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Image source: Visual China

Blue Whale News July 31 (Reporter Sun Yu)On the evening of July 30,StarbucksOn the same day, Luckin Coffee announced its operating results from April to June this year.

The financial report shows that from April to June, Starbucks' operating income was US$9.11 billion (about RMB 65.84 billion), a year-on-year decrease of 0.6%; net profit was US$1.055 billion (about RMB 7.6 billion), a year-on-year decrease of 7.62%. Among them, Starbucks China's revenue was US$734 million (about RMB 5.3 billion), a year-on-year decrease of 10.71%.

On the other handLuckin CoffeeFrom April to June, Luckin Coffee’s operating revenue was 8.403 billion yuan, a year-on-year increase of 35%; its net profit was 871 million yuan, a year-on-year decrease of 13%.

Comparing Starbucks China and Luckin Coffee, from the perspective of revenue, Luckin has surpassed Starbucks China and further widened the gap, with the revenue gap between the two exceeding 3 billion yuan; from the perspective of operating profit margin, Starbucks China's operating profit margin is 15.6%, while Luckin's is 12.5%.

Store revenue and net profit are mixed

Since the beginning of this year, the "price war" in the coffee industry has continued. Luckin Coffee has continued its "9.9 yuan for coffee" promotion strategy, and Starbucks China has also launched group purchase coupons on different platforms for 19.9 yuan for one cup and 39.9 yuan for two cups. Blue Whale News compared the financial reports of the two companies and found that the "price war" had different effects on Luckin Coffee and Starbucks.

Specifically, Luckin's self-operated store revenue increased by 39.6% year-on-year, but its profit margin dropped from 29.1% in the same period last year to 21.5% in the second quarter of this year. In contrast, Starbucks China's financial report showed that same-store sales fell by 14% from April to June, and the average customer unit price and number of orders both declined, but the store operating profit margin increased month-on-month. Starbucks said that Starbucks faces fierce competition from local coffee shops in China, and these local competitors are priced lower than Starbucks.

From the perspective of store openings, Luckin opened 1,371 new stores from April to June, and the total number of stores increased by 7.4% month-on-month. As of June 30, Luckin had a total of 19,961 stores, including nearly 13,000 self-operated stores and nearly 7,000 franchised stores.

Starbucks China added 213 stores from April to June, a year-on-year increase of about 13%. As of June 30, Starbucks China has a total of 7,306 stores.

It is worth mentioning that coffee products are highly homogenized. In order to maintain consumers' freshness and repurchase rate, major coffee companies will focus on new product research and development. From April to June this year, Luckin Coffee launched more than 30 new products, including Coconut Latte, Lemon C Americano, Light Coffee Super Cup Series, etc. Among them, the sales volume of Light Coffee Lemon Tea exceeded 5.08 million cups in the first week. Starbucks launched 17 new products including White Peach Golden Baked Sparkling Americano and Caramel Popcorn Flavored Frappuccino.

Will the “price war” continue?

At a previous earnings conference, Luckin's Chief Financial Officer An Jing pointed out that Luckin's significant profit decline was mainly due to the company's ongoing promotion of high-quality coffee at 9.9 yuan, which lowered the average price of its products.

According to Cailianshe, Luckin Coffee has reduced its 9.9 yuan coffee coupons to five products in the first quarter, and the prices of the remaining products have returned to the 12-20 yuan price range.

Does this move mean that Luckin Coffee intends to gradually withdraw from the "price war"?

As of now, Luckin's statement is still unclear. When talking about future development plans, Chairman and CEO Guo Jinyi said that Luckin will seize the strategic opportunity of the rapid development of China's coffee market, and further expand and consolidate its leading advantages and consolidate its market leading position by continuously expanding its store network layout, increasing investment in supply chain layout, and continuously strengthening its digital advantages, optimizing costs and improving efficiency.

Starbucks China Co-CEO Liu Wenjuan made it clear that Starbucks will continue to innovate its unique high-end products and experiences without sacrificing operating profit margins in exchange for sales. In addition, Starbucks China will also tap into huge blue ocean opportunities through a rhythmic store expansion plan.

Regarding the "price war", Liu Wenjuan said, "In a competitive environment with frequent promotions, we maintain a high degree of restraint and avoid price wars. At the same time, we have adopted a targeted and precise pricing strategy to create new sales growth and cultivate customers' consumption habits, which is consistent with our high-end positioning."