Image Source: EPA-EFE/Roman Pilipey
Luckin Coffee is coming back for the second time in two years, and it’s better than before. When the Chinese startup was involved in a scandal several years ago, it had its listing removed from Wall Street.
Announcing its comeback on Tuesday, the coffee chain reported a nearly 90% increase in earnings for Q1. This is despite COVID lockdowns and tight market conditions – which the company hopes to indicate traction in the market.
Luckin Coffee is on its way to becoming the largest coffee chain in China. The company has finished its first quarter with 6,580 stores, and it is expected to increase, while leader Starbucks only operates 5,650 branches in China.
Several of its stores are self-operated, and others are under their partners, in contrast to Starbucks’ chains in China that are company-owned.
The recent revenue posted by the company is proof that they are recovering from the crisis they had two years ago when Nasdaq removed them.
Jinyi Guo, CEO of Luckin Coffee, said that they may still be met with skepticism among investors and analysts considering the issues their company was involved in. “We have taken many measures to clean up our own house,” said Guo during an interview.
In 2010, the company began to ramp up efforts and reorganize its internal structures. The changes were imposed when Guo was promoted from senior vice president of product development to CEO eve at a time when the company faced major crises.
He added, “Because of the pandemic, there are a lot of people not able to travel to China, to see for themselves how it looks like in our shops. If they’re able to see for themselves how we operate, then they would know that the figures are true, and they shouldn’t be skeptical about it.”
Since its founding, the coffee chain has been generating a lot of buzz among consumers, challenging traditional coffee shops. It’s targeting mostly young people with their drinks. In a span of 12 months, the company was able to put up 2,000 stores across China.
Two years after its inception, Luckin Coffee entered the US market. Luckin was welcomed by many investors as it exhibited the potential to challenge other mainstream coffee shops like Starbucks.
The then-CEO and chairman of Luckin Coffee were fired following an investigation that found they had falsely reported their revenue. The US Securities and Exchange Commission fined the company $180 million as well as immediate delisting of its stocks from Nasdaq.
The company has poured its energies into boosting and improving services since then, and two years later, they are ready for another go – with a newer outlook that is brighter than before.