Luckin Coffee: Business Model and Unit Economics

S. Ramakrishna Velamuri (First Author), Shiqi Zhang (Participant Author)

Research output: Other contributionCase Studies

Abstract

Founded in October 2017 by Jenny QIAN Zhiya, Luckin Coffee quickly expanded its stores from one trial store in Beijing to 2,370 stores across 28 cities in China by the end of March 2019. More importantly, less than two years after its establishment, Luckin Coffee listed on the NASDAQ on May 17, 2019, a key milestone in its short history. Despite impressive numbers of customers acquired and products sold, Luckin continuously incurred large losses due to heavy expenditure on marketing and promotional activities. By the end of 2018, Luckin achieved an annual revenue of RMB840.7 million with a total loss of RMB1.6 billion. Therefore, the management team needed to decide whether the current business model was healthy or not. If it was healthy, all that was needed was to achieve further scale to turn the losses into profits. If, on the other hand, there were fundamental problems with the business model, then growth would need to be put on hold while these problems were corrected.
Original languageEnglish
Number of pages16
Publication statusPublished - 1 Jan 2020

Case number

STR-20-684

Case normative number

STR-20-684-CE

Update date

2020-07-07

Case type

Library

Published by

China Europe International Business School

Keywords

  • Business Model
  • entrepreneurship
  • growth strategy
  • sustainability
  • unit economics

Case studies discipline

  • Entrepreneurship
  • Operations & Management Science
  • Strategy

Case studies industry

  • Accommodation & Food Services
  • Retail Trade

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