Luckin Coffee widens market lead in China with surging first quarter sales

Luckin Coffee is China’s largest coffee chain by outlets | Photo credit: via Shutterstock

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Luckin Coffee has posted surging first quarter revenues alongside robust outlet growth and strong profits for the first quarter of 2023.
 
Reporting its results for the three months ended 31 March 2023, Luckin Coffee said revenues rose 84.5% year-on-year to reach RMB 4.4bn ($646m), a rise it attributed to increases in the number of products sold, stores in operation and monthly transacting customers.
 
The coffee chain opened 1,137 stores during the period, including its first two international outlets in Singapore, and now operates 9,351 locations, comprising 6,310 company-owned and 3,041 partnership stores.
 
Luckin also reported GAAP operating income of RMB 678.4m ($98.8m) with a margin of 15.3%, compared to RMB 16.1m and a margin of 0.7% a year ago, when the value-focused coffee chain posted its first ever profit since launching in last 2017.
 
Average monthly transacting customers rose 84.6% to 29.5 million, up from 16 million during the same period in 2022.
 
Luckin’s company-owned stores generated profits of RMB 791.6m ($115.3m) during the period and a achieved a profit margin of 25.2% compared to 18.5% in the same quarter of 2022, primarily ‘due to the benefits of economies of scale from the increased number of products sold’, the coffee chain said.
 
“Our goal is to make Luckin Coffee's high-quality coffee accessible to consumers worldwide, by leveraging our brand's professional, youthful, fashion, and healthy image and our new retail coffee business model,” said Dr. Jinyi Guo, Chairman and CEO, Luckin Coffee.
 
“The Chinese coffee market is highly competitive, and we welcome healthy competition and collaboration to expand the market for coffee consumption. Our success in developing and improving our products and services, delivering high-quality products and services to our customers, growing brand awareness, and optimising our supply chain and operational efficiency has enabled us to differentiate ourselves in a highly competitive market,” he added.
 
Luckin’s nimble business model, which deploys heavy discounting alongside small format stores, dark kitchens and delivery, has enabled it to expand at lightning pace across China.
 
It competes with US-based Starbucks, which is seeking to reach 9,000 stores in China by 2025, and other international coffee chains, including Canada’s Tim Hortons and UK-based Costa Coffee.
 
Luckin also faces growing competition from Cotti Coffee, which was launched in late 2022 by its own former executives, Charles Lu and Jenny Qian. Cotti Coffee deploys a similar business model to Luckin and opened 1,300 stores across 181 Chinese cities during its first five months in operation.