After becoming the first coffee chain in China to open 10,000 stores in June, the domestic budget coffee chain Luckin has superseded Starbucks to become China’s highest-earning coffee company in the first half of 2023.
This week sees companies across all industries release their second-quarter financial reports. Luckin posted a net income of 6.2 billion RMB (862 million USD), a year-on-year increase of 88%. The operating profit in the second quarter was 1.17 billion yuan, and the operating profit margin reached 18.9%. During this period the brand also opened around 16 new stores every day on average, bringing the total to 10,836.
This is the first time Luckin’s single-quarter revenue has surpassed its biggest competitor Starbucks, which saw a net income of 5.9 billion RMB (822 million USD), a year-on-year increase of 51% in the Chinese market. Just five years after its establishment and a little more than a year after emerging from bankruptcy, Luckin’s progress this year is impressive.
China’s coffee market is currently locked in a price war that has seen many brands slash the cost of a cup of coffee to just 9.9 RMB (1.38 USD) to stay competitive. Until just a few years ago, Starbucks was easily the most dominant player but is now facing headwinds from the rapid rises of domestic upstarts like Luckin and Manner. Observing the success of Luckin’s WeChat Mini-Program, which allows users to pre-order and collect takeaway coffee, Starbucks has massively expanded its own digital ordering via partnerships with Alipay, Taobao, and other local platforms.
Luckin’s newly appointed CEO, Guo Jingyi, hinted at upcoming grand plans for global expansion in his response to the financial results. “We are committed to accelerating the development of China’s coffee market, expanding Luckin Coffee’s market share and brand influence, and promoting sustainable overseas expansion so that the world can enjoy the high-quality products and services of Chinese coffee brands.”