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MoonFox Data: Luckin Coffee has successfully secured a dominant position in the market through rapid expansion and a broadening customer base

About us: Aurora Mobile (NASDAQ: JG) established in 2011, is a leading customer engagement and marketing technology service provider in China. Its business includes notification services, marketing growth, development tools, and data products. As its sub-brand, MoonFox Data is a leading expert in data insights and analysis services across all scenarios, aiming to help companies gain market insights and empower precise decision-making.

CHENGDU, China, March 14, 2024 /PRNewswire/ — Recently, Luckin Coffee has unveiled its annual financial report for 2023, revealing a total revenue of RMB 24.9 billion, with the year-over-year growth of 87.3%. According to the Generally Accepted Accounting Principles (GAAP) in the United States, in 2023, the operating profit of Luckin Coffee amounts to RMB 3.026 billion, which is twice the size of RMB 1.55 billion in 2022. However, its operating profit margin has increased from 8.7% in 2022 to 12.1% in 2023. From the perspective of sales revenue, Luckin Coffee has emerged as the largest chain coffee brand in the Chinese market. It maintains a relatively stable growth in profits while rapidly expanding. In the realm of exotic coffee imports, how does the domestic brand Luckin Coffee surpass its competitors and establish itself as an unparalleled champion in the coffee industry? In this article, MoonFox Data will conduct multi-dimensional analysis on the online and offline operation data of Luckin Coffee, list key factors facilitating its business growth, and analyze its growth potential.

I. Expand rapidly and leverage the advantages of “large-scale shops” to seize market share 

According to MoonFox iBrand data, the year 2023 witnessed that Luckin Coffee continued expanding its offline stores at a growth rate of 30%-50%. As of the end of December 2023, the number of operational stores nationwide of Luckin Coffee had exceeded 11,000, achieving an increase of over 3,300 stores compared to the same period last year. In the ongoing trend of expanding coffee market education, the primary strategy for Luckin Coffee is to open more new stores to meet consumer demand and create scale effect, in order to enhance brand influence and capture market shares.

Number of offline operating stores for Luckin Coffee in December 2023

Number of offline operating stores

YoY Growth

December 2022

7,907

33.11 %

December 2023

11,273

42.57 %

Data Source: MoonFox iBrand; Data retrieval cycle: 2022.12-2023.12

With the rapid expansion of retail network, the average passenger flow index of Luckin Coffee stores is relatively stable. By the end of December 2023, the national passenger flow index of Luckin Coffee’s stores had increased by over 100% year-on-year, with the average passenger flow index of stores growing by 40%. The average passenger flow index of store, to a great extent, reflects operational efficiency of brand stores as a whole. It indicates stores of Luckin Coffee experience healthy operational state in the past year, and there is still potential for expansion and growth in the future.

Changes to average passenger flow index at Luckin Coffee stores in 2023

Average flow index of store

YoY Growth

March 2023

93

47.62 %

June 2023

102

45.71 %

September 2023

127

73.97 %

December 2023

116

41.46 %

Data Source: MoonFox iBrand; Data retrieval cycle: 2023.03-2023.12

II. Continuously design popular signature product+low-cost strategy, broaden target audience, and attract potential customers to re-purchase 

Luckin Coffee has officially announced that it launched a total of 102 new products in 2023, with sales expected to exceed 2 billion pieces. Among them, Eight SKUs had reached a sales volume of over 1 billion, including the popular Coconut Latte, Moutai Jiangxiang Flavored Latte, and Velvet Latte with high repurchase rates. As a local brand, Luckin Coffee excels at understanding the tastes and preferences of local population. Its successful signature products are widely recognized in market, and varieties of SKU can meet the diverse taste preferences of different consumer groups. In addition, it has launched long-term promotional campaign of “Weekly Discount of RMB 9.9” from May 2023, which helped attract more potential customers to repurchase products over the past year. The data from the Moon Fox iAPP indicates that since September 2023, the daily active users of Luckin Coffee app have maintained a rapid growth. By the end of 2023, the average daily active users (DAU) were maintained at over 2.4 million, with a year-on-year growth rate of 78%.

Changes in average daily active users (DAU) ofLuckin Coffee app in 2023

Average monthly DAU (unit: 10,000)

YoY Growth

January 2023

153.41

39.71 %

February 2023

175.04

38.44 %

March 2023

182.52

32.50 %

April, 2023

195.33

13.77 %

May 2023

212.93

23.98 %

June 2023

235.38

22.62 %

July 2023

227.32

29.91 %

August 2023

221.55

29.90 %

September 2023

301.48

77.91 %

October 2023

290.47

61.57 %

November 2023

265.80

43.75 %

December 2023

241.11

78.48 %

Data Source: MoonFox iApp; Data retrieval cycle: 2023.01-2023.12

In the past year, there have been significant changes in the customer base of Luckin Coffee. In December 2023, the proportion of customers aged 36-45 increased by 6% compared to the same period of last year. This indicates that Luckin Coffee is quickly catering to ideas of “non-coffee core customers” and converting them into brand users. At the same time, the proportion of moderate consumption level consumers went up by 9%. In summary, “expanding the consumer base” is a key strategy for Luckin Coffee to develop business.

Age distribution of Luckin Coffee users in 2022 and 2023

December 2022

December 2023

Aged 25 and under

33.23 %

28.63 %

Aged 26-35

32.26 %

34.26 %

Aged 36-45

18.46 %

24.51 %

Aged 46 and above

16.04 %

12.60 %

Data Source: MoonFox iBrand; Data retrieval cycle: 2022.12, 2023.12

Consumption level of Luckin Coffee users in 2022 and 2023

December 2022

December 2023

Low consumption

34.38 %

28.70 %

Moderate consumption

26.56 %

35.40 %

High consumption

39.06 %

35.90 %

Data Source: MoonFox iBrand; Data retrieval cycle: 2022.12, 2023.12

III. Active marketing strengthens customer’s mind, and social media interaction “attracts” young users

The financial report of Luckin Coffee shows that the sales and marketing expenses in Q3 and Q4 of 2023 have increased by 141.3% and 130% respectively compared with the same period in 2022. Over the past year, Luckin Coffee enormously has established customer base in terms of co-branding, new product promotion, celebrity endorsements, and marketing investment in event sponsorship. In addition to conventional and traditional marketing methods, Luckin Coffee excels at leveraging social media platforms to amplify its brand presence. It closes the distance with users by interacting with them on social media platforms. Through user-generated content to expand spreading scope, it hopes to establish a youthful brand image to capture minds of younger consumers and forge an emotional connection with them. Specifically, in October 2023, Luckin Coffee collaborated with the Tom and Jerry in coffee cup sleeves and other peripheral products, which sparked a wave of creative DIY transformations among netizens. This DIY trend was even popular on social media platforms like Xiaohongshu, causing significant exposure and engagement.

. Can Luckin Coffee sustain its leading position as the “top coffee brand” in China in the future?

Luckin Coffee expresses its plans in 2024 to continue expanding stores in high-line cities, and to accelerate business expansion in low-tier cities by means of interconnected operations, in order to increase its market share. It is expected that Luckin Coffee will have more than 20,000 stores by 2024. According to MoonFox iBrand data, the proportion of Luckin Coffee’s stores in third-tier cities and below rises by 9% in 2023. It sets small number of stores in fourth and fifth-tier cities, but their average passenger traffic index of store is high, indicating strong development potential for store expansion. Therefore, Luckin Coffee may further expand market share by opening stores in lower-tier cities.

Geographical distribution of Luckin Coffee stores in 2022 and 2023

December 2022

December 2023

First-tier cities

15.34 %

19.54 %

New first-tier cities

33.69 %

24.31 %

Second-tier cities

24.84 %

21.15 %

Third-tier cities

15.97 %

19.04 %

Fourth-tier cities

8.13 %

11.05 %

Fifth-tier cities

2.02 %

4.91 %

Data Source: MoonFox iBrand; Data retrieval cycle: 2022.12, 2023.12

Operating status of Luckin Coffee stores in various regions in January 2024

City level

Stores in operation

Average passenger flow index

First-tier cities

2469

103

New first-tier cities

3066

103

Second-tier cities

2671

101

Third-tier cities

2506

116

Fourth-tier cities

1482

109

Fifth-tier cities

641

117

Data Source: MoonFox iBrand; Data retrieval cycle: 2024.01

However, for Luckin Coffee, its future journey is still challenging, with ever-evolving market competition landscape, intense competition from rivals, the emergence of new products and novel competitive tactic, and changing taste and demands of consumers. In response to these challenges, Luckin Coffee must actively consolidate its advantages in product development, supply chain management, distribution channels, and brand assets, in order to maintain leading position amidst the intense competition.

Aurora-Moonfox consistently monitors industry development and regularly tracks corporate performance. The following is our research report on industry hotspots:

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If you need a report, please contact us to obtain it.

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