Have you seen Luckin China’s new product flooding social media yesterday: an alcohol-flavored coffee in collaboration with Moutai (a renowned / staple Chinese liquor brand).
Luckin x Moutai latte
To give a price reference, a bottle of 500ml Moutai Flying Fairy 飞天茅台 2023 costs about US$430 (as of Aug 2023). On the other hand, the Luckin x Moutai latte, which is a latte “with a jolt of liquor”, is selling at ¥38 (US$ 5.20) or ¥19 (US$ 2.60) with vouchers.
So it is not surprising at all that on the first day of its launch, the Luckin x Moutai latte (which many said tasted like alcohol-infused chocolate) created a social craze. More than 5 million cups of Luckin x Moutai were sold, and ¥100M (US$ 14M) in sales was made – in just one day.
Luckin x Moutai latte had record-breaking sales on its first day of launch
How is the Luckin x Moutai latte made?
Many thought that this is how the Luckin x Moutai latte is made – like a cocktail (picture on the left), but it is in fact through ‘Moutai-flavored thick milk’ (picture on the right).
Many on social media are surprised by how the Luckin x Moutai latte is made (source: Xiaohongshu)
The ‘Moutai-flavored thick milk’ is supplied by Saishang Milk, a unicorn-status deep-processing dairy company, exclusively for Luckin. According to Luckin, during the production of the thick milk, ¥30M (> US$ 4M) worth of Moutai is transported to the factory to be processed.
Moutai-flavored thick milk production process (source: Luckin coffee)
Why the partnership?
Coffee/ tea and alcohol concoction is not new – we have espresso martini, bailey coffee, amaretto tea, Starbucks’ Whiskey Barrel-Aged Cold Brew (whiskey-like flavor but no alcohol content!), and even in Singapore’s own backyard, KOI Signature’s Baileys Coffee Latte.
Starbucks’ Whiskey Barrel-Aged Cold Brew and KOI Signature’s Baileys Coffee Latte
During our China Leadership Immersion programme and in our Sip Innovate Repeat- Immersive workshop, we have also observed “How teddy bears are involuting the retail scene”. Competition in China is intense.
Competition in China (source: Sip Innovate Repeat Immersive programme material)
So, it is only a matter of time before Luckin ramps up the competition with this Luckin x Moutai partnership. The Luckin x Moutai latte may be gimmicky, but the craze has been phenomenal.
But what can we learn from this?
Lesson #1: You cannot rely on customers to be loyal
As we share in our Momentum Academy Sip Innovate Repeat immersion workshop, “customers are no longer loyal to any one company, and competition is now fiercer than before.”
Brands are no longer just competing on price and quality, but on other factors – like fun and novelty.
Value propositions of coffee brands to customers (source: Sip Innovate Repeat Immersive programme material)
Lesson #2: You need a knock-out product
For your product to stand out, a company needs a product that everyone can remember (and talk about).
Moutai has built its brand to be one of the most influential brands in China. It has been used on official occasions in feasts with foreign heads of state and distinguished guests visiting China. It received wide exposure in China and abroad when Zhou Enlai and Richard Nixon had Moutai during the state banquet for the U.S. presidential visit to China in 1972.
President Richard Nixon toasting Chinese Premier Zhou Enlai at a banquet in China in 1972 (source:CNN)
As CNN quoted in a 2021 article, “Moutai is China’s most valuable firm outside of technology. It’s worth more than Toyota, Nike and Disney too.”
Kweichow Moutai’s stock price in 2021 (source: CNN)
Lesson #3: Build a win-win partnership
What’s interesting is why Luckin and Moutai are collaborating with each other.
Moutai, being the national liquor brand, wants to reach the younger audience. There have been various attempts by Moutai to cultivate the younger audience who would grow to be long-term Moutai consumers, for example, by launching Moutai ice cream.
On the other hand, Luckin has an extensive distribution (> 10,000 stores) in China, as well as a great marketing power – it has amassed a large following, especially amongst young white-collar professionals over the years with its knock-out products like coconut latte.
Moutai ice cream store
Lesson #4: But…don’t break the law
The billion-dollar question people have been asking on Douyin is “Can you drive after drinking the Luckin x Moutai Latte?”
Someone has done a test in conjunction with the traffic police in Changsha. She drank the Luckin x Moutai latte and was tested by the traffic police. The alcohol content was 10mg / 100ml, which is below the drunk driving threshold of 20mg/100ml.
However, according to the traffic police, the public is “not recommended to drive after consuming this latte”. Note that China has one of the strictest drink driving laws in the world.
Testing of alcohol content in Luckin x Moutai latte with Changsha traffic police
Ultimately, everyone is innovating, but at a different scale
Competition in the F&B space will get more intense and this will push companies to innovate. There are many inspirations we can take from innovative companies like what Luckin is doing and what incumbents like Starbucks are doing to stay competitive.