It only took 18 months to be listed on the NASDAQ in the United States. By 2020, the company was delisted due to financial fraud, and then came back to life. The annual net income exceeded 10 billion and became a domestic coffee beverage unicorn. Lucky Coffee is a legend in the business world.

1. Breaking through the tens of billions mark

Luckin Coffee’s 2022 financial report is out.

According to the latest financial report released by Luckin, the total net revenue in the fourth quarter of 2022 was 3.695 billion yuan, a year-on-year increase of 51.9%; the same-store sales growth rate of self-operated stores was 9.2%. Under U.S. accounting principles (GAAP), operating profit was 313.2 million yuan, with an operating profit margin of 8.5%; in the same period last year, it was a loss of 120.8 million yuan.

Looking at the full-year performance, Luckin has become the first coffee enterprise in China to break the tens of billions in revenue with a total revenue of 13.293 billion yuan in 2022. Compared with last year's total revenue of 7.965 billion, the net increase in 2022 will be 66.9% year-on-year. In the post-epidemic era, Luckin Coffee’s performance growth has been soaring even though the entire industry market has been affected.

Official data from Luckin Coffee: As of now, there are only a handful of domestic companies in China that have entered the tens of billions of catering companies. The only company with official data available is Haidilao in the hot pot industry. On the occasion of its fifth anniversary, Luckin’s revenue exceeded 10 billion, achieving full-year profit for the first time, reshaping the overall pattern of China’s coffee industry.

More importantly, in the past fiscal year, Ruixing achieved an operating profit of 1.1562 billion yuan under U.S. accounting standards (GAAP), and the quality of its operations has been significantly improved. This is a landmark turning point, which on the one hand confirms the sustainable profitability of its business model; on the other hand, it also allows the capital market to dispel many concerns.

Tracking Luckin’s performance over the past year, we have found that since its operating profit turned positive in the first quarter of last year, its operating quality has continued to steadily improve, and it has successfully entered a normal development stage of steady growth.

After entering the Pink Sheets market, Ruixing’s stock price hit new highs. After the start of 2023, riding on the strong rebound of Chinese concept stocks, Luckin, with its performance support, ran wildly, reaching a maximum of US$32 per share as of the closing price on March 2.

The stock price of US$32 is already 88% higher than the issue price of US$17 on Nasdaq that year. Investors have used real money to prove that Luckin is far better than it was three years ago.

In comparison, due to the impact of the external environment, Starbucks’ revenue in the Chinese market in the first fiscal quarter of 2023 (October-December 2022) was US$622 million (4.218 billion yuan). It fell 31% year-on-year, and same-store sales also fell 29%.

Same-store sales are a key indicator for evaluating coffee shop business, and their importance is similar to that of table turnover rate for hot pot restaurants. Luckin's same-store sales continued to grow, proving that it has the tenacity to cope with adverse factors.

Luckin’s average monthly number of trading customers has jumped from less than 9 million in the first quarter of 2021 to 24.6 million in the fourth quarter of 2022. The average monthly transaction number can be compared to the monthly active users (MAU) of the Internet, which is the source of traffic for coffee shops to generate revenue, and Luckin’s number is still growing rapidly.

Official data from Luckin Coffee: Despite the poor external environment, its financial indicators in 2022 will improve in all aspects, especially the overall operating profit for the year turned a profit for the first time and exceeded 1.156 billion yuan ; The annual net income exceeded 10 billion. It can be seen that Ruixing has entered the channel of steady growth.

At present, investors are no longer worried about Luckin’s performance, but are unanimously looking forward to how good its performance will be.

At the same time, Luckin opened 2,190 new stores in the past year, bringing the total number of stores to 8,214. During the same period, Starbucks had 6,090 stores in China. Luckin has 2,124 more stores than Starbucks. This means that Luckin has more than 2,000 touch points, indicating stronger performance flexibility.

In 2023, Luckin has accelerated its store openings, adding 478 new stores in January alone. You must know that the number of new stores opened in the fourth quarter of last year was 368. Luckin opened stores in a single month at the fastest rate in previous quarters. , this year we will also achieve the first "10,000 store goal".

With the expansion of stores and the increase in transaction users, it seems that it is only a matter of time before Luckin can dominate the Chinese market.

2. Roller-coaster development history

Compared with Luckin’s current impressive results, looking back at the peaks and troughs that Luckin Coffee has experienced in the past is like riding a roller coaster.

Luckin Coffee, founded in 2017, was listed on NASDAQ in the United States in just 18 months, setting a record for the fastest Chinese coffee brand to be listed on the U.S. stock market since its establishment, with a total of US$695 million. Market capitalization is US$4.25 billion.

On May 17, 2019, Luckin Coffee was listed on Nasdaq. However, Luckin Coffee did not continue the momentum of rapid progress after its listing, and began to suffer losses in 2019. An incident that happened in 2020 caused Luckin Coffee to fall into an abyss and enter its darkest moment.

On January 31, 2020, Muddy Waters, a well-known short-selling company, claimed to have received an 89-page anonymous short-selling report directed at the domestic Internet coffee brand Luckin. Coffee (Nasdaq: LK) data is fraudulent.

The report stated: “After Luckin’s US$645 million IPO, the company began to fabricate financial and operating data in the third quarter of 2019, which has evolved into a scam.”

Following this, the company's independent director Thomas Meyer has submitted his resignation. Mas Meyer resigned, leaving only three independent directors on the audit committee of Luckin Coffee’s board of directors.

On the evening of May 12, 2020, Luckin Coffee announced adjustments to the board of directors and senior management, and the CEO and COO were suspended.

The stock price of Ruixing Coffee began to fall off a cliff. Before the previous stock price plunge, the highest stock price of Ruixing Coffee in 52 weeks was US$51.38 per share. In June 2020, Luckin Coffee announced its delisting, with its market value falling to less than US$350 million. It was hurriedly delisted 13 months after it was listed. Compared with the time it took to go public, the delisting speed was equally astonishing.

On February 5, 2021, Luckin Coffee announced on its official website that the company filed for bankruptcy protection in New York and that the company is negotiating with stakeholders on the restructuring of the company’s financial debt.

U.S. law imposes extremely severe penalties on companies for financial fraud. Luckin Coffee faces a class action lawsuit with compensation of approximately US$3 billion to US$4 billion, or approximately RMB 21 billion to RMB 28 billion.

At this time, Luckin Coffee has reached the edge of life and death. It has been collectively criticized by the market and feels that there is basically no room for improvement.

However, Luckin Coffee, which has experienced internal strife at the top, delisted the company, and faced huge compensation, has ushered in a rebirth after a series of changes such as debt restructuring, huge fines, internal adjustments, and financing. .

In 2019, the net income was 3.025 billion yuan, and the net loss during the period was 3.161 billion yuan; in 2020, the net income was 4.034 billion yuan, and the net loss was 5.603 billion yuan; in 2021, the net income was 7.965 billion yuan , with a net loss of 539 million yuan; in 2022, the net income will be 13.293 billion yuan, with a profit of 1.156 billion yuan.

From losses in 2019, losses in 2021, and profits in 2022, in just three years, Ruixing has completed its self-salvation.

From being put to death, to coming back to life, and then becoming an industry benchmark, Luckin has truly written a classic case that is difficult to find in business textbooks.

3. A hot-selling machine in the coffee industry

The outside world regards Ruixing’s comeback against the wind as a business miracle. However, looking back on the past year, Ruixing’s success has not only relied on the Internet to operate The advantageous business model and continuous efforts in products are also the key to its rebirth. It can be said that Luckin Coffee has been brought back from the brink of death with one hot product after another.

After the launch of Raw Coconut Latte on April 12, 2021, it quickly became a hit item, creating the phenomenon of "sold out within 1 second" and "entire network rush for goods". In April this year, Luckin launched Coconut Cloud Latte again, with sales of 4.95 million cups in a single week, once again creating a phenomenal sales scene.

On April 11, 2022, Luckin and Coconut Tree jointly launched “Coconut Cloud Latte”. This is the first co-branding of Coconut Tree in 34 years. Some people commented that this is "trendy to the extreme". Although some users have questioned hunger marketing, the reality is that this product is "hard to find" in many stores. On the first day of launch, this product sold 660,000 cups.

On the evening of April 6, 2022, Luckin’s official Weibo announced that raw coconut latte had achieved sales of 100 million cups on the first anniversary of its birth.

As of April 3 this year, the second anniversary of Raw Coconut Latte, sales have exceeded 300 million cups.

Some media said that the popular product Raw Coconut Latte was indispensable for Luckin’s resurrection. This time they join forces, they should also want to recreate the glory of Raw Coconut Latte.

After the raw coconut latte became a phenomenon-level hit in the coffee industry, Luckin Coffee pursued the victory and launched the raw cheese latte in October 2022, which was once again greatly welcomed by the market.

On October 10, Luckin and the well-known animation IP "JoJo's Bizarre Adventure Sea of ??Stone" launched a joint coffee - raw cheese latte, which became an instant hit as soon as it was launched, with sales exceeding 131 on the first day. Ten thousand cups, won the king of Ruixing’s first-day single products.

As of October 16, Luckin’s raw cheese latte sales exceeded 6.59 million cups in one week. With a huge base of young users, this cup of raw cheese latte broke the record of raw coconut latte. record set.

Another new product of Luckin has been greatly welcomed by the market. Therefore, many institutions believe that with the hot product and the optimized operation of management, Luckin’s financial report for the fourth quarter of 2022 will be particularly bright. Eye.

Although Luckin’s development has been full of twists and turns since its establishment, Luckin Coffee has been constantly innovating, from the popular meteorite latte, thick milk latte, raw coconut latte, velvet latte and more. From raw cheese latte, Luckin Coffee has become a hot-selling machine in the coffee beverage industry, and its strong vitality continues to this day.

4. The ultimate craftsmanship to polish super hot products

The ultimate care of Luckin Coffee’s products is evident.

As early as 2021, Luckin Coffee’s first full-line automated smart roasting base was put into production in Fujian. At the end of last year, its second fully automated smart baking base also broke ground in Kunshan, Jiangsu Province. It is expected to be completed and put into operation in 2024. By then, Luckin will have formed a self-processing baking supply network with an annual production capacity of more than 45,000 tons to ensure that more supplies are supplied to stores. High quality, fresher coffee beans.

In order to control the quality of raw materials in the upstream supply chain, Luckin launched the “Global Bean Hunting Journey” on February 20 this year. At the same time, WBC World Barista Competition champion Anthony Douglas was invited to take the lead and go deep into coffee production areas around the world to delve into all aspects of planting, harvesting, green bean processing, and quality control. Select high-quality coffee beans according to championship standards.

At present, Luckin’s “purchasing warehouse” of coffee beans has expanded to six major production areas in China: Yunnan, Brazil, Ethiopia, Colombia, Panama, and Guatemala.

By mastering high-quality raw materials in the upstream and building a roasting base in the midstream, Luckin is determined to control the lifeline of high-quality coffee. Coupled with the expanding downstream stores, "from seed to cup", Luckin delivers a cup of good coffee to users.

In order to allow users to drink coffee with excellent taste, Luckin Coffee selects the best seasonal Arabica beans from around the world, the top Swiss fully automatic coffee machine, freshly roasted and freshly ground, ensuring that every A cup of coffee is always at its best tasting period, making it a cup of good coffee that users can “afford and drink”.

Unlike the aroma of tea and the alcohol of wine, coffee has its own sourness and bitterness, which once put a huge question mark on whether coffee entrepreneurship can succeed in China.

Ruixing team’s research found that latte coffee is the “biggest common denominator” that balances Chinese people’s tastes with coffee drinks.

According to the financial report, Luckin launched nearly 140 new products in 2022, including professional-grade SOE series such as Paradise Manor and Geisha, as well as popular series such as raw cheese latte. Luckin spares no effort in constantly exploring new hot products. From meteorite latte, thick milk latte, raw coconut latte, velvet latte to raw cheese latte, Luckin has created generations of hit products, proving that the success of its product strategy is not "luck", but "strength" .

Having mastered the password to continuously launch “hot products”, Luckin took advantage of the momentum and took off in the “Big Latte Era”.

Looking back at the development history of Luckin, even in the most critical moments, Luckin Coffee still did not stop innovating on products. It also kept up with the needs of market users and continued to promote new products on hot products. , relying on solid product strength to win more users, turn the tide at a critical juncture of development, and return to the top.

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