E86 – The Impulso Podcast – Luckin Coffee opens 20,000th store

Luckin Coffee has opened its 20,000th store, in Beijing! This comes as no surprise as Luckin has been bold in its expansion, opening almost 1,000 every month in Q4 2023. 

But how did Luckin achieve this incredible growth? Are they trying out a new business model in their 20,000th store?

Tune in to the latest episode of the Impulso podcast as we dive into the data-driven strategies behind Luckin’s success.

Also available on Spotify and Apple Podcasts

Featured materials:
Momentum Works Immersions: F&B innovations
Coffee in Southeast Asia, Momentum Works
Luckin Coffee opens its 20,000th store, The Low Down
E76: Starbucks vs Luckin in China, who is winning?, The Impulso Podcast
E63: How does Luckin Coffee open 1000 new stores every month?!, The Impulso Podcast

[AI-generated transcript]

[00:00:00] 

Sabrina: Hello, everyone, and welcome back to episode 86 of the Impulso podcast by Momentum Works. So on today’s episode, we’re going to be talking about a company that we talk about quite often, actually, and that would be Luckin Coffee. And the reason why we’re talking about Luckin Coffee is they’ve actually opened its 20th thousand store in Beijing.

So on 18th July, so about two weeks ago, Luckin actually opened its 20th thousand store. 

Jianggan: I even don’t know how to pronounce that 20, 20, 000, 20, 000, 

Sabrina: 20, 000. 

Jianggan: Okay. But anyway, they have lots of stores. 

Sabrina: Yes. So 

Jianggan: they have a big ceremony in Beijing and I think lots of people showed up. Yeah. So was it surprised?

Sabrina: It’s not very surprising, right? So we’ve talked about Luckin coffee a lot. So in episode 76 of the podcast, I think we talked about Luckin Coffee versus Starbucks in China and Luckin Coffee is something we talk a lot about in the lowdown blog, as well as in our SIP innovate repeat programs that we hold.

So we know that they’ve been growing very rapidly, right? So it’s just a matter of time. [00:01:00] 

Jianggan: Yeah. So for the whole, I mean, from end of Q1, 2023 to end of Q1, 2024 they added like 9, 239, Stores to the store count. So I mean, to reach 18, 590 stores. So breaking the 20, 000 mark, it’s just a matter of time.

And it’s just the best celebrated like the 10, 000. Store mark about a year ago. So yeah, it’s fast.

Sabrina: It’s very fast. There was one. Was it last year? They were opening like a thousand stores 

Jianggan: Every 

Sabrina: month. Yeah, Every month

Jianggan: And obviously In a previous episode of the podcast we talked a lot about I mean why they could do that part of the reason is a lot of operations are actually digital are actually automated. They have lots of data that they have procured from Various providers. I mean, the map service providers, , for delivery platforms, et cetera, which allow them , to decide where to open a store before sending the team to find out whether they could secure a location, which is different from how traditional retail works, right?

You send a guy with a stool. I’m [00:02:00] usually the boss and to sit in a mall for like three days, then you realize, okay, good. That’s a spot, but they use data. Yeah. 

Sabrina: So I think when we talk about Luckin, we know that they are a very data driven company and that’s how they’ve built their operations, right?

and they’re very tech savvy. So when you visit most Luckin stores, you don’t see a barista making coffee using an espresso machine. It’s just a normal coffee machine and they press a button. 

Jianggan: What is a normal coffee machine? 

Sabrina: Like, not a normal coffee machine, but a simpler coffee machine, where you just press a button.

Jianggan: Most likely you just need to press a button. I mean, in a normal cafe, you have handcrafted coffee, right? You’d have, one machine to grind the coffee. 

Sabrina: Grind the beans. 

Jianggan: Yeah, grind the beans. And then you move it to another machine to add the steam and water to make the coffee. And there you add milk using Zone.

Technique to make it nice. What’s that called? Latte art? Latte art. Yeah. So Luckin didn’t do any of this because 

Sabrina: They want it to be efficient, right? So it takes them less than [00:03:00] two minutes to prepare a cup of coffee. 

Jianggan: I actually know the specific KPI they have, which is each employee in each store needs to make 17 cups, a couple of drinks, whatever drinks that is every half an hour.

So trustless roughly into less than two minutes, less than two minutes. Right. 

Sabrina: But in their latest store in Beijing, which is their 20th thousand store, they’ve actually introduced handcrafted coffee for the first time, but their machine looks. A lot simpler than other coffee shop machines, even though this is handcrafted, no?

Jianggan: It looks like a noodle maker in China. 

Sabrina: I mean, you 

Jianggan: Sausage maker. Whatever. 

Sabrina: This to like the huge espresso machines that you see at Starbucks. This looks very simple. 

Jianggan: This is just a grinding machine, right? But I don’t see any coffee bean in it. Okay. Interesting. We checked the prices and they actually sell this Like freshly made.

Handcrafted coffee at a price level which is a little bit more expensive than Starbucks. So we don’t know yet. This [00:04:00] is like a marketing gimmick for them to say that, okay, there’s a showcase. I mean, you can have good coffee at Luckin or it’s something that they want to taste and roll out at a larger scale, because at some point in time, at their price level, their customer segment, they’re going to saturate it.

Would they, go and move up to occupy the third space that startup Starbucks is currently occupying in China? I think it’s very possible. 

Sabrina: That’s interesting. Because most of their stores in China don’t have. Seating areas, right? Or is that something they’ve been introducing recently?

Jianggan: Are very small. And some of the stores would have like, I don’t know, three, four tables. I mean, tall chairs, et cetera. Some stores have sitting area, but it’s definitely uncommon. I think, that depends on what kind of real estate they can secure. But most of the orders come from takeaway and delivery.

Sabrina: And of course, as Luckin Coffee is scaling very, very rapidly, they are also going deeper into the supply chain, right? So they’ve started buying beans from Brazil, I think. Which is the Brazilian guy from the opening? 

Jianggan: There are a couple of Brazilian guys and [00:05:00] the, image on the bottom right, you would have the I think the head of commercial section of the Brazilian embassy and what’s his name?

Adriano Giacomet Higa de Aguiar that’s his name. So, basically he showed up with some of his colleagues and obviously the reason why they take it so seriously is Luckin coffee committed to buy 120, 000 tons of coffee beans from Brazil over the next two years. And the deal was signed when the vice president of Brazil Alckmin, was in China.

And I think the media in China published an interview with him where he said, Oh, I drink 20 cups of coffee every day. So I mean, it shows that first Brazilians are passionate about coffee. And second, that’s, it is a really, really big deal, right? So how do they process all this coffee? 

Sabrina: So we know that they also have the largest coffee processing facility in China.

Jianggan: So that process is about 45, 000 tons of coffee beans. That’s the largest single facility in China. They also have other facilities in other provinces. So this facility is [00:06:00] actually, I mean, as you can see, it’s actually in the province where I’m from. And and one thing, I mean, Jiangsu, which is next to Shanghai, and one thing specific about this province is, if you look at this map, it’s entirely flat land.

You don’t have any mountain at all. 

Sabrina: Is that good for coffee bean processing? 

Jianggan: No, it’s good for logistics.

Sabrina: But in addition to deepening their supply chain, they’ve also started. experimenting or trying different streams of revenue, right? So I think we’ve spoken about this in the previous episode where we spoke about Luckin, but we know that they’ve also started selling on supermarkets and not just supermarkets, right?

They also sell online now. Is it Taobao? 

Jianggan: Yeah. Yeah. I think I think they have like going to the supply chain and made, I mean, with the skill and everything they made. There’s a product competitive from a phone pricing point of view, and obviously it’s very natural for them to extend into different channels.

So they’ve been sending instant coffee. In, the supermarket shelves, they have their fusion coffee as well. [00:07:00] And I think my cousin buys all his. Like, instant coffee consumption from e commerce with the Luckin brand, I said, why do you buy Luckin brand? He said, this is the brand. I know the other side. Tim Hortons, et cetera. So I, don’t know them that well and I don’t know whether I should trust those brands. I think the last time we went to China for the immersion, we brought a few boxes of the instant coffee, coffee capsules back, and we put that in office and all those were consumed by Elody over like two weeks.

Our colleague. Yeah, 

Sabrina: I, I’ll ask her. 

Jianggan: She drinks lots of coffee. 

Sabrina: I’ll ask her if the capsule taste the same as actual Luckin coffee. 

Jianggan: I think she is just going for the caffeine. That’s true. 

Sabrina: It’s just for fun. So of course we say Luckin’s branding seems to be really strong in China, right? So your cousin buys Luckin from e commerce platforms, just because it’s the only brand.

Or it’s the most recognizable brand that he knows. 

Jianggan: It’s a brand he knows and he sees Luckin outlets everywhere and it’s obviously a brand that that you feel [00:08:00] that you can trust. 

Sabrina: And of course we know that Luckin has also been exploring with brand partnerships to probably sort of further increase their brand awareness, brand recognition in China, right?

So they collaborated with Garfield. 

Jianggan: Like they signed a deal with Garfield? Garfield is fiction. 

Sabrina: Garfield, I can’t, 

Jianggan: no. Oh, 

Sabrina: I mean. It’s like, yes, they signed a deal with Garfield. 

Jianggan: I think Garfield would be too lazy to like, you know, even move the pen to sign the deal. But anyway, so Garfield’s name is in China.

And and you can see them like across some of the Luckin stores. They also signed with the song with the cartoon figures. Do you know that? 

Sabrina: I don’t know them. 

Maybe they are Chinese cartoon. I’ve never seen them before. 

And then also this poster here as well, which I thought was some Manga, but turns out to be Journey to the East, to the West.

Journey to the West. Oh God. Journey to the West. So that’s actually Sun Wukong, the Monkey King. 

Jianggan: Journey to the East is to Japan, and Journey to the West is to India, where you get real mantra. [00:09:00] 

Sabrina: Because every time I go to the East, I will say, oh, Journey to the East. 

Jianggan: And, Jack Ma specifically said that I mean, Journey to the West, the important thing is that no matter how hard the journey is, no matter how many challenges you go through, I mean, you don’t change your direction, which is West.

That’s how it is. But anyway, so Journey to the West. This is the I mean, just a side track a little bit. This is a famous movie made in Hong Kong by Stephen Chow. Like kind of sad life story, which, touched the heart of lots of people back In 1990s, and I think they used this to appeal.

I mean, this is not appealing to the Gen Z and J Alpha. This is where people who were born in 1980s, so, that shows they’re exploring the different types of demographics with different partnerships and as we have learned, and this partnerships do not really cost them much. And because they have the distribution and, scale to, negotiate a good deal and also these brands would need them to, reach out to different people. We opened Moutai last year, right? 

Sabrina: Yes. So last year we 

Jianggan: Did you try that? 

Sabrina: No, I didn’t. We, I [00:10:00] dunno why I didn’t go to Luckin at all when we were in China, by the way, I was drinking bubble tea . 

I didn’t drink any Luckin. 

Jianggan: So our colleague, Weihan had I think a cup of Moutai and then she, wrote an eCommerce report.

Sabrina: We had, we didn’t have Moutai, we had bia jiu , but not Moutai Luckin coffee. 

Jianggan: That’s fake. 

Sabrina: Yeah, we had the fake. So speaking of brand partnerships, they also did some in Singapore, right? So we went to buy, I don’t know who went to buy actually, not me. Somebody in the office went to buy Luckin coffee and they actually did a collaboration with Sesame Street.

So they have like Cookie Monster on their cup and then they had like little cup holders with so cute. With the Sesame Street characters as well. 

Jianggan: Yeah. So, I know people in our office. I will not name who and who actually clicked all these different cards because they have different characters on it, right?

It’s just kind of cute. 

Sabrina: That’s cute. 

Jianggan: Yeah. 

Sabrina: Jianggan doesn’t know the Sesame Street characters, by the way.

Jianggan: I grew up watching Journey to the West, [00:11:00] and not Sesame Street. Yeah. 

Sabrina: So since we’re talking a little bit about Singapore, this is also something that we’ve mentioned a lot probably in our coffee in Southeast Asia report, as well as in our Sip, Innovate and Repeat programs, that the coffee, tea, freshly made drinks market in Singapore is very, very saturated, right?

The competition is fierce. 

Jianggan: So this are a couple of photos we took last week last weekend, actually. So on the left, you will see a outside of a mall. So you have three f and b stores. LiHo Tea which is local, right? I mean it’s is the local, 

Sabrina: It was the ex franchisee of Gong Cha who broke off and then they opened as LiHo. 

Jianggan: So successful in the country, I would say. 

Sabrina: They are more mass market. So LiHo is one of the cheaper bubble teas that you can find in Singapore. Yeah. 

Jianggan: And here is interesting, right?

You see LiHo right next to Luckin, which has a bigger shop front and right next to Mixue, which, I mean, if you look at the design, it’s [00:12:00] actually in a way kind of similar to Luckin. But Mixue here appeals to the masses. And on the right is It’s underground mall in Singapore over the weekend. You have like tons of people queuing to buy 1 dollar ice cream for Mixue and I think they’re doing very, very well.

Mixue is a company we covered extensively in our F& B and new retail coverage. 

Sabrina: We also have a report called Who is Mixue? Where on our website, where we examine the company. So Mixue is actually a very interesting company to look at, right? Because most people think of them as just an F& B company, but when we went to analyze their reports and all, they actually operate a little more like a supply chain company.

Jianggan: They focus a lot on supply chain and the stock concept and everything is sort of. Cookie cutter, minimal and easy for franchises to do, but they really do sell a lot of, ice cream and, milk tea. Yes. 

Sabrina: So you can see in this photo here, but opposite this Mixue in the mall, there’s actually also a Luckin coffee.

So you can see that a lot of these competitors are normally in very close proximity to one another as well. 

Jianggan: Which is [00:13:00] interesting because in China, Luckin and Mixue are very different. Mixue is mass appeal and Luckin is a little bit more premium. But in Singapore, I think Meishui seems to position itself a little bit up compared to what they do in China.

I, learned that Mixue could still make a profit if they sell the ice cream, which is now retailing at 1. If they sell it at 0. 60, they will still be profitable. So that shows how much scale they have with the supply chain. For development storage, right? Something like that. Yeah. 

Sabrina: The kids will go, wow. If I could buy ice cream for 60, also it’s double the size of like a McDonald’s vanilla cone and 60 cents. 

Jianggan: McDonald’s is lower their price. It used to be like 150. Now it’s 120. And sometimes it’s 1. 

Sabrina: 150 is ridiculous for McDonald’s ice cream. 

But speaking of fierce competition. Another famous Chinese brand has also recently entered Singapore, right?

So this is Chagee. 

Jianggan: Chagee had a similar story to Gong Cha, right? 

Sabrina: In the past they were here and then their ex [00:14:00] franchisee broke off and started their own bubble tea chain. It´s called empty. So you know the like n sign, I think like Amp T. 

Jianggan: Okay. Oh, T. Okay. 

Sabrina: So, and then, so I guess Chagee has decided to enter the market.

It’s through a franchise by themselves. 

Jianggan: It is self-operated and self, they have actually assembled a, quite, it’s the right word to say it. I mean, I wouldn’t say lavish, but, a quite big team. So they’re, the general manager for Singapore was just left as a CEO for Foodpanda. Their recruiter for the region used to work as a headhunter for Google for nine years.

And they hired, I think, lots of branding professionals for famous brands. If you look at lots of what they do, it’s very professionally done. And some people argue that, hey, you’re just a bubble tea company. Why do you spend all this? But it has, this great momentum in China. So they’re jasmine milk, green milk tea.

It’s, very popular across the board. So I actually want to, when to check out when they had soft [00:15:00] opening Last week I think in Plaza, Singapore, one of the malls in Singapore so by 10 o’clock before they open, there was already a queue. And we, can see that there are also more than 10 employees in a store, which is not that big.

So, it shows that every employee was properly trained. So, it shows that they have deep control of the operations. And this company. I spoke with some veterans of F&B and retail in the country, and everyone believes that, okay, this company is probably destined to succeed because they have that brand power, they have that supply chain, they have that image.

What can, Make it difficult for them in Singapore is if they had encountered any trouble in China, because they’re expanding fast. I think it’s the same thing people have been arguing about Luckin. Luckin had its trouble, but then recovered and Chargee is in a seemingly invisible mode. Will it face any, challenges?

We don’t know, but as long as I think they’re doing well in China, I think they would do well in other markets. 

Sabrina: When I think now, by the time this episode is out, Chagee would have had launched [00:16:00] in Orchard as well. So they’ve actually been doing a promotion with Shopee and Grab where they’re selling the, so they are famous for their green milk tea, right?

So they’ve been selling vouchers for their green milk tea for a dollar, which I bought and I’m going to buy Chagee. 

Jianggan: For a dollar? 

Sabrina: Yeah, it’s really good. Yeah, it’s really good. But I think like you mentioned, Chagee sort of already had, Its brand was already known in Singapore because obviously previously they were in the market and even after they left I know a lot of Singaporeans who would go to Johor Bahru just to buy Chagee.

Oh, really? Yes So they used to have this promotion where I think on the 10th of every month They would give you like a free small gift with the Chagee cup. So at the bottom of the cup Yeah, it’s like you can open it and then they would give you like a small lipstick or something. They had that promotion 

Yeah, it’s a very small.

So they have a very strong branding. A lot of Singaporeans already know and like their brand. 

Jianggan: So I feel that we should do something more about Chagee because it’s a very interesting case study. I had a chance to, 

Sabrina: who is Chagee report? [00:17:00] Coming soon. 

Jianggan: I had a chance to talk to the founder back in 2021 before Chagee started like searching back then.

I don’t know. I mean, I was at a panel. It seems that many other people I’ve met who are like F& B veterans would look down upon him because That guy didn’t have any education. When he was 18, he could hardly read. I mean, which is very rare in China at this juncture because government makes sure everyone has basic education.

So, he became a like worker in some of this like a beverage stores when he was very young. And people believe that he has learned a lot of things during that experience, which, I mean, Ordinary, sorry, not ordinary, but normal founders who have been through the university route, you know, the, the pro like, you know, I’m investment banking or whatever, consulting would have a, I mean, he would have very, very different understanding about how to make things work.

And this is also like lots of the early entrepreneurs in F&B in Singapore, anywhere would, I mean, they just started with the store and they learned. Things in a hard way. And yeah, 

Sabrina: I think they’re always more successful [00:18:00] because they know how things actually work on the ground.

They are not so caught up in like, oh, theories or strategies that I studied in school. Like, you know, they actually know what’s happening and they’re able to turn that into actionable insights for their own business. Yes. And that’s what helps them grow. 

Jianggan: What’s the new Starbucks strategy?

Triple shot reinvention with coupons. 

Sabrina: Yeah. Amazing. That’s what educated people give you. 

Jianggan: Yeah, because they need this. 

Sabrina: Fancy words. 

Jianggan: No, but they need this to communicate across organizations, right? Large organizations. How do you make simple words? But I think the Chagee founder has something different.

I’ve, discussed a lot with different Chinese investors who have either invested in Chagee or Regrettably, missed that investment. So there’s lots of perspectives. So yeah, I think maybe we could do a bigger piece about this,

Sabrina: a deeper, deep dive into Chagee. We buy Chagee and then we talk about it.

Jianggan: Joshua, who’s behind the camera, you know, that the Sabrina consumes 40 percent of the bubble tea [00:19:00] and she always finds ways to consume more bubble tea. 

Sabrina: I brought him to buy bubble tea yesterday. 

Jianggan: Oh, really? 

Sabrina: Yeah. 

Jianggan: It was his first day? 

Sabrina: Yeah. 

Jianggan: Okay, brilliant. 

Sabrina: Yes. So, I think we’ve seen not just Tati, right, but we’ve seen a lot of Chinese F& B brands entering the Southeast Asian market, and of course, they all face their own issues, right? But be it supply chain branding, having to operate in a different environment, and we see that. Of course, some of them enter as self operated stores. Some of them have, entered with franchisees, helping them expand their network. So. This leads to my next point, which is Momentum Works is actually doing a food and beverage immersion to Changsha and Guangzhou in November this year, where we are hoping to leverage on this wave of Chinese F& B brands entering Southeast Asia to bring some of the Southeast Asian practitioners to China to meet this F& B brands or meet with investors, players who are interested in entering this market.

Jianggan: [00:20:00] So, yeah, Changsha is interesting is actually the F&B innovation capital of China. And it’s also home to Chinese, which Chagee shamelessly copied, and but yeah, there’s lots of stories and so, you’re gonna put the details of, you mentioned. 

Sabrina: Yeah. So the details will be below. If you guys are interested in learning more about the F&B seen in China, do check it out.

It’ll be linked in the show notes below. So I think that’s all for today’s episode of the podcast. So thank you guys for tuning into another episode of the impossible podcast. We hope that you enjoyed today’s episode and as usual, do like our podcast and subscribe to our YouTube channel if you haven’t, and of course you can also subscribe to us on Spotify, Apple podcasts, or your preferred podcast platforms to stay up to date on the latest happenings and trends in tech, new retail, and the broader digital economy.

Thank you. And bye bye.