Luckin Coffee, the Chinese coffee giant, reaffirmed its commitment to its low-cost beverage strategy despite facing challenges to profitability due to rising costs. CEO Guo Jinyi expressed confidence in the company’s ability to sustain its RMB 9.9 pricing strategy, emphasizing Luckin’s robust infrastructure and scale as key factors in mitigating inflationary pressures. The company reported a 38% increase in group revenues for the fiscal year ending December 2024, reaching RMB 34.5 billion ($4.7 billion), with a notable 36% sales growth in the fourth quarter amounting to RMB 9.6 billion ($1.3 billion).
Although Luckin experienced higher expenses in materials, property, delivery, and marketing in 2024, its annual net income rose by 3% year-on-year to RMB 2.9 billion ($405 million). Despite evidence indicating that the ongoing price war is impacting profits, both Luckin and its competitor, Cotti Coffee, have shown a steadfast commitment to maintaining competitive pricing strategies. Cotti Coffee’s Chief Strategy Officer, Li Yingbo, announced the continuation of the chain’s discount strategy for the next three years to make coffee more accessible to Chinese consumers.
While Jinyi assured investors that Luckin would not transfer increased operational costs to consumers, reports suggest that the company has adjusted its promotional offerings, limiting discounts to a narrower range of beverages at select locations. Luckin’s investments in its supply chain and production facilities have positioned the company favorably in China’s expanding branded coffee shop market. A significant agreement with the Brazilian Trade and Investment Promotion Agency for the supply of 240,000 metric tons of coffee over five years has provided Luckin with price stability amid market fluctuations.
In addition to securing a substantial coffee supply agreement, Luckin inaugurated a new 570,000 square foot roasting facility in Suzhou City and initiated the construction of a new RMB 3 billion ($21.2 million) roastery and supply chain hub in Qingdao. These strategic moves aim to enhance Luckin’s operational efficiency and scale, with plans to achieve an annual roasting capacity of 100,000 tons by the end of 2025.
Despite the impact of its low-cost pricing strategy on profitability, Luckin continues to witness significant sales growth, with a 24.5% year-on-year increase in average monthly transacting customers in the fourth quarter, totaling 77.8 million. The company expanded its footprint by opening 6,066 new stores in China in 2024, reaching a total of 22,284 outlets, with a majority being company-operated. Luckin also ventured into international markets, launching 21 new stores in Singapore and entering the Hong Kong market with five outlets. In January 2025, Luckin further expanded its global presence by debuting in Malaysia.
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