Why coffee have a great future in China - case study Luckin Coffee

Why coffee have a great future in China? - case study Luckin CoffeeWhy coffee have a great future in China, Luckin Coffee shop is a good example. Resilience is the key driving power for Luckin coffee turn its wheel toward its desired track, adjust its driving style, to renovate its consumer approach, reshape its future destiny, today Luckin coffee in China got bigger and abundant multi-coffee-cups placing to almost 10,000 coffee shops, spreading all over China. surpassed Starbucks 6,200. What a great leap forward narrative in the coffee macro-arena!

How the cup of Luckin Coffee turned bigger

Luckin Coffee was a later comer among coffee chains in China, started in Beijing 2017. Todayhow the Luckin Coffee brand became a significant one among others in sizable China’s coffee chains. Here are the keys:

Vouchers Strategy 1 - Luckin Coffee started offering a cup free coffee to new consumers, then, for loyal customers or price-alert coffee drinkers using discount coupons up to 89%. The goodness of this strategy was to collect more coffee drinkers under its armpit, encourage customers stick to the brand, enlarge its brand consumers’ base, this distinctive attribute led Luckin’s achievement the first step. However, the disadvantages of this strategy were given away significant part of profit by way of free coffee, soon this vouchers strategy was proofed not completely virtue.

Enlargement Strategy 2 - Luckin Coffee with its branding-goal from begin with, 4,000 localities its coffee shops opened in crowed streets cross China in just 24 months, a remarkable speed with ambition in action, its influence in necessary magnitude that contributes to the result, that Luckin Coffee commanded its forceful position among China coffee chain.

Digitalization Strategy 3 -  Luckin Coffee adapted of a digital system, generating revenue, improving, and streamlining processes and efficiency, and fostering businesses where Luckin Coffee process customers’ orders and payments, to be operated with the use of mobile apps, computers, and the internet, in today’s world, digital information is at the centre of everything. Luckin Coffee succeed in stronger its market power by leveraging of digital technologies and data to create new business models and opportunities in China coffee market.

Venture Strategy 4 - Luckin Coffee took the road of joint venture, picked their investment partners wisely, Centurium Capital and Joy Capital were their chosen ones, financially, together carry the burden and share the gains, Luckin Coffee thrived its desired position, shined cross all major cities, applauded  to the joint venture option that coined new better position in the completive China coffee market.

Why coffee have a great future in China? - case study Luckin Coffee

Why Luckin coffee poured into the cup less soundly meanwhile?

Imagination seemed beautiful than the reality. Luckin Coffee combated gaining revenue challenge at the earlier stage of development. Although Luckin’s business model was well-intended, however, for keeping customers comeback by given “sizeable discounts tokens” failed. In today’s economy, customers tend to be attracted towards a given price point, discounts tokens collected enough new customers, but it is no guaranteed customers coming back. It created financial catastrophe around the corner.

It is the “sizeable discounts tokens” made the original financial plan untenable. Its price-reduction ambition was disproportional with financial gains. Plans cannot keep up with changes of consumers choices, the Luckin coffee cup broken, for mending the broken coffee cup of the brand, the money changer of the company forged profit facts for keeping up its positive appearance.

One can say its all to blame the forcefully market competition, it is “do everything to win” mentality, even to go the extra mile immorally, at the critical moment, there is no way, only fiend makes a way. Then, catastrophe around the corner, the “unrealistic sizeable discounts tokens” led the brand to financial loses.

Finally, come to senses, it was a reporting over potential financial incoherence in Luckin’s revenue record, alarmed this coffee brand, the company was pushed to admit its fraud, over RMB 2.2 billion (circa USD 340 million) in additional sales for the brand had invented by the money charger of the company, and resulting delisted from Nasdaq . Eventually, justice prevailed, CEO of the company dismissed, the management undergone rigid key surgery.

How Luckin’s coffee brand bounced back on profit track?

How Luckin’s coffee brand bounced back on track to profit? meditated on the past failure, pondered the not very efficient marketing strategies in the past years, crucial business model surgeries were urgently needed, necessary changes were  unavoidable, moving farther, to make the most effective use of resource, Luckin vowed to take tougher action against persistent financial draining. How Luckin’s coffee brand bounced back on track to profit? Here are the 3 key aspects of solid renovation that Luckin’s business implemented:

Luckin ceased perform less well than expected operations (key renovation 1)

Pause the pace of stretching its brand store sites, purge perform less well one, coffee store operations were the costly spending, Luckin pondered its coffee business operations model, selling strategies, up and down experiences in the past, it came to the point for changes, to delay and pause the pace of stretching its brand store sites, purge perform less well than expected stations from here and there 4,500 down to 3,900. Meanwhile,

Stopped operating side hustles that did not add values to the brand, theoretical speaking, Side hustles are a great way to boost income, plus explore potential business ideas with little upfront costs or major time commitments. However, with Luckin case, those side hustles had never been lucrative, such as:  retail vending machines, fruit juice joint venture. Therefore, the side hustles service was withdrawn by the proprietors of Luckin coffee business.

Tidying up financial strings to move on, trimming out less sustainable and overcostly approaches, among others,   removed free coffee vouches,   raised coffee prices, reduced advertising running cost by 70%, etc. All adapted approaches were for one goal – making company’s business financially maintainable and moving forward.

As Luckin coffee implemented raising prices strategy resulting increase its market share increased. Until the third quarter 2023, Luckin Coffee Inc. announced its unaudited financial results three months ended September 30, 2023, total net revenues in the third quarter were RMB 7,200.0million (US$986.8 million), representing an increase of 84.9% from RMB3,894.6 million in the same quarter of 2022.  Luckin third quarter 2023. 

Luckin third quarter 2023

Created Luckin higher-price novelty drinks to regain its sales revenue (key renovation 2)

Luckin kept gaze at its core - revenue growth. There seemed no easy way, innovation made the way. Luckin created novelty coffee drinks that reinforced Chinese consumers taste, which was the turning point for Luckin substantially to mend its sales digits and revenue growth.

Luckin created novelty drinks, simply, the blending of drinkable coffee with fruit juice or syrup which recipes organized by primary and important ingredients, like coffee, juice, or fruit syrup. Although it’s not typical darkly coloured, bitter coffee, but Chinese style coffee that tailored and well prepared which echoed the sensation of kinder flavour perceived in the mouth, with Luckin novelty drinks yielded sales revenue, Chinese coffee drinkers loved and enjoyed, appreciated of unique sweeter flavour, and willing to pay higher price for tasty new drinks, that’s all about.

New drinks echoed appetite, stomach, sense of taste, from here on, Luckin’s R&D turned its focus on creating fine range of drinks for sophisticated palates, echoed appetite, stomach, sense of taste, transformed its revenue around with higher prices-tags novelty products, that’s one of secrets of how Luckin’s coffee brand bounced back on track to profit. Luckin coffee key operating data (Sep. 2022 – Sep. 2023)

Luckin coffee key operating data (Sep. 2022 – Sep. 2023)

Effective changed Luckin corporate image with fresh approach (key renovation 3)

After regained its sales, driving its revenues growth, no time to wait, luckin worked uniquely harder on its damaged image, with the intention of developing a new, differentiated identity in the minds of consumers, investors, competitors, and other stakeholders.

Luckin utilized the power of superstar, applied celebrity’s lights shine on its brand, the company involved radical changes to its brand's image, marketing strategy, and advertising themes. One special deal worked, and worked well with Eileen Gu, a Chinese athlete, Olympics three time medalist, a national well-known freestyle skier, her endorsement was such Luckin effective strategy, resulting repositioned the Luckin brand/company, distanced itself from negative connotations of the previous branding, moved the brand upmarket.

Luckin delivered a new message to the millennials, importantly, superstar communicated a new message, a new board of Luckin directors wishes to communicate,  connected with the millennials, those born between 1981 and 1996 are the main coffee consumers in China, coffee shops occupied by the younger generation Chinese, since most social networking groups are dominated by the millennial generation in China, and the coffee shop and coffee industry brims with theories on what makes millennials tick.

Luckin timely approach, revamped luckin corporate image, secured more consumers, especially the young ones, through celebrity’s fame to maximum the volume of the millennials’ coffee lovers, that’s other secrets of how Luckin’s coffee brand bounced back on track to profit and went beyond.

Why coffee have a great future in China? - case study Luckin CoffeeWhere Luckin coffee stretched its brand cross border to global   

Where Luckin coffee stretched its brand cross border? Was there a need at this stage for Luckin to step in global coffee market open cross-border coffee stores, the answer was positively YES. Why?

Since Luckin determined to continue its revenues perpetual growth, with its widening ambitions and durable growth expansion strategy in the global stage, the company pulled out its coffee stores cross border, and had been positioned them among others at the global stage in the outward form of its international expansion strategy.

Luckin coffee international expansion strategy

As Luckin Coffee reported with 13,273 stores at the end of the third quarter of 2023, which include 8,807 self-operated stores and 4,466 partnership stores. In earlier March 2023, luckin took an unprecedented step in a process of expansion strategy, inaugurated its pioneering store in Singapore.

That brave step has never been taken, and such things has never been done before, but this novel experience was valuable for company’s further outward expansion, tested its business model overseas, by December 2023,  Luckin coffee opened its 30thflagship stores operation in Singapore. As the company’s CEO detailed that Singapore is the starting point for the company’s internationalization strategy, implement its business model overseas.

Luckin coffee international expansion strategy results

With this preliminary foothold, novel experience and subsequent accomplishment, quickly Luckin was on the way to opened its cross-border coffee store in Malaysia for securing sustained growth, as Luckin remain focused on value added product offerings, and persisted with expansion strategy by inevitable widen its customers base, and broaden its global track for durable growth, strengthen the Luckin brand and its coffee power in the international stage.

Currently, Luckin eyeing bigger markets in Asian region, Indonesia, Malaysia, and Thailand have potentials, which targeted as the subsequent luckin expansion destinations countries, it implies that there will be more stores openings in the future in those pick out fertile localities, the company committed to its expansion strategy, made sure Luckin’s coffee cups properly positioned on the tables of global coffee market for the years to come.

Why Coffee have a great future in China - case study Luckin CoffeeWhat to expect from China coffee revenues in 2027

Coffee is a beverage brewed from roasted coffee beans. Today, coffee drinking as the modern beverage appears in modern-day China, it has the increasing sales in the Chinese market for hot beverages, though coffee is now a popular hot-drinks commodity in China, however, the country is tea drinking paradise. Nevertheless, all is on the going in China, food and drinks undergone an extradentary changes. Today, coffee drinkers are cool, coffee beans China imports has became a cool theme too, among agrarian products.

The capacity of China coffee market is massive, new coffee shops have emerged, and are thriving in major cities in China, coffee beans China imports by value 2020-2023 grow higher. Brazil, Vietnam, and Colombia are the top exporters of coffee beans as of 2023. China’s coffee market expected to exceed CNY200 billion (USD29.6 billion) in 2024, and witness a CAGR of 10.42% 2022-2027. Here explants, what to expect from China coffee revenues in 2027.

Coffee beverages have a great future in China -1

Through case study Luckin Coffee, and other Chinese players in the coffee market in China, like Coffee Box, Pacific Coffee, Manner Coffee, Seesaw Coffee, and local additional promising Chinese brands, like , Saturnbird Coffee,  Yongpu Coffee, confirmed that coffee shops not only have emerged rapidly, but also intensely thriving in major cities in China.

As a later comer and player, China, has been getting on the global coffee trend only in recent years. In 2022, per capita coffee consumption in China was only around 11 cups, padding significantly behind the Western countries and other Asian regions.

China widely known is not traditional coffee drinking country, and the hot beverage market was directed by tea, the greatest country’s first drink. Yet, today, drinking coffee in local coffee shops is a trend in China, signalling social graces and transformed manners, super cool for the millennials.

coffee Chinese importers active

China’s coffee market at a compound annual growth rate -2 

Forecasted China coffee consumption continues growth in 2024, in fact,  in 2021, China’s coffee market grew by 31% over the previous year, and is projected to increase at a compound annual growth rate (CAGR) of 9.63 percent between 2022 and 2025.

The coffee segment generated US$15.34 billion in revenue in 2022. Forecasted coffee consumption in China (2023/24) 4.9m 60 kg bags, coffee import value from Vietnam 49.6m USD. Ethiopia is the leading coffee supplying country to China in terms of volume.

Coffee drinkers and coffee shops owners both dominated by the millennials in China -3

Coffee consumption belongs to the dynamic younger generation Chinese, born from 1981 to 1996, the first global generation, who have embraced aspects of the Western lifestyle, it is the millennials sit in the coffee shops sipping coffees.

Although the volume of Chinese coffee drinkers is not as large as other Western countries, but as population concerned, China coffee market size is not smaller as you may think upcoming years.

Hot drinks business analysts, commodities consumption experts view China as one of the most promising coffee markets. As the volume of coffee drinkers are catching on, the country has never shortage of food and beverages consumers, coffee is not exception.

coffee in China latest trend – growth imports in 2023

Unroasted coffee beans roll into China among agrarian products imports -4

China itself is not coffee beans rich producing country either, as coffee is brewed from roasted coffee beans, therefore, China got into the main flow of coffee beans import, and unroasted coffee beans traded as an agricultural commodity.

As of 2023, Brazil was the leading grower of coffee beans, producing 35% of the world's total, flowing by Vietnam, and Colombia are the top exporters of coffee beans as of 2023, China coffee bean imports have surged, the sales of coffee reaching multi-billions of dollars high.

Unroasted coffee beans China imports by value 2020-2023 grow higher. Brazil, Vietnam, and Colombia are the top exporters of coffee beans as of 2023. China’s coffee market expected to exceed CNY200 billion (USD29.6 billion) in 2024, and witness a CAGR of 10.42% 2022-2027.

Luckin Coffee crowned as the largest coffee chain in China today -5

The local chains Luckin Coffee and Cotti Coffee rapidly expanded over the past year, adding 5,059 and 6,004 stores, respectively. Luckin, founded only six years ago, has 13,273 stores in China, making it by far the biggest operator. Luckin Coffee, the Chinese startup is the country's biggest coffee chain with over 13,000 outlets.

There are also other Chinese coffee brands include Yunnan Coffee Traders, Mellower Coffee, Lanna Coffee, and Manner Coffee, among others. Each brand offers unique flavor profiles and innovative products, making it worth exploring the options available in the growing Chinese coffee market. the number of coffee shops continues to increase nationwide, even bigger increase in instant coffee sales.

China developed quite mature coffee products distribution channels, include supermarkets, convenience stores, specialty shops, and online retail stores. Moreover, coffee in a portable, easy-to-drink style while on the go for the working millennials, it's all available in main cities, particularly, hot portable drinks can be collected in the train stations and travelers convenes transfer platforms in China.

Around Chinese coffee consumers, coffee shops emerging numbers, coffee beans China imports trend, and China coffee market forecast 2025-2027, all signals one message, coffee have a great future in China!

Why coffee have a great future in China? - case study Luckin Coffee

Coffee beans buyer companies, importers in China 

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