The Chinese coffee giant says it has the infrastructure and scale to mitigate rising costs and maintain its RMB 9.9 beverage offer in competition with affordable rival, Cotti Coffee
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Beverage promotions on display at a Luckin Coffee store in Zhongshan, China | Photo credit: Freer/Shutterstock
Chinese coffee giant Luckin Coffee remains committed to its low-cost beverage strategy despite rising costs hindering profitability, CEO Guo Jinyi indicated to investors following strong 2024 results.
Luckin’s group revenues increased 38% year-on-year in the 12 months ended 31 December 2024 to RMB 34.5bn ($4.7bn), with sales up 36% in the fourth quarter to RMB 9.6bn ($1.3bn).
Despite higher materials, property, delivery and marketing costs throughout 2024, Luckin’s annual net income increased 3% year-on-year to RMB 2.9bn ($405m).
Speaking on an earnings call, Jinyi said Luckin Coffee was well-placed to continue its RMB 9.9 ($1.40) pricing strategy – first initiated in 2023 to match value-focused rival Cotti Coffee – as the coffee chain’s strong infrastructure and large scale had enabled it to mitigate inflationary pressures.
“We don’t have plans to increase prices and our RMB 9.9 coffee promotion will consistently be available to our customers,” he said.
Despite growing evidence that the price war is negatively impacting profits, with Luckin’s net income growing just 3% last year compared to a staggering 483% in 2023, neither Luckin nor Cotti appear willing to back down. In November 2024, Cotti’s Chief Strategy Officer Li Yingbo said the chain’s discount strategy will remain in place for a further three years as it seeks to make coffee more affordable for Chinese consumers.
However, while Jinyi has indicated Luckin will not pass on higher operational costs to consumers, reports in China suggest the coffee chain has reigned in the scope of the discount, with less frequent promotions applying to a smaller range of beverages at fewer stores.
Nonetheless, investment in its supply chain and production facilities have enabled Luckin to maintain a competitive edge in the fast-growing Chinese branded coffee shop market.
In November 2024, the coffee chain signed a $1.38bn agreement with the Brazilian Trade and Investment Promotion Agency (ApexBrasil) for the supply of 240,000 metric tons of coffee over the next five years – a move which offers greater price certainty for Luckin amid wider market volatility.
Additionally, Luckin commenced operations at a new 570,000sq ft roasting facility in Suzhou City, Jiangsu in April 2024 and broke ground on a new RMB 3bn ($21.2m) roastery and supply chain hub in the eastern port city of Qingdao five months later. According to Jinyi, Luckin will have an annual roasting capacity of 100,000 tones by the end of 2025.
“Our scale advantage and enhanced efficiency give us some buffer to absorb such pressures. Therefore, we think the impact of rising coffee bean prices is largely manageable for us for the moment,” he added.
While low-cost pricing has hampered Luckin’s profitability over the last 12 months, the strategy continues to drive significant sales growth for the chain, with average monthly transacting customers growing 24.5% year-on-year in the fourth quarter to 77.8 million.
The Beijing-based operator opened 6,066 net new stores in China last year to reach 22,284 outlets – 65% of which are company operated. Luckin also opened 21 net new stores in Singapore to reach 51 sites and launched in Hong Kong with five outlets. China’s largest coffee chain has since scaled its international presence further with a January 2025 launch in Malaysia.