Luckin Coffee: Rise, Fall, and Reinvention — Part 8

CEO Q&A: Competition, Pricing, Products, and the Road Ahead

This article is Part 8 of the eight-part chronicle on Luckin Coffee’s rise, collapse, and reinvention. It is the excerpt of a sharing by Luckin Coffee CEO Guo Jinyi in 2024, translated into English here. 

You can also read the other parts of the series here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7

Audience Member 1:
How do you plan to respond to Cotti? Their challenge is significant—you can’t afford to stop offering your 9.9 RMB discount coupons.

Many of their stores are located right next to yours, and based on my observations, their foot traffic isn’t much lower than yours. Doesn’t this mean your pricing power is limited? As they scale, won’t they pose a brand challenge to you?

Will you consider engaging in an aggressive price war to crush them, or will the market evolve into a Coca-Cola vs. Pepsi-style rivalry?

Guo Jinyi:

1. I don’t see our 9.9 RMB offer as a price war or market competition (“involution”).
   • Whether we sell at 9.9 RMB depends on what product we’re selling, in what context, and with what cost structure.
   • If the pricing structure is reasonable, certain products can be sold at 9.9 RMB sustainably.
2. I don’t have access to their financial data, but I can say that in Q3, Luckin reported 1.5 billion RMB in operating profit, which is a solid financial performance.
   • I benchmark our results against the world’s best restaurant chains, where a 10% net profit margin is considered outstanding due to the industry’s scale and strong cash flow.

It’s important to consider that while you may see Luckin and Cotti stores side by side, we also have locations in beverage streets where there are 20-30 competing brands.

This is an all-out war. If we focus too much on one competitor, other players will seize the opportunity to take us down.

Our focus is on our own business, with an unwavering commitment to customer experience.

• It’s not our competitors taking customers away—it’s customers choosing to leave us.
• We must refine the details:
  • For example, when launching a co-branded product, are we maximizing its impact?
  • When customers visit during peak hours, is our service faster and more efficient than competitors?

There will always be new competitors emerging. When they do, we thoroughly analyze their raw materials and cost structures. If certain materials meet consumer expectations and comply with regulations, they may present opportunities for cost optimization.

The key is to think from the customer’s perspective and identify where we can improve, rather than simply lowering prices in response to competitors.

Cutting prices indefinitely is a race to the bottom.

If one brand sells at 6.6 RMB, and another undercuts it at 5.5 RMB, followed by 4.4 RMB—both will eventually perish, while the remaining brands on the same street will thrive.

Our goal is to maintain a healthy, sustainable market position.

Audience Member 2:
What products and services played a role in Luckin’s turnaround? What specific customer needs did they fulfill?

Guo Jinyi:
Coffee naturally comes with barriers to entry, so our first step was to lower these barriers while also providing an emotional connection for consumers.

We approached lowering barriers in two directions:

1. Milk-based products:
   • Since Chinese consumers are accustomed to drinking milk, we introduced products such as:
     • Thick Milk Latte
     • Cream Cheese Latte
     • Butter Latte
     • Mascarpone Latte
2. Plant-based options:
   • Initially, we launched oat milk, which sells well in the U.S. as part of a vegan and low-carbon lifestyle. However, it posed a challenge for Chinese consumers because:
     • Oat milk’s pure taste alone was not very appealing.
     • The combination of oat milk with coffee did not taste great to most Chinese consumers.
   • We identified coconut milk as a more promising alternative because:
     • It complements coffee uniquely with its natural sweetness.
     • It is perceived as healthy and pairs well with the summer season.

Thus, we pivoted our plant-based product strategy towards coconut milk, which became a major success.

For consumers looking for refreshing options, we developed beverages such as:

• Orange C Americano
• Pomelo C Americano
• Lemon C Americano

These products aligned with post-pandemic consumer preferences, as people sought healthier and more refreshing choices.

We closely monitor shifts in consumer taste preferences and stay updated on innovative trends from independent coffee shops around the world.

Additionally, coffee has a strong social element, and consumers want to interact with it emotionally.

To meet this need, we introduced annual celebrations around our best-selling products:

• Every April, we celebrate the birthday of the Coconut Latte.
• On its first anniversary, we collaborated with Coconut Palm to launch the Coconut Cloud Latte.
• On its second anniversary, we partnered with Doraemon to introduce the Icy Coconut Latte, which coincided with the end of the pandemic, marketed under the theme “Coconut Latte from the Future.”

Each year, we continue to evolve these key product lines to cater to consumers’ emotional needs, including high-profile collaborations with brands like “Black Myth: Wukong” and Moutai.

Our overarching strategy is to create products that are both delicious and fun. The core lies in deep consumer insight—not only meeting their current demands but also anticipating and leading future trends.

You can also make reference to the following Momentum Works reports and articles for more:

• Inside Luckin Coffee
• Coffee in Southeast Asia
• Chinese F&B in Southeast Asia
• Quick Commerce in China 2025
• Food delivery in Southeast Asia 5.0