Lu Zhengyao was executed 3 billion, and Cudi Coffee did not have Luckin Lucky
Lu Zhengyao had another accident.
Recently, Lu Zhengyao, the founder of Cudi Coffee, was executed for nearly 1.9 billion yuan, and the enforcement court was the Beijing Fourth Intermediate People's Court. The information does not disclose the specific reason for this enforcement, but judging from the current public information, the above-mentioned case is a legacy case from the "Shenzhou" automobile company founded by Lu Zhengyao.
In addition to the latest case of 1.89 billion yuan being executed, Lu Zhengyao has been listed as the person subject to execution three times before, involving an amount of about 1.093 billion yuan, plus the new information on being executed this time, and nearly 3 billion yuan has been executed in about a year. In addition, there are a number of consumption restriction orders and equity freezing information under his name. This former business legend is now a complete old man.
At the same time, Lu Zhengyao's financial situation has also affected Cudi Coffee, and industry insiders are worried that it will affect the operation and future development of Cudi Coffee. To this end, Cudi Coffee made a timely response, saying that the incident has no impact on the company's business, and the operation and management team of Cudi Coffee will continue to remain stable and provide consumers with high-quality services and products.
But to be honest, these enforcement messages have once again raised more questions about the business ethics, capital management and risk aversion capabilities of Lu Zhengyao and his core team.
Originally, in the competition with Luckin, Cudi seemed to have a hard time coping, and the outside world continued to boo Cudi, and Lu Zhengyao thundered at this time, which made it even worse for Cudi.
Can Lu Zhengyao still believe it?
Since ancient times, Fujian businessmen have been known as the first group of Chinese businessmen, Fujian people love to do business, good at doing business, believe that love to fight to win Fujian people spelled out countless legends in the Chinese business world, Lu Zhengyao is a typical Fujian businessman.
Lu Zhengyao has a good sense of business, is the best at seizing opportunities, and is very bold and dares to gamble. He has successively founded well-known enterprises such as Car Rental, Luckin Coffee, and Cudi Coffee, and single-handedly created the "Shenzhou Department".
In the past few years, Lu Zhengyao has also accumulated a lot of wealth. In 2016, Lu Zhengyao made his debut on the "Hurun Report" with a net worth of 7.5 billion yuan with Shenzhou Special Car, and after Luckin went public in 2019, Lu Zhengyao's net worth directly doubled, ranking 195th on the "Hurun Report" with a net worth of 18 billion yuan.
But the good times didn't last long. In 2020, Luckin was targeted by the short-selling agency Muddy Waters, which released an 89-page short-selling report, saying that Luckin Coffee was involved in fraud.
On the first day after April Fool's Day in 2020, Luckin took the initiative to admit that it had inflated its revenue performance by 2.2 billion yuan. Subsequently, the stock price of Luckin Coffee plummeted, triggering a circuit breaker, and it was forced to delist from the U.S. stock market. Lu Zhengyao's "Shenzhou system" also fell apart, and the share price of Shenzhou Car Rental once fell below HK$2, and finally completed privatization and delisting in 2021.
After the Luckin financial fraud scandal was exposed, Lu Zhengyao's reputation was affected to a certain extent, and he faced a huge fine and class action lawsuit, he had to resign as chairman, and Lu Zhengyao's fortune also shrank significantly.
Countless people sighed for him, if Lu Zhengyao walked more steadily, was not so greedy for merit, and did long-term value, maybe the result would be different.
As a native of Fujian, Lu Zhengyao is least afraid of failure and challenges, after quitting Luckin, he once again started a new entrepreneurial journey, this time it is still the coffee track - Cudi Coffee.
Lu Zhengyao seems to have a kind of personality charm, he raised his arms and shouted, the veterans of Luckin and Shenzhou are still following, many people are willing to gamble again, and Cudi Coffee quickly started.
Since the opening of the first store in October 2022, Cudi Coffee has expanded rapidly across the country, and in February this year, it announced that the number of stores worldwide reached 7,000.
Only this time, Cudi Coffee doesn't want to be a "stand-in" for Starbucks anymore, but points at Luckin.
Luckin is not so easy to replicate
Cudi Coffee has taken the old path of Luckin, hoping to use the low-price subsidy strategy to create another "Luckin".
Last year, Luckin Coffee announced the launch of a store celebration promotion, launching a 9.9 yuan coffee product, Cudi Coffee aimed at Luckin and fired fiercely, and hit the price of a cup of coffee to 8.8 yuan in one go. I have to admit that under the general trend of consumption downgrade, Cudi Coffee has indeed attracted a group of price-sensitive consumers.
In order to be able to expand quickly, Cudi also adopts the associate model, which does not charge a franchise fee and is divided according to the business conditions after opening the store, which lowers the threshold for franchisees to invest in the early stage. According to the brokerage research report, the initial investment in joining Cudi Coffee is about 300,000.
But no matter how much Cudi Coffee tosses, it has always been at a disadvantage in the competition with Luckin, and the author believes that the reasons are as follows.
First, in terms of cost control and supply chain management, Cudi is not as good as Luckin. Luckin Coffee has effectively reduced the cost of raw materials through large-scale procurement and self-built supply chains (such as roasting coffee beans), and its scale advantage also helps to dilute costs, allowing it to offer lower prices to attract consumers.
The research report of China Merchants Securities also shows that in the "9.9 yuan" price war, due to factors such as the number of cups, the volume of procurement, the difference in self-built supply chain and the difference in operational efficiency, the cost of a single cup of Luckin is about 9.5 yuan, while the cost of a single cup of Cudi is about 10.2 yuan.
Although Luckin Coffee faced margin pressure in the price war with Cudi Coffee, its store size and turnover reached new highs, and its operating profit doubled. On August 1 last year, Luckin Coffee also said in the second quarter financial report that it would maintain the preferential price of 9.9 yuan for at least 2 years in the future.
On the other hand, Cudi lacks stamina in many aspects, and does not have the possibility of continuing to tug with Luckin. Previously, some Cudi franchisees reported that Cudi Coffee has a serious disconnect in the supply chain, whether it is daily raw materials or materials, it has been in an irregular state of shortage.
Second, in terms of business model, Luckin Coffee implements the "direct + associate" model, in which the directly operated stores focus on the first and second tier cities, and the associated stores mainly sink to the third and fourth tier cities. Cudi Coffee, on the other hand, adopts a franchise model.
Compared with the franchise model, the direct sales model has greater advantages in brand control and service quality consistency. For example, Cudi often uses coffee machines indiscriminately, and some netizens reported that Cudi stores are a mix of Starbucks coffee machines, Luckin coffee machines and domestic coffee machines, and the coffee machines are put into use without precise adjustment, which will make it difficult for the product to achieve a unified standard in taste.
Third, in terms of product innovation, Luckin Coffee has performed better. "Raw coconut latte", "thick milk latte", "velvet latte" and other blasts appeared one after another, which shows the research and development ability, and although Cudi Coffee has done a good job in marketing, it lacks innovative explosive items......
Fourth, it is brand influence and consumer awareness, and Luckin Coffee is also better. As an early brand to enter the market, Luckin Coffee has established a high brand awareness and consumer awareness, while Cudi Coffee, although it was founded by Lu Zhengyao, the founder of Luckin, after leaving Luckin, it is a step late.
Market competition is dynamic, but for Cudi, trying to "kill" Luckin by copying it obviously doesn't work.
Can we share the joys and sorrows, and the affiliate is gone?
Instead of making coffee well, Cudi only thinks about expanding like crazy.
Compared with Luckin, Cudi Coffee has opened stores faster, and 7,000 stores is not enough, Qian Zhiya, chairman and CEO of Cudi Coffee, shouted the goal of reaching 20,000 stores worldwide by the end of 2025 in an internal letter released in October last year.
Qian Zhiya is a person that Lu Zhengyao trusts very much, she has followed Lu Zhengyao since the time of Car Rental, and has served as the director and COO of UCAR, the executive vice president of Car Rental, the CEO of Luckin Coffee, and the current chairman and CEO of Cudi Coffee.
Speaking of Cudi's "small goal", based on the current 7,000 stores, Cudi Coffee must maintain an average annual opening rate of 6,500 new stores for two consecutive years.
But in fact, since the beginning of this year, the opening speed of Cudi Coffee has slowed down significantly.
The changes in the number of stores opened by Cudi Coffee monitored by Narrow Door Restaurant Eye in the past year show that the number of new stores in Cudi hit a new low in February and March this year, and the number of new stores in March was only 98, a significant decrease compared with the peak of 1,500 in July last year.
The reason behind this is that Cudi Coffee's cash flow is tight. According to a report by the Daily Economic News, in February this year, some people in the catering industry revealed that Cudi owed more money in the supply chain, and the payment cycle was longer than normal.
Cash flow is tight because the affiliates don't want to do it.
Luckin fought a price war back then, and capital transfusion and franchisees were indispensable, but Cudi lacked capital support and could only rely on the money of franchisees. Cudi's cash flow is mainly derived from the sale of raw materials to affiliated stores, 0%-25% commission from the gross profit of associates, and margin received in advance.
But after more than a year of endless price wars, the affiliates couldn't sit still.
Recently, there are many Cudi associates on social platforms to attack and complain about Cudi, equipment transfer, store closure, loss of money and other stories are not uncommon, an associate wrote a "letter to the management of Cudi Coffee Company" post, he said that he lost 450,000 yuan due to investment in Cudi Coffee.
Luckin thundered back then, and some people beautified Luckin's financial fraud as a discount to the Chinese by the wool of American capital, and now this boomerang is coming. Cudi is really exploiting and squeezing affiliates, and there are also salary cuts, wage arrears, etc., which greatly damage Cudi's brand image.
Moreover, there has been no news of financing from Cudi so far, and now the investment in the new consumer industry is cold, and once the cash flow is broken, the consequences of Cudi are unimaginable.
In the business world, the credibility and social recognition of the founders are crucial, and the fluctuation of Luk's personal financial situation will also indirectly affect Cudi Coffee's financing ability and market confidence.
After the madness, Cudi should also think carefully about what consumers really need, instead of indulging in the capital game.
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