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Author: Zhixia

Source: Zhenghedao (ID: zhenghedao)

A trillion-level market is ready to take off. According to iMedia Research, the market size of China's coffee industry will reach 617.8 billion yuan in 2023, and is expected to exceed one trillion yuan by 2025.

According to the "White Paper on China's Freshly Ground Coffee Industry" released by Deloitte in April 2021, compared with developed countries, China's per capita coffee consumption in 2021 was only 9 cups/year, far lower than the United States, Japan and other countries (for example, the United States is about 340 cups/year and Japan is about 293 cups/year).

In my country, there is still a lot of room for growth in both the coffee market and per capita coffee consumption. In this fast-growing industry, a leading brand with 20,000 stores has emerged: Luckin Coffee.

On July 18, Luckin Coffee’s 20,000th store, the Beijing Zhongguancun Zaiwu flagship store, officially opened. Whether it is store size, supply chain construction, or brand and products,Luckin Coffee is at the forefront of the industry and has become a footnote to fashionable and convenient consumption in this "fast economy" era.

Recently, CCTV News has also focused its camera on the quality magic behind Luckin Coffee's 20,000 stores, visiting the Luckin Coffee (Jiangsu) roasting base in the form of a short video, paying close attention to Luckin's high-quality coffee and the core supply chain behind it.Through this lens, we can see the competitive advantages of a leading coffee company, which uses new quality productivity to promote corporate innovation and development while bringing the entire industry to a higher level of development.

While Luckin Coffee redefined "scale", it also aroused the curiosity of the outside world:How did Luckin Coffee, standing at a new milestone, achieve leapfrog growth and become a representative of new quality productivity enterprises and a synonym for Chinese coffee?

Next, we try to deconstruct Luckin’s development logic.Take a look at the three aspects of digitalization, supply chain and brand power.

1. The “magic” of digitalization

Who would have thought that every Luckin store around us and every cup of Luckin coffee in our hands has been cast with the "magic" of digitalization.In the wave of digitalization, Luckin Coffee has been driven by full-chain data since the inception of the brand, with distinctive Internet attributes. It has established a firm foothold in the coffee market and continuously surpassed itself, setting new industry records.

In fact, Luckin Coffee’s business logic is centered on digitalization, with “people, goods and places” as the three pillars, to reconstruct the new retail business model.It can be said that the success of Luckin’s 20,000 stores is inseparable from the absolute advantages brought by digitalization and the coordination between people, goods and places.Luckin can therefore be called an innovation leader that uses technology to help companies innovate and develop and discover advanced productive forces.

With the in-depth implementation of the Digital China and Cyber ​​Power strategies, China's digital economy has been fully exerted and has developed rapidly. In December 2022, the "Opinions on Building a Data Basic System to Better Play the Role of Data Elements" was issued, requiring the acceleration of the construction of a data basic system; the following year, the National Data Bureau and 17 other departments jointly issued the "Three-Year Action Plan for Data Elements × (2024-2026)", aiming to give full play to the amplification, superposition and multiplication of data elements.

Image source: China Government Network official account

Under the macro trend of digital economic development, many companies have achieved innovative growth through digital empowerment. Luckin Coffee is undoubtedly a leader in the coffee industry.

First of all, Luckin has gradually achieved the industry's ultimate digital store operations.

Walking down the streets, you will see that every Luckin Coffee store is not located randomly. Luckin Coffee will combine internal and external data to generate a takeaway heat map to select each store more accurately and efficiently, thereby improving the quality of site selection.It can be understood in this way that at Luckin, customers are not asked to find stores, but stores are asked to find customers. Luckin will open stores wherever customers are.

Use stores to expand into more regions and reach more consumer terminals. With the opening of multiple stores in Xinjiang and Tibet in May this year, Luckin Coffee stores now cover all inland provinces of China.

Image source: Luckin Coffee official Weibo

In addition, Luckin Coffee uses a continuously optimized management system to open up data visualization paths for nodes in the entire chain, including procurement, ordering, warehouse inventory, and store inventory, to achieve coordinated control of the flow of goods in the entire industry chain.In this way, Luckin has achieved standardized store operations, reduced management pressure, and improved work efficiency, which is in sharp contrast to the extensive operation and management of traditional stores.

In terms of users, Luckin Coffee has captured a large number of consumers, especially young people, through digital marketing.

In today's era, products should not only deliver use value to consumers, but also emotional value, because consuming products is precisely expressing oneself.

Through digital marketing, Luckin has strengthened its brand image of "professional, young, fashionable and healthy" in the minds of consumers, and has also created a long-term brand reputation.

Ultimately, the product itself is needed to seize the market and grab the minds of consumers. Luckin Coffee also uses powerful "digital magic" in product innovation.

To this end, Luckin Coffee has spared no effort in strengthening product research and development and continuously launching new products, and big data has played a huge role in this.It can be said that every hot-selling product is a product of digitalization.

Because, as Luckin’s brand proposition “Luck is in your hands” says, luck will not fall from the sky. Only by being down-to-earth and working hard can you truly grasp luck.Compared to "coincidence", Luckin Coffee believes more in data.

Image source: Luckin Coffee official Weibo

Luckin’s explosive product development mechanism is built on the underlying foundation of Luckin’s full digitalization.Based on deep insights into consumer demand, Luckin will digitize various raw materials and flavors, quantitatively track popular trends in beverages, and take steady steps to ensure that every product it produces is the result of careful research and development based on consumer demand.

It can be seen that with the help of technology, the engine of advanced productivity is driving Luckin to continuously expand its stores efficiently, while accurately connecting products, stores and consumers.Luckin Coffee ensures a steady supply of high-quality coffee to its stores, allowing the stores to operate in an orderly manner and consumers to easily enjoy high-quality products. It achieves efficient coordination and transformation of "people, goods and places" through technology and data-driven development.

In fact, in the process of Luckin Coffee's large-scale development, the secret of success is not limited to this.

2. Integrate vertical supply chains to build a solid foundation

Whether in the bustling streets of Beijing, Shanghai and Guangzhou, or in small towns in the counties, every cup of Luckin Coffee you drink tastes the same in all stores.To achieve this uniformly high quality, brands have a lot of work to do, and the supply chain is a key link.

The powerful supply chain system is a solid guarantee for Luckin Coffee’s quality, popular products, joint ventures, R&D, operations, and more.

Today, the status of the supply chain has been raised to an unprecedented level. It can be said that all industries have entered the era of supply chain competition.

The ever-improving supply chain map is giving Luckin Coffee greater control.If the supply chain is viewed as a huge network of links, then Luckin Coffee has mobilized global resources for the company and created more value for consumers and the industry by forming alliances across the entire supply chain.

1. Lianheng - Expanding the circle of friends in the industrial chain

Luckin has been building a high-quality supply chain system, working with premium global brand suppliers to establish a huge "circle of friends" network to ensure the continued stable and high-quality operation of its 20,000 stores.

What Luckin Coffee can do is to firmly grasp the initiative of quality starting from the first raw bean. Since 2023, Luckin Coffee has started the "Global Bean Searching Journey", visiting Panama, Ethiopia, Indonesia, Yunnan, China and other global high-quality production areas, going deep into the last meter of the production area, and bringing back high-quality coffee beans for Chinese consumers.

Just recently on June 5, witnessed by Brazilian Vice President Gerardo Alckmin, Luckin Coffee signed a memorandum of understanding to purchase 120,000 tons of coffee beans in Brazil in the next two years.

On July 11, the Brazilian ambassador to China visited Luckin Coffee's Beijing headquarters and reached a consensus with Luckin on continuing to promote Brazilian coffee trade and cultural exchanges. Not only that, at the opening ceremony of the 20,000th store, representatives of the Brazilian Embassy in China also came to the scene to congratulate.

In fact, as early as 2022, Luckin Coffee signed a three-year purchase order for 45,000 tons of coffee beans with Brazil. As the world's largest producer of Arabica coffee beans, Brazil plays an important role in the entire coffee industry.

Brazilian senior officials' close attention to Luckin Coffee is not only a recognition of Luckin Coffee as a Chinese coffee brand, but also means that Luckin Coffee, in collaboration with a major coffee-producing country, will be able to gain a supply chain advantage at the source of high-quality coffee beans.This series of actions further demonstrates that Luckin is going all out in purchasing high-quality coffee beans, international economic and trade cooperation, and coffee culture exchanges between China and Pakistan.

At the same time, as the "Global Bean Hunting Tour" continues, Luckin's footprints are not only in Brazil, but also in various coffee producing areas such as Ethiopia, Indonesia, and Yunnan, China.Link the global coffee bean supply chain and collect high-quality beans from all over the world.

However, in order to ensure the high quality of each cup of coffee, Luckin Coffee has to go beyond just finding beans. Luckin Coffee integrates global partners to achieve a stable supply of milk, coconut milk, coffee beans and machines.

Taking the Luckin Coffee (Jiangsu) roasting base visited by CCTV News as an example, the base has fully introduced international cutting-edge equipment and technologies, including the full set of roasting processes from Italy's BRAMBATI, as well as ICA packaging machines introduced from Italy and jointly developed cartoning equipment, all of which ensure the stable presentation of the coffee flavor and greatly improve production efficiency.
Luckin Coffee is expanding its circle of friends in the industry chain and its efforts to create high-quality coffee are evident.

2. Vertical integration - Deep integration of vertical supply chains

Luckin Coffee has always attached great importance to the construction of its own supply chain and has continuously increased its investment in it. On April 20 this year, Luckin Coffee's Jiangsu baking base, which invested US$120 million, officially went into production in Kunshan, Suzhou. This is the magic factory that CCTV News explored.

"It is the largest roasting base in China that has been put into operation, accounting for nearly 20% of the country's roasting capacity." In the video, Liu Qian and Xiao Ni are in this spacious roasting workshop, with bags of raw coffee beans and stable operation of automated machinery and equipment.When all of this is truly presented before our eyes, it once again proves that Luckin's high-quality "magic" relies on absolute hard power.

The world's cutting-edge intelligent equipment, perfect roasting curve, and highly efficient logistics system allow freshly roasted coffee beans to be delivered from warehouses to 20,000 stores across the country in an ultra-short time.It can be said that no matter where we are, every cup of mellow coffee in our hands contains vigorous and fresh new quality productivity.

To date, Luckin Coffee has established two fully automatic intelligent roasting bases, including the Jiangsu roasting base and the Fujian roasting base, forming a coffee roasting network with an annual production capacity of 45,000 tons.

In March this year, Luckin Coffee's Yunnan Baoshan fresh fruit processing plant was put into trial operation.It further strengthened Luckin's deep integration of the vertical supply chain from fresh fruit to coffee, and improved Luckin's quality control capabilities from upstream coffee bean and fresh fruit processing, roasting and processing to terminal coffee production.

Image source: Luckin Coffee official WeChat account

The strengthening of supply chain barriers has given Luckin more confidence to support the expansion of stores. However, not every brand has such foresight, and the only one who can surpass Luckin is probably Luckin itself.

3. Build an unbreakable user reputation

As Luckin Coffee continues to take root in China, the perception that coffee is Luckin is gradually deepening. This is precisely the appeal of the brand.

Luckin has established a good reputation among consumers and accumulated a large number of loyal consumer customers by continuously launching high-quality products.By the end of 2023, Luckin's cumulative number of consumer users exceeded 230 million, forming a strong brand effect and becoming the most popular coffee chain brand among consumers.

Luckin Coffee is particularly known for its innovative products, and can be called a hit-making machine in the coffee industry. Over the years, its phenomenal products have been constantly trending on the hot searches, making its peers envious.

For example, Luckin Coffee has sold 700 million cups of Raw Coconut Latte in three years; the annual sales of Orange C Americano has exceeded 100 million cups. With its strong ability to create hit products, Luckin can quickly attract users' attention and get everyone into the trap almost every time it launches a new product.

Image source: Xiaohongshu netizens

It is worth noting that Luckin Coffee is not only recognized and sought after by consumers for its coffee quality, but this "new product maniac" is also continuously and madly innovating new product categories.

In early June, Luckin Coffee launched a new series of "Light Coffee Lemon Tea" to meet the needs of two major groups of people at once: "Iced Coffee Lovers" and "Lemon Tea Lovers".It once again demonstrated the brand's innovative strength and precise insight in product development and content marketing.

This breakthrough innovation breaks the boundaries between lemon tea and coffee, innovates the functional value of lemon tea, attracts more consumers, and demonstrates strong and sustainable product innovation capabilities.

In addition, there are young people around me who not only like to drink Luckin's new products as soon as possible, but also like to collect paper bags, cup sleeves and other product peripherals. From the striped puppy, Doraemon, Tom and Jerry, to Havoc in Heaven... these are all big IPs loved by young people. With the blessing of these IPs, Luckin has repeatedly become popular. The above are all manifestations of Luckin's brand power.

Image source: Xiaohongshu netizens

The characteristics of new quality productivity are innovation, and the key lies in quality. Luckin Coffee has appropriately implemented this feature, forming a positive response between stores, products, users and brands, building a strong brand appeal, and also providing a brand model for the industry to practice new quality productivity.

IV. Conclusion

The rise of Luckin Coffee is not only the prosperity of an industry, but also the improvement of the advanced productivity of the times.

As a catering brand that has been around for less than 7 years, Luckin Coffee has been moving forward along the path of innovative productivity since its inception, breaking away from the production and operation model of traditional retail companies.By adopting a high-tech, high-efficiency, and high-quality business approach, it has rapidly grown into a leading company in the coffee industry and has become a "synonym" for Chinese coffee.

Today, with the scale advantage of 20,000 stores, coupled with the moat built by supply chain, digitalization and brand, Luckin Coffee has firmly established its position as the leading company in China's coffee industry.From digitalization to supply chain, Luckin Coffee has provided a real example of new quality productivity for the entire industry through innovative development and production practice. An outstanding world-class coffee brand is quietly brewing and ready to go.
typesetting| Cao Buhua| ZhixiaRotationEditor-in-Chief| Xia Kun