Yesterday (18 July 2024), Luckin Coffee opened its 20,000th store, in Beijing, another key milestone for the fast growing Chinese coffee chain. This is only a year after Luckin Coffee opened its 10,000th store in the southeast city of Xiamen on 5 June 2023. We discussed Luckin Coffee’s growth in Episode 76 of the Impulso Podcast: Starbucks vs Luckin in China – who is winning? VIDEOAt the end of Q1 2024, Luckin had a store count of 18,590, or 9,239 more than a year ago, so breaking through the 20,000 number was just a matter of time (and deliberation).How can Luckin grow so fast? We have discussed a lot about Luckin’s strengths in our blog (TheLowDown), the Impulso Podcast by Momentum Works and Sip Innovate Repeat immersion workshop. Perhaps you can make reference from this page from a case study in our Coffee in Southeast Asia report:Data-driven product development and store operations are faster, more efficient and more scalable. Ensuring touchpoint with every user (i.e. user operations through app or Wechat/Alipay mini programme) really allows Luckin to have all the data points, and the ability to develop and market targeted products. While the founders of Luckin Coffee were ousted after the famous accounting scandal, the vision and technological foundation they had set allowed the new management to really bring the company from bankruptcy to profitable scaling. The ability to tap into a lot of external data: from food delivery platforms, telcos, mapping apps etc, is also a key enabler of Luckin’s fast expansion. This data allows Luckin to select promising new sites, even before sending a team to the ground. Handcrafted coffee, for the 1st timeNormally Luckin in-store staff just needed to press buttons to make cups of drinks – in order to gain efficiency. Any latte art will significantly slow down the turnover. One interesting attribute of the 20,000th store is that – for the first time, Luckin is selling handcrafted coffee. A cup of handcrafted drink is priced at CNY38 (US$5.2), almost the same price as Starbucks – although after vouchers consumers actually pay CNY20 (US$2.75). Is Luckin trying out a different business model that will eventually compete even more directly against Starbucks in China? Data will tell. Also at the opening ceremony of the 20,000th store was Adriano Giacomet Higa de Aguiar, Head of Commercial Section of Brazil’s Embassy in Beijing. In June this year, Luckin Coffee signed a deal committing to procure 120,000 tonnes of coffee beans from Brazil over the next two years. With its scale, Luckin obviously is able to (and has to) go even upper stream to the supply chain to optimise costs and ensure reliability. In addition to procurement of beans, Luckin also built a number of processing plants in China, with a total processing capacity of 45,000 tonnes a year. The image below shows Luckin’s processing plant in Jiangsu (the biggest single facility in China):With a widely recognised brand and supply chain capacities, Luckin’s coffee products are already widely available across supermarkets and ecommerce channels in China: Overseas expansionLast year, Luckn Coffee started operations in Singapore, their first international market. It opened 30 stores within the first year of operations in the city state, and added a few thereafter. People once worried that consumers in Singapore would not download an app just to buy coffee – the worry was unnecessary. However, in Singapore, site selection is still a craft of experienced professionals as data is not as readily available as in China. Whoever is doing this for Luckin in Singapore is doing a good job. As Luckin is now preparing to expand into a few other countries, how it continues to adapt its core strengths would be very interesting to watch. Related —Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].
