Image Source: EPA-EFE/Roman Pilipey
Luckin Coffee is taking over the coffee world again – the second time around – and they’re aiming big. It can be recalled that the Chinese startup was involved in a scandal several years ago and then removed from Wall Street.
The coffee chain announced its comeback on Tuesday, posting a nearly 90% increase in first-quarter earnings. This is despite the COVID lockdowns and tight market landscape that have hurt many businesses across China.
Luckin Coffee is on a mission to provide the best coffee in China, and they’re doing it at an unprecedented pace. The company has grown exponentially since its opening, growing to operate over 6,580 stores – a bigger number of stores than industry leader Starbucks which only has 5,650 branches across China.
Several of its stores are self-operated, and others are under their partners, in contrast to Starbucks’ chains in China that are company-owned.
The recent revenue posted by the company is proof that they are recovering from the challenges they faced several years ago when they were ejected by the Nasdaq.
CEO Jinyi Guo said in an interview that investors and analysts may still be skeptical about the company’s entry into the market considering the issues they’ve been involved with before. “We have taken a lot of measures to clean up our own house,” he said.
Since 2010, the company has tried to revamp its operations and reorganize its internal structures. Back then, Guo was senior vice president of product development when he was promoted to CEO amid the crisis. When he became acting CEO, Guo made the changes to ensure that the system would perform better.
“Because of the pandemic, there are a lot of people not able to travel to China, to see for themselves how it looks like in our shops,” he added. “If they’re able to see for themselves how we operate, then they would know that the figures are true, and they shouldn’t be skeptical about it.”
Since it was founded, the Luckin has been generating a lot of buzz among consumers, challenging traditional coffee shops. It’s targeting mostly young people with their drinks. It then became a billion-dollar company, and in a span of 12 months, the company was able to put up 2,000 stores across China.
Two years later, Luckin Coffee entered the US market. Luckin was welcomed by many investors as it exhibited the potential to challenge other mainstream coffee shops like Starbucks.
It was the worst time for the company when it was pulled out of Nasdaq in 2019 after a report found that they were fabricating its revenue. Luckin Coffee was then fined $180 million by the US Securities and Exchange Commission, and it had its CEO and chairman fired, allowing Guo to step into the limelight.
Luckin Coffee’s exit from the market was not without some disappointment. But two years later, Luckin Coffee has taken over where it left off and is now entering with an updated vision that can guarantee its success.
Opinions expressed by US Insider contributors are their own.