion into its future plans, actively seeking new markets suitable for Luckin's development.
Image source: Internet
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The above content is compiled by CoffeeHunters, a coffee news website.
