So analysts had been singing the songs of Luckin Coffee even until its implosion:
To be honest, it is not entirely the fault of equity analysts – because the financial reports, at least the Annual Report, were supposed to be audited by reputable firms.
Amongst all the hubris, 半佛仙人 – a blogger in China in his pseudonym, has been claiming that Luckin is a phenomenal ‘chives cutter’ in its public blog posts as well as video clips.
For those who are not familiar with Chinese internet lingo, Chives (to be precise, Garlic chives or Chinese chives) often refer to retail investors.
The metaphor goes: Chives never learn, you cut them and they grow back for you to cut again.
The Video post Muddy Waters report
Anyway, back to Luckin, the following 半佛仙人 video, published right after the Muddy Waters report, is hilarious:
It calls Luckin “The shine of Chinese products, the chive cutter of US market, the mudflows of Nasdaq, the nightmare of US stock investors, the heir of internationalism by using western funds to breed oriental consumerism, the emotionless voucher machine, the khaleesi of pot cleaning water (a reference to Americano’s taste), and the obvious champion of 2019 money burning tournament.”
The video asks “Why is the capital market so slow? Why do they have to get 90+ full time and more than 1000 part time investigators to reach a conclusion that everyone knows in China.”
It answers the question whether Luckin is a good company by saying that obviously from a consumer perspective it is good – you get years of supply of almost free coffee, funded by capital.
Blue ocean of tea drinking in the US?
The video also pokes fun at the Luckin story: the low coffee consumption per capita in China and by deduction the massive upside in the blue ocean if everyone in China drinks coffee to the mature level of US and other markets. Besides, coffee is addictive.
The author says “by the same logic, the most promising Chinese company is Xiaoguan Tea, because western customers do not drink as much tea per capita, while tea contains caffeine and is addictive. Xiaoguan Tea will help US become a big consumer of tea.”
It also bashes the stupidity of those who claim Starbucks coffee is tastier than Luckin. It says the main advantages of Starbucks are: consistent quality, good service, bright space, fast internet, good branding, clean toilet, well-trained staff.
“Why would you criticise Luckin when it uses more expensive beans than Starbucks, sells its coffee cheaper than Starbucks, and often treats you coffee for free?”
It also analyses Luckin’s financial reports, with the main point of raising money from US capital market to buy Chinese consumers free coffee.
Continuous storytelling
The unmanned retail announced by Luckin, according to the author, is an ultimate weapon of chive cutting. “It uses auto coffee machine which is already prevalent in China to give consumers more discounts and free goodies.”
“The amazing thing is, Luckin is always able to expand its portfolio to find more excuses for its steep losses and continue to subsidise consumers!”
“Luckin knows that Chinese investors will not believe in their story, so they spared Chinese investors and focused on US market.” It says.
“Chinese fraudsters should learn from Luckin on vision, you should not focus on cheating the money from your consumers, but from big investors,” the video concludes. “The business model does not make money, does not generate positive cash flow, and continues to cut the capital market chives. It is a truly great company.”