75 billion Luckin Coffee makes a comeback

The rapidly expanding tea beverage industry has reached a stage where collective performance is being delivered.

When profitability replaces scale as an important indicator for measuring corporate valuation, having better cash flow has become a key condition for tea beverage companies to gain recognition from the capital market.

In fact, since the explosive growth phase of the tea beverage industry, the characteristics of fast-moving consumer goods combined with large-scale replication and imitation have made the tea beverage industry the most valued sector in the capital market. With the support of "traditional + internet," tea beverage companies have sprung up like mushrooms, becoming a significant entrepreneurial hotspot.

But fundamentally, the catering industry is a capital-intensive industry. Despite good cash flow, making a profit is not easy. Therefore, from the perspective of the capital market, the best business models are those like Mixue Bingcheng and Chabaidao, which profit from supply chains and franchise fees.

The previous Nayuki model has already been "abandoned" by the capital market. For example, the once-popular Luckin Coffee, despite its massive scale and slightly better revenue-generating ability than Mixue, has a significant gap in market valuation. This reflects changes in market preferences.

According to the latest Q3 financial report, Luckin Coffee achieved revenue of 36.511 billion yuan in the first three quarters, a year-on-year increase of 46.86%; net profit attributable to the parent company was 3.082 billion yuan, a year-on-year increase of 46.42%; gross margin was 40.38%, and net profit margin was 8.44%. As of the end of Q3, Luckin Coffee's total cash balance was 8.648 billion yuan.

In contrast, Mixue Bingcheng. Its revenue in the first half of the year was 14.875 billion yuan. Net profit attributable to the parent company was 2.693 billion yuan. As of the first half of the year, Mixue Bingcheng's total cash balance was 17.612 billion yuan. From the revenue structure, Mixue Bingcheng's core revenue comes from product and equipment sales, accounting for 97.44% of total revenue.

From a market capitalization perspective, Luckin Coffee's market value in the pink sheet market is $9.665 billion, approximately 75.2 billion HKD, with a P/E ratio of 17.8x; while Mixue Bingcheng's total market value is 149.9 billion HKD, with a P/E ratio of 26.4x.

Currently, whether it's Luckin Coffee or Mixue Bingcheng, domestic expansion has reached a bottleneck, and going overseas has become an inevitable path. However, whether overseas expansion is the ultimate answer for these companies remains to be seen.

Previously, Guo Jinyi, co-founder and CEO of Luckin Coffee, publicly revealed that Luckin Coffee is actively promoting the process of returning to the U.S. main board listing under the guidance of superiors, which means that Luckin Coffee's relisting may already be on the agenda.

Luckin Coffee's "Rebirth"

From the current industry development, the elimination round has begun. Whoever has more cash reserves will have more possibilities. When scale is no longer the only factor, the industry's ecosystem needs to be rebuilt.

Data shows that after its establishment, Luckin Coffee quickly opened the market through the internet model of "online ordering and in-store pickup."

In addition to its differentiated business model, Luckin Coffee also used real money for subsidies, which was a key factor in its success. Under the strategy of large-scale subsidies by "Shenzhou" founder Lu Zhengyao, Luckin Coffee quickly captured users' minds with heavy subsidies such as "first cup free" and "buy five get five," forcibly creating a "10-yuan coffee" gap in the domestic market.

In May 2019, under the halo of the "fastest IPO in the world," Luckin Coffee quickly listed on Nasdaq, becoming a capital myth at the time.

From establishment to listing, Luckin Coffee took only 18 months, while coffee giant Starbucks took 21 years. After the successful listing, Luckin Coffee began to accelerate its expansion. By the end of 2019, the number of Luckin Coffee stores had soared to 4,910, surpassing Starbucks in number for the first time, and its market value once approached $13 billion.

However, rapid expansion is not all advantages. The disadvantages of management and the challenge of how to make a profit are indeed difficult for companies to digest in the short term.

As its scale rapidly expanded, Luckin Coffee's business model, which was highly dependent on subsidies, became increasingly difficult to operate. On the one hand, high subsidies attracted mostly price-sensitive customers, and once subsidies stopped, customer retention was a concern; on the other hand, in order to maintain growth to meet the expectations of the capital market, Luckin Coffee had to continue to maintain high subsidies, which also put it under tremendous performance pressure.

Finally, in 2020, Muddy Waters released an 89-page report accusing Luckin Coffee of financial fraud, which detonated Luckin Coffee. Subsequently, Luckin Coffee admitted to financial fraud and was delisted from Nasdaq in June 2020, moving to the over-the-counter market with extremely poor liquidity. In addition to delisting, Luckin Coffee also faced multiple challenges, including huge fines from the U.S. Securities and Exchange Commission, collective lawsuits from investors, and debt collection from suppliers.

But it is worth noting that its huge scale and cash flow advantages have once again supported Luckin Coffee.

After the crisis broke out, the original management team and investment team led by Lu Zhengyao were ousted. At this critical moment, the core shareholder, Centurium Capital, chose to "double down against the trend." From 2021 to 2022, its leader Li Hui led two key capital increases for Luckin, helping the company complete debt restructuring and pay approximately $1.65 billion in settlement funds and fines, achieving a "complete break" with historical issues.

While solving historical problems, the more critical point is that Luckin Coffee has also adjusted its business model: it first closed nearly two-thirds of its underperforming stores nationwide, shifting from simply pursuing the number of stores to focusing on the operational efficiency and profitability of individual stores. In addition, Luckin Coffee abandoned the "traffic thinking" that relied on crazy subsidies to attract new customers and turned to "profit thinking" driven by product strength and operational efficiency, such as launching the "Raw Coconut Latte," which sold more than 100 million cups a year.

Under drastic reforms, Luckin Coffee has returned to the right track and has once again achieved rapid development in recent years. Data shows that as of the end of the third quarter of this year, the total number of Luckin Coffee stores reached 29,214. Supported by its huge scale, Luckin Coffee's total net revenue in the third quarter alone reached 15.287 billion yuan.

"Comeback"

Today's Luckin Coffee has laid a solid foundation in the crisis and has become healthier.

Steady operations and a scaled system have made Luckin Coffee more comfortable. In the industry, with the ebb of capital, the previous money-burning model has exited the stage, and Luckin Coffee's competitive pressure has also eased.

Currently, in addition to having more than 29,000 stores, Luckin Coffee has also established a complete supply chain system. For example, the price of coffee beans, the most important raw material in the coffee industry, is affected by global commodities. In 2025, the global price of green coffee beans surged by more than 80%, putting tremendous pressure on the entire coffee industry. However, Luckin Coffee has already stabilized the cost of raw materials through various means.

In 2024, Luckin Coffee signed a five-year, 240,000-ton long-term procurement agreement with Brazil, the world's largest coffee bean producer. In addition, to hedge the risks of a single production area, Luckin Coffee has also significantly increased the proportion of coffee beans purchased from Yunnan Baoshan to 38%.

In addition to the layout of upstream raw materials, in the midstream processing part, Luckin Coffee has also achieved self-built production capacity.

In order to control quality and costs in its own hands, Luckin has continued to invest in the construction of roasting capacity. In June 2025, its fourth roasting plant started construction in Xiamen. After completion, the company's annual coffee roasting capacity will jump to 155,000 tons.

However, although it has built a core moat through a complete supply chain system, Luckin Coffee still needs more conditions to regain the favor of the capital market.

At present, the competition in the coffee market is still fierce. In the past, Luckin Coffee's main competitor was only Starbucks, but now more and more coffee brands such as Manner and MStand have emerged. Although their positioning is different from Luckin Coffee, they will still take away some of Luckin Coffee's users. In addition, companies like McDonald's, KFC, Guming, and Mixue Bingcheng have targeted the coffee track, and it can be foreseen that Luckin Coffee's competitive pressure will be greater.

From a performance perspective, Luckin Coffee has actually felt the pressure brought by competition. The financial report shows that Luckin Coffee's GAAP operating profit in this quarter was 1.7766 billion yuan, a year-on-year increase of 12.9%, and net profit was 1.2783 billion yuan, a year-on-year decrease of 2.7%. The growth rates of both calibers were far lower than the revenue growth rate, and non-GAAP profits even declined. This data shows that Luckin Coffee has fallen into a situation of "increasing revenue without increasing profits." With the intensification of competition, its profit side will continue to be under pressure.

In addition to competitive pressure, another major problem for Luckin Coffee is that the expansion speed may slow down. Luckin Coffee adopts a "self-operated + joint-operated" dual-wheel drive model. Self-operated stores focus on core business districts in first- and second-tier cities, establishing brand benchmarks and verifying operating models; while the joint-operated model is fully liberalized and becomes a weapon to sink into third- and fourth-tier and even county-level markets. However, in some mature business districts in first- and second-tier cities, Luckin stores are already too dense, resulting in diluted customer traffic per store. Against the background of nearly 30,000 stores, the speed of store expansion will inevitably slow down.

At the 2025 Xiamen Entrepreneurs Day Conference held earlier, Guo Jinyi, co-founder and CEO of Luckin Coffee, publicly revealed that Luckin Coffee is actively promoting the process of returning to the U.S. main board listing. Indeed, today's Luckin Coffee has completed its transformation, but to regain favor in the capital market, in addition to supply chain and scale, Luckin Coffee still needs a sexier story.