At four o'clock, there is a watershed, "morning coffee and afternoon tea".
Recently, a reporter from 21st Century Business Herald found that Luckin Coffee's ordering mini program and software no longer have the option of "9.9 per week", and have replaced it entirely with "afternoon tea starting from 9.9". Users can receive a 38% discount coupon for new products and a 9.9 yuan "afternoon tea" limited time coupon that takes effect after 4:00 pm.
Within the available range, there are 11 products including Da Tun Pear Light Milk Tea and Fengdan Ceylon Light Milk Tea, and no products containing coffee. The reporter attempted to add the cheapest American coffee to their shopping cart. With a discount coupon of "52% off all drinks", the price displayed was 11.96 yuan, while using the same price discount, a latte was 15.08 yuan.
Circled the Happy Valley, solidified the fundamentals, "exited" the price war, and Luckin's profits visibly increased. The latest financial report data shows that Luckin Coffee's revenue for the third quarter of 2024 was 10.181 billion yuan, an increase of 41.4% year-on-year. According to US accounting standards (GAAP), the operating profit margin was 15.3%, the operating profit was 1.557 billion yuan, and the net profit was 1.303 billion yuan. As of press time, Luckin Coffee (ADR) (LKNCY) reported $24.620 per share, up 2.07%.
Set the time back to June 9, 2020, the last trading day before Luckin's delisting. Luckin left the main board market with a closing price of $1.38, a decrease of 91.88% from its issue price of $17 on May 17, 2019, and a decrease of 97.31% from its historical high of $51.38 on January 17, 2020.
Four years of turbulence and upheaval. Today, Luckin Coffee's stock price has increased by 17.84 times, and its size has preliminarily met the basic conditions for returning to the main board market. The last time I faintly heard the sound of a comeback was in early 2022, when Luckin completed its asset restructuring and went on. But now that two years have passed, will Guo Jinyi still lead Luckin towards NASDAQ?
According to media reports, Luckin plans to enter the US market as early as next year. This is a test of luck for its business to enter the US market, but it is also seen by the market as a signal that Luckin is attempting to return to NASDAQ. After the return, Luckin's valuation will be directly benchmarked against Starbucks, which is another capital story.
Just this time, how can it regain the trust of investors?
The repeated horizontal jump of "9.9"
There is no longer a figure of "9.9" in the martial arts world, but the legend of "9.9" is spreading everywhere.
On December 31, the reporter of 21st Century Business Herald opened the Tiktok live broadcast room purchased by Ruixing Coffee Group and found that the price of its second kill was as low as 0.5 yuan per cup, and there were many hot items within the price range of 2 yuan.
(Flash sale prices in the live broadcast room, screenshot from the reporter's phone)
The 21st Century Business Herald reporter learned that among the links on the shelves of Tiktok's usual "Ruixing Coffee Group Purchase" studio, there are "one out of 12 classic popular models" with a price of 5.9 yuan, "one out of 10 American families" with a price of 9.9 yuan, and "one out of 15 warm coffee in winter" with a price of 7.9 yuan. However, it is only supported to pick up at the store, not for taking out.
Unlike the bustling promotions in live streaming rooms, this year, the 9.9 yuan promotion on Luckin Coffee's mini program and app has repeatedly fluctuated and quietly metabolized the caffeine component at the end of the year.
According to public information, in February of this year, Luckin Coffee set a threshold for its 9.9 yuan promotion, requiring the addition of customer service to receive coupons. The coffee category applicable to the 9.9 yuan price range is also decreasing. In May of this year, the 9.9 yuan per week event section only left options such as American style and latte, and added orange C iced tea and grapefruit C iced tea without coffee. At the end of the year, it evolved into a discount coupon for afternoon tea starting from 9.9 after 4:00 pm, and coffee products exited the promotion stage of the mini program.
This two pronged strategy is not a concession to the affordable coffee market, nor is it a random swing. On the contrary, just as its advertising slogan on mini programs and apps goes, "Morning coffee and afternoon tea", Luckin Coffee is gradually testing the market's response, occupying "all time", and demonstrating its ambitious goal of grasping coffee and plotting the tea beverage market.
In addition to the "full-time" competition over "caffeine", the evolution of Luckin Coffee's discount quota also reveals its more flexible and sensitive market strategy.
The spotlight first turned to its low-priced coffee coupons, which have changed their distribution channels, prices, and more diversified choices. Whether it's customer service, welfare groups, Tiktok live broadcast room, ten cup group tickets, and seckill activities, we can find that Ruixing is looking for users with higher viscosity and loyalty. The increase in the threshold for mini programs has washed away the "passers-by" who only want to "fleece", leaving higher net worth customers in the welfare group, and the traffic space for mini programs and apps has been reserved for new tea drinks; Tiktok studio provides as usual, and even cheaper coupons also hold the scoring points of coffee, leaving enough dignity for customers who want to obtain affordable coffee.
As Guo Jinyi said, "I never think 9.9 yuan is a price war. Under a reasonable price structure, 9.9 yuan has its sustainability
In addition, looking back at the launch of its tea beverage products in August, it was quite lively and unique to the summer season. Its "Light Jasmine · Light Milk Tea" has been launched, with Liu Yifei as the spokesperson, telling the favorite health stories in the tea drink market from the beginning, such as "real tea, real milk" and "4 zeros" (4 zeros are 0 vegetable fat powder, 0 aspartame, 0 hydrogenated vegetable oil, 0 trans fatty acids). After summer comes early autumn, another story of tea drinking, Luckin Coffee actively embraces the trend of "the first cup of milk tea in autumn".
Hot selling products enter the market, spokespersons increase exposure, immediately tell the favorite stories of new tea drinks, and seize the marketing trend of new tea drinks. By employing all four strategies and leveraging new media and other platforms for promotion, Luckin Coffee has also established a firm foothold in the new tea beverage market, welcoming a surge of traffic.
Gently jasmine red, but Luckin is very cautious.
Cautious store strategy
In 2024, the once "black and red" Luckin Coffee, after Guo Jinyi took over, although still maintaining a low price strategy and a trend of adding new stores, seems to have become more low-key and stable. On the one hand, Luckin Coffee has reduced its promotional efforts for "low prices" and "number of stores" through more flexible low price marketing; On the other hand, it is a more cautious store strategy.
According to its Q3 2024 financial report, Luckin Coffee opened a net of 1382 new stores during the period, bringing the total number of stores to 21343. The total number of stores increased by 6.9% compared to the previous quarter. Compared with the third quarter report of 2023, it can be seen that it has slowed down. At that time, the net number of newly opened stores during the period was 2437, and the total number of stores was 13273, with a month on month increase of 22.5% in the total number of stores. According to multiple sources, Luckin Coffee has the highest number of stores in the Chinese coffee industry.
Three brands and one play. Using expansion strategy as the coordinate system, the number of stores as a reference, and Luckin Coffee as the origin, two brands with seemingly different stories can be compared in the same dimension. One is Kudi, and the other is Starbucks.
Kudi's keywords can be described as' soaring ahead '. The 'high song' lies in Kudi's slogan of 'opening 50000 stores in three years'. The 'fierce advance' lies in the fact that compared to the other two coffee brands, Kudi, who has always been good at fighting storms, is still maintaining a radical price war and an expansion strategy of 'three stores surrounding one store' and 'close combat'. On the other hand, looking at the actual situation of opening stores in Kudi, according to data from Narrow Gate Restaurant, the number of its stores exceeded 6000 by the end of 2023, while the number of its stores at the end of 2024 was 8170, with a per capita consumption of 10.32 yuan.
From 2023 to 2024, Starbucks accelerated its descent and became closer to the "small town story". According to Starbucks' Q4 2024 financial report and annual report (as of September 29, 2024), the total number of Starbucks stores in mainland China has reached 7596, covering nearly 1000 county-level markets. In the fiscal year 2024, Starbucks China entered 166 county-level markets, setting a new historical high, and the number of new markets entered nearly doubled compared to the previous fiscal year. Among them, half of the newly added stores are located in lower tier cities (third tier and below cities), and the proportion of newly added stores in lower tier cities has reached a historical high. On October 19th, Starbucks announced that every Starbucks store in mainland China will sell Yunnan single origin coffee beans in the future.
For Starbucks, Guo Jinyi believes that "what Starbucks is most worth learning is the establishment of coffee culture, the dissemination of its brand, and its long-term efforts in the supply chain from source to end." Luckin Coffee has learned from Starbucks' pace in the coffee supply chain and quickly formed its own business model.
Although there have been references, luck, storms, and setbacks, looking back on Luckin's journey, it can be said that he came from a heroic background and became a legend step by step. Founded in 2017 and IPO on NASDAQ in 2019, it was suddenly exposed for financial fraud in January 2020, delisted in June, and resumed profitability in 2022. In 2023, it surpassed Starbucks China with a turnover of 24.9 billion yuan, and its operating profit for the third quarter of 2024 was 1.557 billion yuan.
The past successes are no longer replicable. But Luckin can't be wrong again in the next step of the capital market.