What does the latest coffee online news mean for Cotti Coffee?

A court in Beijing filed an enforcement case against Cotti Coffee founder Lu Zhengyao and partner Li Huan for about 1.896 billion yuan, reported on April 3 by the Beijing Fourth Intermediate People's Court. It is the third enforcement action against Lu within a year, with cumulative amounts nearing 3 billion yuan.

The news spread as Cotti opened its first US store in Hawaii. Jiemian News links the case to old debts from the Shenzhou system of auto companies, which collapsed after the Luckin fraud scandal in 2020. Cotti says operations are normal, but whether the enforcement order affects future financing remains the industry's focus.

While Cotti Coffee opened its first store in Hawaii, USA, its founder Lu Zhengyao was once again subject to court enforcement of nearly 1.9 billion yuan, drawing widespread attention. According to the China Enforcement Information Disclosure Network, the case was filed by the Beijing Fourth Intermediate People's Court, with an enforcement amount of approximately 1.896 billion yuan. This is already the third time Lu Zhengyao has been subject to enforcement within a year, with cumulative amounts approaching 3 billion yuan. From the Luckin financial scandal to the collapse of the Shenzhou system, and now to Cotti Coffee's rapid expansion, Lu Zhengyao's business trajectory has always been accompanied by controversy and the shadow of debt. Cotti responded that operations are completely normal, but whether the massive enforcement information will affect its future financing remains a focal point of industry attention.

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Just as Cotti Coffee's first US store officially opened in Hawaii, news that its founder Lu Zhengyao and partner Li Huan were subject to enforcement of nearly 1.89 billion yuan also spread rapidly online. On the evening of the 7th, the topic #CottiCoffeeFounderSubjectToEnforcement# surged onto the Weibo hot search list, with reads now exceeding 150 million.

According to information disclosed on the China Enforcement Information Disclosure Network, the amount enforced against Lu Zhengyao this time is approximately 1.896 billion yuan. The enforcing court is the Beijing Fourth Intermediate People's Court, and the filing date was April 3.

Since the case was only filed on the 3rd, according to relevant legal procedures and regulations, the official specific reasons for this enforcement have not yet been formally announced. Only the parties involved or their attorneys can obtain the detailed legal documents.

According to an analysis by Jiemian News, based on currently available public information, the above case stems from an old matter left over from the "Shenzhou system" automobile companies founded by Lu Zhengyao.

In 2020, following the "Luckin fraud scandal," the "Shenzhou system" capital empire built by Lu Zhengyao instantly collapsed, and Lu Zhengyao himself and the Shenzhou Ucar company behind him immediately faced numerous contract and debt lawsuits.

Since January 2021, Lu Zhengyao and his spouse Guo Lichun, due to a contract dispute with Shanghai Puyin Anxin Asset Management Co., Ltd., were subject to enforcement of 1.367 billion yuan. After that, four more enforcement records were added, bringing the cumulative enforced amount to as high as 4.595 billion yuan. Corresponding to these enforcement records, Lu Zhengyao also has 10 records of being restricted from high consumption, with cases spanning from January 2021 to January 2024.

In addition, according to Tianyancha data, apart from the latest 1.89 billion yuan enforcement case, Lu Zhengyao also had one enforcement record each in March 2023, April 2023, and January 2024, with the enforcement amounts totaling more than 1.1 billion yuan. Adding the newly added amount on April 7, within about one year, the total amount enforced against Lu Zhengyao has approached 3 billion yuan. In addition, there are multiple consumption restriction orders and equity freeze records under Lu Zhengyao's name. (A terminated enforcement case usually refers to a case where the court rules to terminate the enforcement procedure because the person subject to enforcement has no property available for enforcement.)

Public information shows that Lu Zhengyao was born in July 1969 in Pingnan County, Ningde City, Fujian Province. He is currently chairman and CEO of CAR Inc., chairman of Shenzhou Ucar, and chairman of the strategic committee of Cotti Coffee. He once served as chairman of Luckin Coffee, and his business moves have always attracted outside attention.

Lu Zhengyao was already labeled as "one of the members of the former Luckin financial fraud team," and afterward suffered successive failures in entrepreneurial projects such as "Qu Xiaomian" and "Shejian Yingxiong." Market trust in him had long been greatly reduced. Today's Cotti Coffee can be considered to be in a relatively decent operating state.

Lu Zhengyao founded Cotti Coffee in October 2022. Regarding whether the above enforcement will affect Cotti Coffee's cash flow or pace of expansion, some media reporters sought verification from Cotti. A relevant person in charge responded that "there is no impact, and everything is normal at present." In fact, from the company's operational level, as Cotti's legal representative, Lu Zhengyao's personal debts and risks such as being restricted from high consumption indeed will not directly interfere with Cotti Coffee's normal operations.

However, it is worth noting that Cotti, which now has 7,000 stores, is almost "imitating" Luckin Coffee in products, pricing, and strategy, and has long engaged in close-quarters rivalry with it. It not only has long implemented a low-price strategy of single-digit coffee, but also continuously expanded stores into other countries and regions, thus requiring even stronger capital support.

Given that Cotti relies so heavily on external financing for its development, the news that Lu Zhengyao has been subject to enforcement of several billion yuan may bring a more severe test for Cotti Coffee's refinancing.

Image source: Internet

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