Lucky’s same-store sales fell 16.7% year-on-year, and CEO said it would not raise prices

Photo source: Visual China

Blue Whale News, February 21 (Reporter Zhang Jinglun)On the evening of February 20, Luckin Coffee announced its fourth quarter and full-year 2024 financial results. The financial report shows that Lucky’s total net income in fiscal year 2024 was 34.475 billion yuan, an increase of 38.4% from 24.903 billion yuan in fiscal year 2023. Under U.S. Accounting Standards (GAAP), Lucky’s operating profit in 2024 was 3.538 billion yuan, a year-on-year increase of 16.9%.

From the perspective of net income alone, Starbucks ‘revenue in China was US$2.958 billion in fiscal year 2024, a year-on-year decrease of 1.4%. Luckin once again surpassed Starbucks China to become the largest domestic coffee beverage brand by revenue.

At the call conference on Luckin’s earnings report, Luckin Coffee Chairman and CEO Guo Jinyi said that 2024 is a critical year for the development of Luckin Coffee’s business. In a complex and ever-changing industry environment, our strategy is focused, goals are clear, and implementation is in place., continue to expand market share and competitive advantages. rdquo;

The increase in revenue scale is due to the rapid growth of stores.

Last year, Luckin Coffee added 6092 stores, including 6071 stores in China (including 5 stores in China Hong Kong) and 21 stores in Singapore. This speed is far faster than that of its peers. Narrow-door dining eye data shows that Cudi, which currently ranks second in the industry in terms of stores, has opened 2864 stores and closed 1245 stores in 2024. Starbucks China only added a net of 790 stores throughout fiscal year 2024.

As of the end of the fourth quarter of last year, the total number of Luckin stores reached 22340, an increase of 37.5% compared with the same period in 2023. Among them, there are 14591 self-operated stores (including 51 stores in Singapore) and 7749 joint stores. More specifically, the revenue from Ruixing Coffee’s self-operated stores in 2024 will be 25.592 billion yuan, a year-on-year increase of 43.1%; the revenue from associated stores will be 7.745 billion yuan, a year-on-year increase of 24.4%. This means that cooperative stores, which account for approximately 34.7% of the total, only contribute 22.46% of Luckin’s total revenue in net revenue.

At the performance meeting, Guo Jinyi said that as more consumers gradually develop the habit of drinking coffee, user demand in the domestic coffee market will continue to increase steadily. Therefore, on the basis of ensuring store quality and operational efficiency, it will continue to maintain a leading position. With the speed of opening stores in the industry, the main direction of store layout is still to encrypt high-line cities and expand sinking markets.

As an imported product, coffee’s main market has always been limited to first-tier and new first-tier cities. Bailian Intelligent data shows that in 2021, the proportion of cafes located in second-tier cities and above will be close to 70%, while beverage shops will only account for about 50%.

Chain coffee brands densely clustered in first-and second-tier cities have also chosen to rush out of their base camps and continue to explore the low-tier market. According to incomplete business statistics, the proportion of Starbucks stores in cities below the third tier has increased from 4.79% at the end of 2023 to 6.23% at the end of 2024, and the number of township stores has reached 6%;Tims Tianhao Coffee has increased from 0.33% at the end of 2023 to 0.97% at the end of 2024, and the number of township stores has reached 1.95%.

On the other hand, the sinking market is also an advantageous market for many new tea brands, including Mixue Ice City, the king of sinking, and Guming, which has high penetration rates in the provinces of Baoyou, all of which have launched their own coffee SKUs. In the process of sinking and expanding coffee brands, there may inevitably be left-right fighting.

Guo Jinyi also admitted that Ruixing also noticed that many tea and beverage companies have been listed one after another recently. It is foreseeable that market competition in the ready-made beverage industry will further intensify, and Ruixing’s market penetration advantage may also encounter challenges. To this end, Ruijinhui continues to increase investment in brand and marketing, striving to maintain its leading position in the industry.

At present, what the industry is most concerned about is Lucky ‘s attitude towards 9.9 yuan coffee.

At the beginning of 2024, Lucky will shrink the weekly 9.9 menu, and only some categories will maintain this preferential policy. At the beginning of 2025, the news of Lucky’s price increase caused quite a stir among coffee lovers. Blue Whale News reporters searched on social media and found that netizens in many places posted articles saying that the original price of some Lucky products in some areas had been raised by about 3 yuan. At the same time, the threshold for using the once-popular 9.9 yuan coupon has also been greatly increased. Only one coupon can be received per week, and the scope of application has been reduced to specific products.

This operation has also been seen by the outside world as a signal that Luckin Coffee is gradually abandoning its low-cost involutional strategy.

But it cannot be ignored that the supply price of raw material coffee beans is also rising. On February 11, 2025, the Arabica coffee futures price on the Intercontinental Exchange in New York (ICE) exceeded 430 cents per pound, setting a record high in 47 years. The increase in the past year was as high as 118.57%. Since then, coffee futures prices have fallen back, but they are still running high.

At the performance meeting, Guo Jinyi revealed that the current rise in the price of raw coffee beans will indeed bring some cost pressure, but Ruixing has built an integrated supply chain through early investment in the entire industry chain, which can take advantage of scale and efficiency advantages to a certain extent. Hedging and digesting the impact of rising coffee bean costs, the impact is generally controllable at present.

Guo Jinyi also mentioned that Ruixing Coffee currently has no plans to raise prices, and the 9.9-piece coffee campaign will continue to be carried out to maintain a leading position in the ready-made beverage market where competition is intensifying.

Previously, Li Yingbo, chief strategy officer of Cudi Coffee, also revealed in an interview with the media that he would continue to adhere to the 9.9 yuan strategy, would not raise prices, and maintain the goal of 50,000 store terminals by the end of 2025 unchanged.

From the industry’s perspective, in the field of chain FMCG coffee, market competition is fierce and product prices are relatively stable. Even when the cost of coffee beans rises, brands usually do not easily increase terminal retail prices to avoid affecting market share and consumer loyalty.

However, despite the reduction of Ruixing’s 9.9 yuan category, it failed to stop the decline in same-store sales in its self-operated stores. In 2024, same-store sales in Ruixing’s self-operated stores will decrease by 16.7% year-on-year, and will increase by 21.0% year-on-year in 2023. However, in terms of each quarter, the same-store sales growth rate indicator of Ruixing Coffee’s self-operated stores continued to improve, from-20.3%, -20.9%, and-13.1% in the first three quarters of last year to-3.4%, and achieved a one-month positive in December.

However, in terms of horizontal comparison, in the China market in fiscal year 2024, Starbucks China was driven by an 8% drop in average customer unit price, and same-store sales also fell by 8%, which was also lower than Luckin’s indicator.

Regarding the decline in same-store sales, Guo Jinyi said that due to a series of objective factors such as the store training cycle and the development of customer consumption habits, Lucky’s same-store indicators have fluctuated and declined in stages, which is fully in line with Lucky’s strategic judgment. rdquo;

“In 2025, we will continue to focus on expanding scale, advantages and market share, further enhance our competitive advantages, adhere to a sound operating strategy, take into account flexibility and mobility, respond to market changes in a timely manner, and maintain industry-leading store opening speed, give full play to the cost advantages brought by scale, improve operational efficiency through digital capabilities, and meet user needs with highly cost-effective and competitive high-quality products. Achieve sustained and healthy business growth.& rdquo; Guo Jinyi said.