After going to work at the beginning of the year, the migrant workers who never left their hands suddenly found that Luckin 9The $9 a cup campaign shrunk.
On February 19th, Xiao Fan, who works in Beijing International Trade Center, planned to have a cup of coffee, opened the Luckin applet, and after "selecting a store" in the past, the system would automatically jump out of "99 yuan" coupon, but this day disappeared. Xiaofan had to spend 18 yuan and order a new drink. Later, I was reminded by a friend to know that Luckin "9The "9 RMB" coupon is hidden in the secondary menu bar and can only be used for a few selected coffees.
Not only that, in order not to let consumers use it "smoothly", Luckin also set up a "trick" - in the "classic menu" and "every 99" menu is displayed under two **. In other words, if the consumer does not find out the secret, even if he receives the coupon, if he continues to buy a raw coconut latte under the customary interface, he still needs 16$5.
On February 18, "Luckin 99 yuan a cup of activity shrinkage" topic rushed to the hot search on Weibo. Many netizens reported that the original 99 yuan coupon, now only 8 designated drinks can participate, and then sparked heated discussions. Some netizens said fiercely: "If you can't afford to play, don't play", "The store with Cudi next to it will be more active, and it will take off without Cudi", "It's not 9."9 don't buy it, because Luckin is only worth 99 "Coffee freedom is gone".
In "9After the shrinkage of the "9 yuan" activity was scolded on the hot search, the relevant person in charge of Luckin Coffee said to **: The adjustment of corporate preferential activities is a normal business behavior.
More than half a year ago, Guo Jinyi, chairman and CEO of Luckin Coffee, also said conclusively: "9The "9 yuan thanksgiving activity" exceeded expectations and will be carried out on a regular basis, at least for two years. Unexpectedly, he changed his mind half a year later.
Xiaofan recalled, in fact, Luckin"9The "9 Yuan" campaign has shown signs of shrinkage in November last year. In the past, it would automatically pop up before ordering, and "you can't scratch it off", and you will need to search for it after November to receive it. The city found that November is also the time when Luckin announced its third quarter report for 2023, and the profit margin began to shrink.
To recap, Luckin's "9The "9 yuan" event is to snipe Cudi and go online decisively.
In the first half of 2023, Cudi has been making great progress, opening more than 5,000 stores in one go, and fighting a big battle to sell coffee to 99 yuan a cup, in just two weeks, more than 1.5 million cups were sold. In the face of Cudi's menacing, Luckin chose to follow up in May last year and launched 9The 9 yuan event was mainly distributed in stores around Cudi at that time. A month later, Luckin expanded its scope to cover all stores.
The effect of this ** battle is significant. Many people have achieved coffee freedom through Luckin, and many people have abandoned Starbucks to drink Luckin instead.
According to Luckin's financial report data, as of the third quarter of 2023, the number of new customers exceeded 30 million, the average monthly number of trading customers reached 58.48 million, and the single-quarter revenue hit a new high, reaching 7.2 billion yuan, a year-on-year increase of 849%。According to the estimation of investment promotion, Luckin is opening the "9After the "9 yuan" campaign, the revenue of a single store increased by 5% to 10% month-on-month.
But the war also eroded Luckin's profits.
In the second quarter of 2023, before Cudi's sudden kill, Luckin's net income and operating profit both hit record highs of 6201.4 billion and 1172.8 billion yuan, and officially sat on the throne of China's "coffee brother". And with the passive on-line "99 yuan", after entering the third quarter, Luckin's profit margin fell by more than 5 points quarter-on-quarter, to 134%。Operating expenses increased by 141% year-over-year. At the third-quarter earnings conference, Luckin management said that the profit margin may continue to decline in the fourth quarter.
Now Luckin is facing the next challenge: the winter coffee consumption season continues; Outside of Cudi, Luckin's enemies are spreading across the industry; Brands are expanding rapidly in lower-tier markets – and Luckin, which is about to manage more than 20,000 stores, will be the real test from now on.
At the end of January this year, the stock price of Luckin pink sheet market rose by nearly 50% in more than 3 months, and market concerns increased sharply. And Luckin quietly reduced "9The marketing investment of the "9 yuan" activity may be to grasp the profits more firmly before the bigger battle comes.
Fighting, co-branding, and staking ground, Luckin was forced out by Cudi in the past year, and he was also busy flying.
According to the financial report data, as of the end of the third quarter of 2023, the total number of Luckin Coffee stores was 13,273, including 8,807 self-operated stores and 4,466 associated stores. As of the end of 2022, the total number of Luckin stores is only 8,214.
Now, a few months later, the total number of Luckin stores has approached 20,000. As of February 20, Luckin Coffee had 18,082 stores, with an average of more than 2,000 stores per quarter, according to Narrow Door Restaurant.
If before Cudi's catfish entered the game, Luckin's store opening plan was mainly to "saturate" increase points in first- and second-tier cities, then in 2023, especially "9After the launch of the "9 yuan" activity, Luckin's store opening strategy went to a defensive "point encryption" for Cudi on the one hand, and vigorously promoted sinking at the same time.
According to the Jihai brand monitoring, as of October 2023, third-tier cities and below have contributed 36% of Luckin's new stores. This made it possible for many people to drink Luckin coffee in their hometown during the Spring Festival holiday just past.
Kaka's hometown is located in a fourth-tier county in Hubei Province, with a local population of 300,000. When she returned to her hometown in early February, she saw that the coffee machine in the Luckin store was "so busy that it was smoking" and that it took 20 minutes to wait for an order to pick up an order. On social networks such as Xiaohongshu, many netizens said that since around August last year, they have found Luckin in their third- and fourth-tier cities, counties, and even townships.
A coffee industry analyst told the city: Previously, the industry generally believed that the coffee market could only focus on first- and second-tier cities, and 15-25 yuan was the psychological range of consumers for coffee. "Third-tier cities do not have enough business density, they only like to drink flavored milk tea, and it is difficult to leverage the demand for coffee." The "third place" advocated by Starbucks, coupled with a unit price of about 35 yuan, has been regarded as high-end consumption in third- and fourth-tier cities.
Therefore, the mainstream view at that time was that "the coffee market was close to saturation and it was difficult to support more points". During this period, Luckin also slowed down its store layout and focused more on optimizing profit margins, reducing subsidies and marketing spending.
However, on May 29, 2023, in order to stop Cudi from continuing to soar, Luckin began to change its nature, no longer sticking to self-operation, and launched the "franchise with stores" policy, and at the same time launched a "new joint operation cooperation" method for stores during the lease contract period.
This model is commonly known as the "flop" in the industry, and the purpose is to facilitate the initiator to seize the opponent's high-quality points. At that time, Luckin said that the area with stores covered 241 cities in 21 provinces and two autonomous regions, excluding cities and regions that were basically saturated in Beijing, Shanghai, Guangzhou, and first- and second-tier cities.
According to Luckin to **: This store franchise activity is the first time Luckin has opened, and it is also the last time to open, and the time window may be very short - therefore, this can also be seen as Luckin's "shouting" and urging to Cudi franchisees. In addition, according to the city circle, compared with the new franchise stores, Luckin has relatively relaxed requirements and support for the "flop" from Cudi stores.
Jihai monitoring data shows that among the newly opened stores in first-tier and new first-tier cities, the proportion of "encrypted stores" within 500 meters of existing stores is close to 60%. According to the city, in addition to seizing points in advance in the layout of "crypto stores", many of them also come from the "flop" that focuses on Cudi.
After a year of fierce battles with Cudi, 9With a 9 yuan promotion, the number of stores has advanced from 8,000 to more than 18,000, and Luckin has completely changed its appearance. At the same time, the bigger challenge is that Cudi is mainly based on franchises, while Luckin's main battlefield is still self-operated.
In other words, it is the franchisee's money that loses in the ** battle, and Luckin loses his own money. At the beginning of 2023, Luckin had planned to open 10,000 stores by the end of the year. And passive expansion is a helpless and dangerous move for Luckin. While revitalizing the situation, Luckin should consider long-term stability and quick resolution.
And from the contraction "99 yuan" activities, Luckin no longer regards Cudi as the number one enemy.
Standing at the Cudi level, although in the past year, although "sticking to Luckin" has been put on the lips, and objectively helped the workers achieve coffee freedom, it has been very difficult to add new stores, and it has not created popular models such as Luckin Changhong's raw coconut latte and thick milk latte, but it has further reduced the ** to 8$8 a cup.
In addition, operating a chain of restaurants and controlling the ** chain is king. In September this year, Cudi co-branded Wuchang Rice to launch the "Rice Milk Latte", which has obvious intentions to benchmark the "Sauce Latte". However, according to ** reports, in the second week of the product's launch, many stores have run out of goods to sell.
What's more, more and more doubts erupt about Cudi's profitability. Cudi's "8The 8 yuan coupon is always**, but according to the industry's single cup of coffee after the operating costs are superimposed, a single cup is close to 8-10 yuan, and Cudi can be said to sell a cup and lose a cup.
In order to balance the return on investment expectations of franchisees, Cudi has been adopting the "subsidy welfare" play: participation 88 yuan coupon for coffee, press 9 per cup9 yuan subsidy 1$1. Franchisees who open multiple stores will be given another 05 yuan subsidy - if the location is close to Luckin, there is an additional subsidy.
According to the city, in 2023, Cudi will also be personally listed by Lu Zhengyao and signed a VAM agreement of up to 1 billion yuan with Douyin, covering the whole year. Then, on the one hand, Cudi continues to subsidize, on the other hand, Lu Zhengyao has bad credit in the capital industry, and there is no news of external financing, and Cudi's financial pressure can be imagined.
Previously, Cudi's development strategy was to use the money of franchisees to pave the way, and use the best war to do large-scale to attract a new round of franchisees, but now this practice is becoming more and more unsustainable. In January this year, Cudi was exposed to a series of problems such as forcing franchisees to sell alcohol, low gross profits, and difficulty in recovering costs.
Cudi's expansion has also slowed down significantly. Cudi, which boasted to have opened more than 5,000 stores around July 2023, now has only 6,800 stores. According to the analysis of industry insiders, the situation of Cudi is not optimistic now, and if the franchisee centrifuges in large quantities, there will be a danger of collapse.
As the pace of Cudi's hurricane slowed down, Luckin began to have the spare strength to gradually shrink the first battle, re-consolidate the first system, and adjust profits.
In fact, in the past year, although the volume of stores has more than doubled, Luckin has basically held the moat at several key nodes such as the first chain, ensuring the income of a single store, and introducing franchisees.
Although Luckin has sunk into the county seat in a big way, according to the city boundary, its capital verification process for franchisees is still very strict, and only "professional players" are accepted.
A Luckin franchisee revealed to the city that in the middle of last year, although the public information required franchisees to verify the threshold of 600,000 yuan, the actual "need for at least 1.5 million". In addition, Luckin also requires franchisees to have experience in tea drinks and have certain store resources. According to **, the actual audit pass rate of Luckin is less than 5%. "A lot of people have moved to join Cudi, which has a lower bar to entry. ”
In terms of the layout density of point site selection, Luckin has also done relatively moderation to avoid mutual blood pumping between stores. Kaka told the city boundary that she saw that there were already three Luckin in the county town of Hubei, and now the business is relatively hot. "But the county has a limited population, and if there are a few more, it will be difficult to say business. ”
In addition, Luckin, which is known for its first-class chain capabilities in the industry, has launched new products every month from first-tier cities to lower-tier markets to ensure stable output. In September 2023, the sales volume of Luckin's soy sauce latte will reach 5.42 million cups on the first day, and the sales volume of the mascarpone cheese latte will also reach 16.24 million cups in the first week, but the market as a whole has not experienced a shortage of supply and quality fluctuations.
After taking the battle of Cudi, he quietly went offline" 99 yuan" activity, Luckin, obviously hopes to return to his more familiar rhythm as soon as possible.
The city has found that after 2021, by creating popular models such as raw coconut lattes, Luckin has significantly increased the unit price and repurchase rate of customers: a single cup** has increased from less than 10 yuan in 2019 to 15 yuan in 2022. Snow Lake Capital also said in the "long" report released in November 2022 that 32% of Luckin's sales come from high-frequency users who buy more than 5 times a month, which is significantly ahead of other brands, and Luckin has gotten rid of its dependence on coupons and subsidies at that time.
But then, Luckin has bigger problems to solve. Gradually offline "9After the "9 yuan" event, consumers who are accustomed to low prices will still buy it, you must know that the lucky coffee in Mixue Bingcheng is much cheaper, and the development speed is not slow.
After crossing the hill of Cudi, another more difficult battle awaits Luckin.
The consumer in this article is a pseudonym).
Author |Li Yuan.
Edit |Chen Fang.
Operations |Liu Shan.