What does Luckin Coffee's growth say about the coffee industry?

Luckin Coffee's Q2 2024 report showed total net revenue of 8.403 billion yuan, net profit of 871.1 million yuan, and close to 20,000 stores. Same-store sales at self-operated stores still fell 20.9% year-on-year. Starbucks also reported a 14% decline in same-store sales in China, showing that store growth and revenue gains can hide weaker performance at existing locations.

The price war drives this gap. Promotions of 9.9 yuan and even 6.6 yuan keep drawing volume, but profitability stays under pressure as brands crowd into the same locations. Smaller and independent shops feel the squeeze most, since dense openings leave less room for individual stores. The result is a coffee industry where scale expands faster than per-store earnings.

Luckin Coffee's Q2 2024 financial report shows total net revenue reached 8.403 billion yuan, net profit of 871.1 million yuan, and total stores approaching 20,000. However, same-store sales at self-operated stores fell 20.9% year-on-year, and Starbucks' same-store sales in the Chinese market also dropped 14%. Behind the appearance of growth in both revenue and store count, the same-store data reveals hidden concerns. The price war continues to escalate, with promotions of 9.9 yuan or even 6.6 yuan emerging endlessly. Brands trade low prices for sales volume, yet profitability pressure is hard to conceal. Leading brands and small-to-medium brands alike are caught in the battle for locations, stores are opening ever more densely, and the survival space for individual stores is constantly being squeezed. This article combines the latest financial data to analyze why Luckin finds it harder to make money amid scale expansion, and explores the evolution of the competitive landscape in the coffee industry.

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Last night, Luckin announced its Q2 2024 financial report. The report indicated that total net revenue for the quarter reached 8.403 billion yuan, with net profit of 871.1 million yuan. This month, Luckin celebrated the opening of its 20,000th store, bringing the total number of stores to 19,961.

Subsequently, Starbucks released its latest financial report this morning. Data shows that its net revenue for the quarter was 733.8 million USD, up 5% quarter-on-quarter. The number of stores at the end of the quarter was 7,306, an increase of 213 from the previous quarter and a 13% increase year-on-year.

On the surface, both Luckin and Starbucks are seeing rising revenues and continuously expanding store networks. But if we turn our attention to same-store sales, the situation looks less optimistic. Luckin's financial report revealed that same-store sales at self-operated stores fell 20.9% year-on-year. Starbucks' quarterly report likewise showed that same-store sales in the Chinese market decreased 14% year-on-year, with both average ticket price and transaction volume contracting.

This reflects that although brands continue to increase their number of stores and the financial reports present a scene of prosperity, newly opened stores may not bring the sales growth the brands expect.

Thus, in a coffee market where "there are many monks but little porridge," brands' first thought is often to exchange lower prices for more sales, making the 9.9 yuan competition increasingly fierce and even dragging in some peers who were originally on the sidelines.

Among them, Luckin is undoubtedly the protagonist of the price war. Since launching a price war with Cotti last year, Luckin has attracted widespread consumer attention, greatly increased brand awareness, and expanded its user base, but at the same time it has been accompanied by a continuous decline in operating profit margin and increasingly obvious profit losses.

To stop the bleeding in time, Luckin began to scale back low-price promotions and restored the prices of some best-selling products to their original levels. This move prompted a large number of users to complain on social platforms that the brand "can't take the heat," and they turned to other brands, causing a significant drop in store sales.

At the same time, competitors targeted the customers Luckin lost and quickly fought for the market with 9.9 yuan or even lower 6.6 yuan prices, making the price war increasingly intense. Even Starbucks, which disdained price wars, was not spared and was forced to join the battle.

It cannot be denied that low prices can indeed drive product sales, but sales volume does not directly equal profitability. For small and medium-sized brands lacking sufficient financial support, trading price for volume actually means losing money on every cup sold, which is no different from drinking poison to quench thirst. Over time, they will only be dragged down and ultimately headed for closure.

For leading brands with strong financial strength, the price war also puts them under pressure. Therefore, brands have launched battles for locations, trying to drive overall sales and increase profits through more stores. In the eyes of the brands, more stores may mean occupying a larger market share.

However, increasingly dense location layouts invisibly compress the market's room to survive, intensifying not only competition among brands but also competition among stores, causing some stores in poor locations to fail to make ends meet. Perhaps, in this bloody industry competition, "opening stores without making money" will no longer be only a concern for small and medium-sized brands, but will also become a worry for leading brands such as Luckin and Starbucks.

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