LKNCY (Trans): Market Share Gain Remains Top Strategic Priority---
Below is Dolphin Research's Trans of Luckin's FY25 Q4 earnings call. For the earnings read-through, see LKNCY: Is China's coffee leader being held hostage by the delivery wars?$Luckin Coffee(LKNCY.US)
- Key Financials Recap
- Earnings Call Details
2.1 Management Highlights
- Strategy & Market Outlook
Core strategy: The company remains focused on scale, prioritizing store expansion, customer growth, and product innovation. Management views the moat in made-to-order coffee as end-to-end operating excellence across the value chain, not a single dimension.
Market view: China's coffee market is seeing accelerating demand and a more diversified competitive landscape. Leveraging a digital-first model with a rapidly expanding store network and user base, Luckin is building a more resilient foundation for future growth.
Guidance: Into 2026, the company will continue to prioritize scale expansion. It will also stay agile to adapt to market shifts.
2. Business Segment Updates & Outlook
A. Store Expansion & Ops
China expansion: Maintain a competitive opening pace, deepening presence in prime locations of top-tier cities while extending into lower-tier markets to cover more consumption scenarios. The company is the first F&B chain in China to exceed 20,000 self-operated stores.
Store innovation: The 30,000th store, an 'origin flagship' in Shenzhen, showcases leadership beyond scale. It elevates craft and enhances the customer experience.
Intl expansion: We remain disciplined and measured. Scale-up will be prudent.
- Singapore: Store count now ranks among the leaders locally. The model and unit economics are largely validated.
- Malaysia: Operating via franchising, we are leveraging Singapore learnings and supporting partners to localize execution. Performance is improving as localization deepens.
- U.S.: Still early-stage exploration, focused on building the operating infrastructure and localizing the model. We are accumulating learnings and sharpening consumer insight.
B. Product Innovation
- Innovation engine: We launched 30 new made-to-order beverages in Q4. Full-year new launches exceeded 140, sustaining product leadership.
- Pro coffee positioning: Through campaigns like 'Brazil Coffee Season', we rolled out origin-led lines such as Samba Black Gold and added Black Gold beans to 25 beverages. This reinforces our specialty positioning and supports customization.
- Beyond coffee: We introduced products like Matcha and Salted Milk Tea to broaden dayparts and leisure scenarios. In 2025, non-coffee beverages accounted for over 20% of total cups.
C. Customer Growth & Ops
- Customer growth: We are expanding the base with great taste and emotionally resonant brand experiences. In Q4, we added over 24 mn transacting customers.
- User ops: By integrating product innovation, IP tie-ups (e.g., hit mobile games, animated films) and precision operations, we lifted the share of high-frequency users. Overall purchase frequency improved meaningfully.
2.2 Q&A
Q: Q4'25 store expansion far beat expectations, with net adds of over 8,000 demonstrating strong competitiveness and execution. At the same time, same-store sales seemed softer than expected. Could you elaborate on the drivers?
More importantly, how should we think about 2026 trends, including new-store opening pace, SSS trajectory, and margins at the store and corporate level? What strategies will you adopt to navigate this fluid backdrop? Any guidance or color?
A: Looking into 2026 and our long-term strategy, China's coffee market remains in a rapid growth phase with substantial structural opportunities. In 2025, subsidies on delivery platforms materially accelerated consumer adoption of coffee in China, driving strong demand and fast-rising consumption, which further validates our strategic stance.
Gaining share remains our top priority. In 2026, amid a complex and dynamic market, we will stay disciplined yet flexible, focusing on stores, cost, and pricing to support healthy performance.
Store expansion: We will leverage our proprietary, industry-leading digital site selection and planning systems to execute a granular strategy. This will sustain an efficient and competitive opening cadence to capture dense, fast-growing urban demand, while closely tracking store ramp and maturity.
Volumes: On supply, we will keep customer-centric innovation, enriching the portfolio to reach more users and scenarios. On demand, we will harness digital capabilities to run more targeted, market-relevant marketing. These efforts strengthen emotional ties through brand innovation, improve reach and conversion, and ultimately lift retention and purchase frequency.
Pricing: We will maintain competitive price points while widening price bands to optimize the overall architecture and flex to diverse market needs. We will continue to enhance the experience to support pricing and ops, with more bundle options, customization, and specialty bean selections.
In short, given the evolving delivery subsidy dynamics, the time needed for order mix to normalize back to pickup, and the high base from 2025's heavy subsidies, SSS and profitability may face short-term volatility and pressure in 2026. That said, we remain focused on healthy execution.
Q: Competition is becoming more diverse, with more cross-category rivalry between tea and coffee brands. How do you view this evolution, and what does it mean for us?
A: Made-to-order beverages are among the few categories in China with clear long-term structural opportunity and runway. As habits form, more entrants are natural and, importantly, help educate consumers and deepen penetration, expanding the overall market.
Over time, the basis of competition is evolving. Since Luckin's founding, China's coffee market and consumer behavior have shifted rapidly. Brands can no longer rely on pricing, a single hero SKU, or one-off campaigns for durable success.
Instead, long-term competitiveness depends on a comprehensive set of capabilities, including brand awareness, customer experience, emotional connection, product development, and store coverage. Delivering a holistic experience across these dimensions will determine long-term success and requires strong digital operations and scale advantages. After five years, we believe Luckin is building systemic strengths across all dimensions.
On these foundations, we use digital tools to interact directly, frequently, and efficiently with customers. This gives us deeper insight into evolving tastes and preferences, enabling more targeted product launches, marketing, and engagement programs.
On product, guided by customer needs, we push continuous innovation with a focus on elevating coffee craft and flavor experience. Our frequent launches are not mere SKU additions; they reflect supply-chain resilience and R&D strength across bean sourcing, roasting, recipe development, flavor expression, and customization.
From expanding origin coverage globally to building China's largest self-operated roasting network and forming a team of coffee masters, we have built robust infrastructure to support long-term competitiveness. These assets underpin our innovation cadence.
Fundamentally, made-to-order coffee relies on convenient locations and efficient fulfillment. Breadth of scenario coverage and store proximity are key to converting demand into sales. With 30,000 stores nationwide, we cover both cities and towns across tiers and can better capture the ongoing demand growth.
Q: We have been expanding internationally for some time. How should we assess current progress, and what are the future strategy and plans?
A: Compared with mature overseas markets, Mainland China's growth and potential remain globally compelling and are our core business base. The digital and scale advantages forged in China's complex competition will be central to our overseas expansion. We are taking a long-term approach to build sustainable, repeatable operating models.
Overall, overseas has achieved early traction. In Singapore, our first self-operated intl market, we have opened 80+ stores over three years, becoming the No. 2 coffee chain by store count locally. With innovative products, seamless digital service, and value-for-money, we grew our customer base, cup volumes, and ASP.
We have delivered stable store-level profitability since H2 last year, validating the model. This gives confidence to scale.
Leveraging Singapore's brand impact, we entered Malaysia in 2025 via master franchise. We opened 70 stores by year-end, meeting the first-year target. Drawing on Singapore experience, we helped local partners build a deeply localized operating system, with steady market performance.
As the business enters an acceleration phase, both sides are confident about the outlook. This provides a strong reference for franchising in more intl markets.
As one of the largest, most mature coffee markets, the U.S. is a major long-term opportunity. We started exploration in mid-2025 and had nine stores by year-end. We are proceeding patiently and with discipline, laying foundations in product, supply chain, consumer insight, and organizational capability.
We remain in the early phase, with priorities on model validation and building operating know-how. This will underpin future scale-up.
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