This is an English adaptation of a FoodBud historical article originally published on June 8, 2022.
According to an interview article from Centurium Capital, Luckin Coffee had recently announced that its store network had exceeded 7,000 locations. The piece framed Luckin’s recovery around changes in product development, store operations, and user operations after the company’s 2020 accounting crisis.
In May 2022, Luckin reported first-quarter net revenue of RMB 2.4 billion, or US$379.3 million, up 89.5% from RMB 1.2687 billion in the same period of 2021. Revenue from freshly made drinks was RMB 1.65 billion, accounting for 68.8% of total net revenue, compared with RMB 970 million and 76.2% a year earlier.
The company also turned profitable in the quarter, posting net profit of RMB 19.8 million versus a net loss of RMB 230 million in the prior-year period. At quarter-end, Luckin operated 6,580 stores, including 4,675 self-operated stores and 1,905 partnership stores. Despite pandemic-related closures, same-store sales growth at self-operated stores remained 41.6%.
Centurium interviewed three Luckin executives:
The shared theme was that Luckin had moved toward a more integrated operating model: brand marketing tied directly to user operations, product development tied to digital data, and store operations managed through standardized systems.
Yang described 2020 as a turning point for Luckin. From that year, the company integrated marketing and user operations into what it called “brand-operation integration.” After becoming chief growth officer, Yang continued to oversee marketing while also taking responsibility for revenue growth, user growth, user operations, and participation in cup and price-setting decisions.
He described three advantages of this model:
Luckin also repositioned its brand around younger consumers, especially those born in the 1990s and 2000s. This affected product strategy. After studying younger consumers’ preferences, the R&D team identified milk coffee as a major direction and developed what Luckin called its “big latte strategy.” Thick Milk Latte, Coconut Latte, and Velvet Latte became core examples in 2021.
The marketing approach then used individual hit products to lift a broader product line and, in turn, the overall brand.
Luckin also refined its brand tone around “professional, young, fashionable, and healthy.” For example, its returning cherry blossom series in March 2022 used zero-calorie sweetener and emphasized zero calories and zero fat. Earlier, its SOE coffee line under the Little Black Cup sub-brand helped reinforce a more professional coffee image. Yang said this professional positioning helped establish a price anchor and gave the company more control over pricing.
Based on the younger brand positioning, Luckin chose ambassadors familiar to younger consumers, including Eileen Gu and Lelush.
Yang said Luckin began learning about Gu in June 2021, signed her in August, and officially announced the partnership in September. The company’s rationale was confidence in the attention around the Beijing Winter Olympics and a belief that Gu matched the brand image Luckin wanted to build.
During the Winter Olympics, Luckin launched two Eileen Gu special drinks. After Gu won her first event on February 8, 2022, Luckin quickly updated its official Weibo, app, mini-program splash screens, banners, pop-ups, and menu pages with Gu-related materials. Ads in office buildings, airports, and cinemas followed within less than an hour, and media coverage around Luckin’s Gu-themed drinks appeared within several hours.
Yang divided private-domain operations into three layers:
He argued that groups and Moments were only supplementary traffic tools. The core was the larger digital operating system, which could understand users, segment them, and define rules around people, products, and places.
After the April 2020 crisis, Luckin began building its own private-domain traffic pool. Within three months, it connected with 1.8 million users through enterprise WeChat. By the first quarter of 2022, Luckin had 16 million average monthly transacting customers and more than 29 million followers on its public accounts. On enterprise WeChat alone, it had nearly 20 million users.
Yang said Luckin’s marketing data middle platform used a CDP, or Customer Data Platform, model and connected data from multiple touchpoints. More than 90% of its marketing rules were automated. For example, the system could recommend hot or cold coffee based on city temperature and weather, or increase delivery capacity and multi-cup sharing coupons on rainy days when users were more likely to group orders.
Yang said the biggest difference between new retail and traditional retail was digital empowerment of “people, products, and places.”
For “places,” data helped with site selection and store optimization. For “products,” it helped optimize selection. For “people,” it supported refined user operations to improve retention and purchase frequency.
He argued that e-commerce models such as RFM segmentation were built mainly around people and products, while new retail also required a distinct rule system for physical locations. A store open for six months and a store open for one month need different customer-acquisition rules. Stores in schools, office buildings, and malls also have different consumption patterns, and a mall store may sometimes behave more like an office-building store after attribution analysis.
Luckin’s goal was to let data models identify store attributes rather than relying on manual judgment.
Yang said Luckin prepared three to six months in advance for potential hit products, coordinating product and marketing teams before launch. Coconut Cloud Latte, launched on April 11, 2022, became Luckin’s top first-day single product: first-day sales exceeded 660,000 cups across the network, with more than 130 cups per store.
Zhou said Luckin did not predict Coconut Latte would become as big as it did. The R&D team could not guarantee a product would be a bestseller, but it could improve the probability by making sure the product logic was sound and aligned with broad consumer preferences.
Luckin chose coconut because it had an existing consumer base. Chinese consumers had long been familiar with coconut milk. In designing Coconut Latte, the team also reduced coffee bitterness because many current coffee consumers did not like bitter coffee. Zhou said the product’s success may also have matched a broader shift from milk tea consumers to milk-coffee consumers as students became office workers.
The real operational test, he said, was supply chain integration. After Coconut Latte sold heavily in 2021, coconut milk was tight from April to July. Existing suppliers either could not buy enough coconuts, as Indonesia and Vietnam were affected by worsening pandemic conditions, or did not have enough capacity. By the time of the interview, Luckin had stable coconut milk supply in Hainan, Shanghai, Chuzhou, and other locations, and Zhou said Luckin may have been the largest commercial buyer of coconut milk products in China.
Zhou said Luckin relied on data rather than luck. It digitized ingredients and flavors, quantitatively tracked beverage trends, and used data to explore product combinations. Instead of describing flavors only as “fragrant” or “sweet,” the team converted them into numbers so that later product development could map those attributes to raw materials.
Luckin’s high launch frequency reflected uncertainty around China’s coffee menu structure. Zhou noted that 70% of coffee products in the United States are black coffee without milk, while the proportion may be higher in Europe. Chinese consumers prefer milk coffee, but the market had not yet settled on what kinds of milk coffee they preferred. Luckin therefore launched frequently to define menu boundaries and build a stable base of signature products.
Thick Milk Latte, Coconut Latte, and Velvet Latte formed part of that base. Zhou said a stable base reduced risk and made new-product testing less pressured.
Luckin planned new products six to eight months ahead, leaving time for supply chain procurement and product optimization.
Zhou described Luckin’s product function as five departments:
Some products could be rejected even if visually attractive if they consumed too much store storage space or created operational complexity.
With this process, Luckin increased store SKUs from 60 to 90 in summer 2021 without adding store staff or changing operating processes. Zhou said the company’s core product capability was not any single product, but the mechanism that allowed it to launch good products quickly. That mechanism depended on Luckin’s full digital data foundation.
Cao described Luckin as combining standardized and industrialized retail features with stronger internet attributes. From site selection to store operation, the company used data-driven systems.
Luckin’s ONE SYSTEM covered site selection, the full store operating cycle, and talent development. For expansion, the company used internal and external data to generate delivery heat maps and improve site selection. Cao summarized the approach as opening stores where customers already were, rather than making customers search for stores.
He emphasized that Luckin had been data-driven across the full chain from the start, which helped improve site-selection accuracy, capture consumer feedback quickly, and expand the room for operational optimization.
Cao said Luckin’s store manager and employee turnover rates were far lower than peers. He highlighted three people-management practices:
Cao also said Luckin’s customers and employees were both young, and that management methods needed to reflect that.
Cao said Luckin’s standardized, systematic, and simplified operating system allowed it to launch more than 100 new products a year without adding pressure to store teams. Product formulas and SOPs were unified, and the product center conducted stress tests before store rollout.
At the operations level, Luckin focused on lowering operating costs through data. Store shift management had moved to mobile workflows; shelf-life control was automated; scheduling used big data and forecasts; ordering and thawing were automated; and employee training and interaction were online.
Cao defended the use of automatic coffee machines, arguing that they were essential to consistent quality and that reproducing lab-developed flavor through automatic machines required technical capability. Luckin also used IoT monitoring for coffee machines, refrigerators, and other equipment, including automatic exception alerts.
On food safety, Cao said efficiency was irrelevant without quality. Luckin used a one-vote veto system for quality management: if a store had a quality incident, it received no bonus regardless of other performance. Materials were traceable in the system, expired materials triggered automatic disposal alerts, employee health certificates were managed in-system, and staff whose health certificates expired could not be scheduled. Store video monitoring was used to check whether operations met company standards.
Luckin’s own customer-service team also helped shorten internal feedback loops and route consumer issues back to relevant departments.
Cao said Luckin looked for partnership-store operators who shared its views on brand and quality. The company used multiple levels of enforcement for operational problems, including warnings, fines, suspension for rectification, store closure, and partner exit.
Renewal management was also important: good partners should be retained, while weaker partners should change or leave.
Cao said Luckin aimed to build a world-leading operations system and team. The company continued to iterate around standardization, systemization, and simplification. In 2022, it planned to keep optimizing processes and systems to support branch teams and improve consumer service.
He added that many Luckin operations managers had worked for years at large international chains. Luckin, in his view, was learning from established operators while using new technology to explore further innovation.
Note: figures and forward-looking 2022 plans in this article are historical, based on the original June 8, 2022 publication.