Ignition Dimension (ID: chaintruth) original
Produced by Burning Finance
Author 丨 Yan Junwen
Editor 丨 Xie Zhongxiu
Ruixing, who was deeply involved in financial fraud and forced delisting, actually handed over a good report card.
On March 24, Luckin Coffee announced its financial results for the fourth quarter and full year of 2021. In terms of revenue, Luckin's total net income in 2021 reached 7.965 billion yuan, a significant increase of 97.5% from 4.033 billion yuan in fiscal 2020. At the same time, the self-operated stores turned a profit for the first time. The financial report disclosed that the profit of Luckin Coffee's self-operated stores reached 1.253 billion yuan in 2021, compared with a loss of 435 million yuan in the same period of 2020.
In another indicator, the number of stores, the financial report shows that by the end of 2021, Luckin has a total of 6024 stores, more than the number of 5557 Starbucks stores in China (as of January 2022 data).
Burning Finance noted that this is not the first time that the number of Luckin stores has surpassed Starbucks. As early as December 2019, it was reported that luckin had 4,910 stores in China, surpassing Starbucks by 600. However, with the financial fraud storm in 2020, Luckin's expansion rate has slowed down. According to Luckin Coffee's 2020 financial report and Starbucks' first fiscal quarter of fiscal 2021, as of the end of 2020, Luckin had a total of 4803 stores, losing to Starbucks' 4863 stores in China (as of December 27, 2020 data).
Two years have passed since the financial fraud storm of Luckin, and Luckin has the potential to be reborn.
Guo Jinyi, chairman of Luckin Coffee, said in the earnings report, "We are very pleased to report the strong overall performance in the fourth quarter of last year and fiscal year 2021. And the reason for the profitability of self-operated stores comes down to, "the increase in the number of transaction customers, the increase in the sales of goods, and the increase in the average selling price." ”
But what cannot be ignored is that Luckin is still far from the overall profit. According to the same financial report data, in 2021, Luckin GAAP (US GAAP) operating loss of 539 million yuan, Non-GAAP (non-US GAAP) operating loss of 236 million yuan, still not achieved overall profit.
At the same time, the growth of this wave of Luckin is closely related to the rapid growth of "franchise stores". According to CITIC Securities, "franchise stores" began to appear in Luckin's financial report in 2019, and Luckin had a total of 4789 stores nationwide that year, including 4507 directly operated stores and 282 franchised stores; in 2020, Luckin stores were distributed as 3929 directly operated stores and 874 franchised stores. By 2021, there will be 4397 self-operated stores and 1627 franchised stores in the total number of Luckin coffee stores. Pulling the long-term axis, Luckin franchise stores are growing rapidly.
Data Source/Comprehensive CITIC Securities Research Report and Luckin Financial Report
Cartography/Burning Finance
And Burning Finance noted that in 2021, Luckin seems to be interested in increasing the recruitment of franchisees. On January 18, 2021, Luckin released the new retail partner recruitment plan on the official public account, announcing the release of franchise. According to the recruitment plan, Luckin does not charge any form of franchise fee for franchisees, and will also provide marketing support for franchisees.
In this regard, Luckin has said that the franchise business has been launched as early as 2019, but "affected by the epidemic" in 2020, it suspended this business and decided to resume joining in 2021.
Luckin's franchise business has attracted a group of young people from lower-tier cities. In February 2022, Sasha, an employee of Ruixing's direct sales store in Changsha, Hunan Province, told Ran Finance, "If possible, I also want to join Luckin." Because (Luckin Coffee) is really profitable, there are a lot of orders per day. But Sasha also expressed regret, "Generally, the franchise is only open in eighteen-tier cities and counties, and Changsha cannot join, possibly because the cost of these places is too large for Luckin to expand." ”
It's also a win-win way. According to the data from Luckin's 2021 financial report, the revenue of Luckin's self-operated stores in 2021 was 6.193 billion yuan, an increase of 78.3% year-on-year; the revenue of associated stores was 1.306 billion yuan, an increase of 312.5% year-on-year. Among them, in the fourth quarter, the revenue of associate stores was 448.8 million yuan, an increase of 248.4% year-on-year.
Guo Jinyi also said in the earnings report, "With the expansion of joint stores into lower-tier cities in China, we have witnessed a significant increase in revenue contribution. This model of collaboration has proven to be highly complementary to our proprietary store strategy. ”
This is also a smart choice, with Many coffee brands such as Manner, M stand, Seesaw and many other coffee brands joining the melee, the coffee market competition in first- and second-tier cities has become white-hot. However, the sinking market can also be regarded as a blue ocean, and Luckin, which mainly focuses on the mid-range and affordable price, has more advantages in entering the sinking market such as county towns and towns.
It's just that the sinking market can bring much profit space to Luckin, and whether the young people in the town can give Luckin a new future is still unknown.
People who wanted to join lined up
In January 2022, Zhang Tao, based in Wuxi, Jiangsu Province, reaped his highest monthly revenue since joining Luckin in 2021.
In that month, Zhang Tao's franchise store turnover was nearly 160,000 yuan, deducted the brand's commission (distribution) of more than 10,000 yuan, and then subtracted the cost of more than 70,000 yuan, the gross profit remained more than 70,000 yuan, and then deducted the delivery fee of more than 6,000 yuan, deducted the manual store rent water and electricity about 40,000 yuan, and then deducted some expenses of 2,000 yuan, net income of more than 20,000 yuan.
But compared to the enthusiasm of joining Luckin, this net profit is not high. "The most tragic thing is after the Spring Festival," Zhang Tao said, for example, on February 18, the turnover of the day was nearly 4,000 yuan, and the gross profit after the order was divided was more than 1,700 yuan, deducting the rent, water, electricity and labor, and only earned 200 yuan on this day. "Selling three or four thousand yuan a day basically can't make any money, the more calculated the more angry, it is better to go to work."
This estimate makes sense, everything is rising in price, such as labor, according to their local labor costs, luckin counter clerk's salary is about 4,000 yuan, the store manager is more, basically at the level of seven or eight thousand yuan.
In January 2021, Luckin restarted to join. Zhang Tao did not apply to join Luckin until the first half of 2021, according to his words, "It is too late to start." "Some of the friends he knows can return the money in 8 months, and even some people have achieved a turnover of 270,000 yuan in January 2022."
However, Zhang Tao, who has been "experienced in the battlefield" and witnessed the local milk tea shop joining the leek cutting, has remained calm, "It is expected that 2 to 3 years will be good." ”
The market also verified Zhang Tao's judgment. The coffee just needed by "hit workers" in first-tier cities is not the case in low-energy cities. For example, this year's Spring Festival, Burning Finance and Economics learned that more young people in the county will tend to choose milk tea instead of coffee. An independent coffee shop owner also told Burning Finance, "Generally, the revenue is higher during the Spring Festival, because the young people who drink coffee have returned." [This shop] can't hold on any longer and is ready to close. ”
But people who wanted to ride on the Ruixing East Wind still flocked to it. "Do you know where to join Luckin? Provide a way that can give you a few thousand dollars as a thank you. "In Luckin Tieba, QQ groups and private channels, people have sought to join Luckin. In third- and fourth-tier cities and county seats, opening a coffee shop seems to have become a new fashion trend after milk tea shops, and more people are waiting to board the Ship of Luckin.
Well-known brands and huge sales are the most attractive elements. For example, a consumer who returned to the county from a municipality directly under the central government once told Burning Finance, "If you want to drink coffee, you will choose Luckin, because the brand is more well-known and more trustworthy." "In 2021, Luckin's raw coconut latte sold more than 10 million cups a month.
However, the threshold for joining is both "high" and "not high". "High" in the cost, the data shows that Luckin's joining conditions include between the ages of 25-45 years old, have a store of at least 30 square meters, design fees of 5,000 yuan, 110,000-130,000 yuan of decoration fees and 190,000 yuan of equipment fees, but also to pay a deposit of 50,000 yuan, if there is no major complaint and damage to the brand within 3 years, this money can be returned, the input cost is at least more than 400,000 yuan.
Zhang Tao told Burning Finance that he invested 570,000 yuan to join Luckin. Sasha also said, "(Want to join Luckin) without 300,000 yuan can not come down, this set of machines will be 300,000 yuan." ”
"Not high" is that Luckin does not charge a franchise fee. According to the "First Finance" news, Luckin does a stepwise draw on the monthly turnover of more than 20,000 yuan, the proportion ranges from 10-40%, and if the monthly turnover exceeds 80,000 yuan, it will have to pay 40% of the "service management fee". Zhang Tao confirmed the above statement, he said, to be precise, for the gross profit of the draw, such as gross profit below 20,000 yuan is not drawn, 2-30,000 yuan part of the extraction of 10%; 3-40,000 yuan part of the extraction of 20%, 4-8 million yuan of the part of 30%.
It's just that it's not so easy to join Luckin now. Yang Wei of a county in Hubei said that through the official public account of Luckin and official channels, Luckin has now closed the franchise in most parts of the country, only in Guangdong and other places, there are sporadic vacancies, the official told him, "If you apply for the area has a quota, there will be someone to contact you, but there are many people in line."
Zhang Wei even got disappointed news through his friend's "insiders" in Luckin, "not open to join in a short period of time, (because) the epidemic is serious, coupled with the shortage of personnel."
Can joining become a new solution to Luckin's expansion?
Luckin doesn't want to expand. On the contrary, Luckin once occupied the market with rapid expansion.
According to the data, Luckin opened more than 2,000 stores in 2018, quickly conquered 22 cities across the country, and sold 90 million cups of coffee to 12 million users. In 2019, Luckin stores also increased by 2716 stores compared with 2018, with a growth rate of 131.02%.
But in 2020, with the storm hitting, Luckin also had to temporarily slow down the pace of expansion and close poorly managed stores. According to Luckin, as of November 30, 2020, Luckin Coffee has opened 412 new self-operated stores and closed 1,021 self-operated stores. From the perspective of the whole year, as of the end of 2020, Luckin has a total of 4803 stores nationwide, an increase of only 34 over 2019.
By 2021, Luckin will restart and join, and the scale of stores has also grown rapidly. In contrast, in 2021, Luckin's directly operated stores increased by 468 compared with 2020, but the number of franchised stores increased by 753, far exceeding the growth scale of directly operated stores.
It can be said that the franchised stores have played an important role in the expansion of Luckin's scale in 2021.
But joining also has drawbacks lurking. In the past, joining meant exporting brands and product standards and establishing a large-scale replicable and standardized supply chain. At the same time, whether it is the express logistics industry or the catering industry, joining means that the brand owner's control power declines and the quality of products (services) declines, etc., it is the nightmare of many Chinese brands.
Therefore, Luckin is also carefully maintaining the balance between expansion and quality, so there is the aforementioned Zhang Wei statement, Luckin did not open to join in a short period of time, in this regard, Zhang Wei speculated, "We call ourselves spare tires, and even suspect that Luckin is engaged in hunger marketing." ”
But this may not be the case, luckin may indeed have a strict assessment of franchisees. Sasha said, "It's not so easy to join Luckin, they will come to conduct a strict assessment of you personally and the store. "The Daily People" also reported that Luckin will conduct research on the initial opening of each store, such as traffic location, passenger flow and so on. For projects that are not suitable for opening a store, they will resolutely stop.
Luckin's franchise business is helmed by Senior Vice President Cao Wenbao, who worked at McDonald's China for over 23 years before joining Luckin, where he was Vice President and Northern Regional Manager of McDonald's China. To some extent, Luckin also learned from McDonald's franchise chain experience in joining the matter, and achieved extreme retailing.
The above-mentioned franchisee Zhang Tao said that after joining, it is a strict assessment, such as all raw materials must be purchased from Luckin, as simple as the counter to place the charging treasure, must be audited by Luckin, the usual health inspection has reached the point of perversion, less than 80 points will be fined, "when the inspection of the side of the seam should be illuminated with a flashlight."
All the orders and orders in Luckin, settlement, etc. must be completed through Luckin Mini Programs, APP, etc., no cash has almost become the default rule, a franchisee said that he had personally seen Luckin's front desk running all over the mall, just to give customers in exchange for change.
In addition, in many media descriptions of Luckin's store management, everyone invariably mentioned monitoring. For example, the pressure to work is greater than the exam, every move has video surveillance, within 2 minutes must be made a cup of coffee, before making coffee must be washed; washing hands must be more than 20 seconds, square towels must be changed once in half an hour, disinfectant water must be changed once in 3 hours; work is basically washing and scrubbing every day, the so-called barista, just need to memorize the operation manual, know how many buttons different recipes press, such as vanilla latte half sugar press the button twice, full sugar press 4 times.
To some extent, this ensures the quality of Luckin and the implementation of management policies to the greatest extent.
But the success of a coffee shop doesn't depend solely on taste, it also depends on the consumer population. In the past two years, there have been more and more arguments about coffee "sinking", and data from the Little Red Book also shows that the search volume for "coffee shop entrepreneurship" in 2021 increased by 311% compared with 2020, of which 35% came from third-tier cities and below, and more and more people tested the waters of "returning to their hometown to open a café".
But how receptive is the sinking market towards coffee? As things stand, they're not optimistic. It still takes time for coffee consumers in the county to be cultivated.
How far is Luckin from being "reborn"?
Having experienced financial fraud storms and forced delisting, Luckin has not lost the hearts of young people. "Delicious and low price. Financial fraud and delisting did not affect my choice. Some consumers said.
Even in the past two years, through marketing and products, Luckin has continued to go out of the circle. The most recent was to sign the Winter Olympic champion Gu Ailing and use it for marketing. Burning Finance mentioned in the article "Yuanqi Forest "Lost" not only Gu Ailing" that by taking the opportunity of signing a contract with Gu Ailing, Luckin was deeply bound to him and achieved good results.
This set of playing methods also worked well. On February 8 (the day that Gu Ailing won China's third gold in the freestyle ski women's big jump final at the Beijing Winter Olympics), Burning Finance visited Luckin Coffee (Shoucheng International Store in Chaoyang District, Beijing), and a customer specifically asked "whether there is a Gu Ailing straw standing card" when buying coffee.
Prior to this, Luckin also signed a "Creation Camp" player Li Luxiu to achieve out-of-the-loop marketing.
Another thing that has to be mentioned is Luckin's new product research and development capabilities in the past two years. 2022 Valentine's Day new products "Fiercely Love You Coco Mandarin Duck", "Secretly Think of You Jasmine Mandarin Duck", Gu Ailing Customized "Walden Ski Latte", "Blue Velvet Snow Latte", and then the previous popular "Raw Coconut Latte", and "SOE Flower Queen Series"... Every new product of Luckin can arouse a lot of discussion and attention.
Guo Jinyi disclosed that in 2021, Luckin launched a total of 113 new products. At the same time, Luckin R&D has also adopted a horse racing mechanism, with an average of only one of the 22 products developed that can be used for the public.
But Luckin is not without worries. In order to make a profit, Luckin, which had occupied the market with preferential and low prices, also began to raise prices. "In the past, there used to be a 10% discount, but now it's basically 4.8% off." A user recalls. In December 2021, Luckin's delivery drinks and pick-up drinks in hundreds of stores also increased by about 3 yuan on the basis of the original price.
In Luckin's third quarter 2021 financial report, Luckin disclosed that the average selling price of drinks was about 15.2 yuan, an increase of 5.5 yuan compared with the fourth quarter of 2019. Although in the 2021 financial report, Luckin did not disclose the price of individual products, Guo Jinyi also said that one of the reasons for the profitability of self-operated stores is "the increase in the average sales price".
This also allows Luckin to lose some customers, "If Luckin increases the price a lot, I will not choose it, because the first is delicious, the second is cheap." A loyal user of Luckin said.
The bigger challenge comes from a highly competitive market. The coffee market is rapidly evolving, according to the incomplete statistics of new consumption, in 2021 alone, there will be 20 financings in the coffee industry, with a total amount of more than 5 billion yuan. Among them, Manner has 3 rounds of continuous melting, and M Stand and Shi Cui have 2 rounds of continuous melting. ByteDance, Tencent and other Internet giants are also among them.
At the same time, there are also many "spoilers", for example, on February 14, the first post office coffee store was officially opened in Xiamen, selling categories including coffee, tea, desserts and post office surroundings, of which coffee, tea prices are between 20-40 yuan, the store can provide two kinds of services: pick-up and delivery to the home.
Even Luckin itself will continue to gain the attention of investment institutions in 2022, and in January 2022, Dapu Capital announced that its lead buyer group completed the acquisition of a portion of luckin coffee's shareholders' shares, and other members of the buyer group include IDG Capital and Ares SSG Capital Management. After the completion of the transaction, Dapu Capital became the controlling shareholder of Luckin Coffee, holding more than 50% of the voting rights of the company.
At present, although the scale of Luckin's stores has ranked first in the country, after opening up the sinking market coffee franchise, acceptance and loyalty are still tested because of factors such as cost and price. As for Luckin's larger goal, re-listing, it takes more effort to achieve.
A person in the coffee industry rating Luckin, not like the FMCG industry, more like an Internet company, whether in products or operations, Luckin is full of Internet style, that is, coffee as an Internet product, rapid iteration, small steps and fast running. "If we follow this logic, its goal is still to return to the capital markets, that is, to go public."
But this is not a smooth road, but full of challenges and variables, Whether Luckin can go through, it is still unknown.
*The caption and some of the inner text illustrations are from Visual China.
*In the text, Zhang Wei, Sasha, and Lingling are pseudonyms.