Luckin Coffee Beats Starbucks to Become China's Top Coffee Company in Q2

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Credit: Visual China

BEIJING, Aug 3 (Ti Post) —— China"s Luckin Coffee"s revenue grew 88% year-on-year to 6.201 billion yuan, outnumbering Starbucks China for the first time, according to the two companies" financial reports released on Tuesday.

Luckin Coffee had 10,836 stores at the end of the second quarter in 2023, while Starbucks China had 6,480 stores.

Rooted in the Chinese market for 23 years, Starbucks dominated the Chinese market for a long time. Starbucks generated revenue of $822 million (5.904 billion yuan) in China in the second quarter, up 51 percent year-on-year, according to the earnings report.

Starbucks reported total revenue of $9.168 billion globally, up 12 percent year-on-year. The company’s net profit reached $1.142 billion, up 25.06 percent year-on-year. The earnings per share was $1.00, up 19 percent year-on-year. By region, Starbucks realized revenue of $6.74 billion in North America in the second quarter, up 11.2% year-on-year, while its international division outside of North America, led by the Chinese market, saw its net income grow 24.5% year-on-year to $1.97 billion in the second quarter.

In terms of profit, Luckin Coffee realized a net profit of 999 million yuan in the second quarter, a net profit margin of 16.1 percent, compared to a loss of 115 million yuan in the same period last year. Luckin Coffee’s CFO An Jing said at the earnings meeting that the key to the improvement in net profit margin was revenue growth, while cost control, digital operations, and scale advantage also contributed to the efficiency improvement.

The operating profit of Starbucks" international division, which includes the Chinese market, rose 177% year-on-year to $375 million, and the operating margin increased 10.50 percentage points year-on-year to 19.0%.

Luckin Coffee surpassed Starbucks China in the number of stores for the first time at the end of 2021, and now the gap has widened further. Luckin Coffee had a total of 10,836 stores, becoming China"s first coffee chain with more than 10,000 stores at the end of the second quarter, with the total number of stores up 15.9% YoY. Luckin Coffee is also accelerating its overseas expansion, adding five new stores in Singapore in the second quarter. Guo Zhenyi, the Chairman and CEO of Luckin Coffee, said on the earnings call that the next step would be to continue developing the overseas market.

Luckin Coffee"s store expansion strategy is to open self-operated stores in first-tier cities, while affiliate stores are used to foray into the low-profit market, with the number of cities covered by the two models at 70 and 265 respectively. Self-operated stores’ revenue increased 85.2% year-on-year to $4,495.3 million in the second quarter, with store-level margins at 29.1%, 0.7 percentage points higher than the same period in 2022. Affiliated stores’ revenue was $1,485.8 million in the second quarter, also up 91.1% year-over-year.

In comparison, Starbucks China had 6,480 stores at the end of the first quarter of 2022. By the end of the second quarter, Starbucks had 37,000 stores worldwide, with 16,144 stores located in its top market – the U.S.

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