Excluding the stores that are not yet open for business, Luckin Coffee, which is embroiled in the financial fraud controversy, has seen cash flow turn positive in stores that have resumed normal operations, the Securities Daily said, citing sources close to the company.
Affected by the outbreak, Luckin Coffee still has more than 300 university stores that are temporarily out of business. As of December 31, 2019, the number of Luckin Coffee's directly operated stores is 4,507. This may mean that over 4,000 Luckin Coffee stores have resumed normal operations.
"So far, it seems that Luckin Coffee stores are operating normally and are still launching new products. They have also recently launched the Haagen-Dazs range and judging from the market response, consumers have responded well," the source said.
Previously, many media reports quoted a source close to Luckin Coffee as saying that the company held a "mid-year meeting" in early August when it said as of July this year, Luckin Coffee single store cash flow has turned positive and its management said profitability is expected to be achieved in 2021.
The meeting affirmed the effectiveness of the new management's strategic reorientation in the last 3 months, although the impact of financial fraud is far from over, according to the Securities Daily source.
Luckin Coffee stopped its strategy of rapid expansion to capture the market over the past 2 years and shifted to creating profitability through fine-tuned operations. Luckin Coffee also achieved 99.89% customer satisfaction in the first half of the year.
For the second half of the year, Luckin Coffee's main management objective is to maintain operational stability and continue to provide high-quality products and services to its customers.
Another source close to Luckin Coffee quoted by the Securities Daily said that the above is true and that the company is currently operating normally, has stable staff turnover, and has accelerated the launch of new products and consumer acceptance since the summer.
"Luckin Coffee is able to get financial recognition," Zhu Danpeng, a senior researcher at the China Brand Research Institute, said, "Luckin Coffee's ability to successfully go public previously is proof of this."
Zhu said that China's coffee market has a bright future, enough to support one or two head companies, "I have confidence in Luckin Coffee."
Data show that in 2018, China's per capita consumption of coffee is only 0.71% of Germany and 1.6% of the United States. The size of the global coffee market is more than 12 trillion yuan, while China currently has only about 70 billion yuan, a large gap with the proportion of the population.
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From 2013 to 2019, China's per capita coffee consumption has been rising year by year, and the average annual growth rate of coffee consumption in China has reached 15%, and it is expected that by 2025, China's coffee market size will reach 217.1 billion yuan, according to the Qianzhan Industry Research Institute.
Zhu said, "China has already entered the queue of coffee powers, even if it is not Luckin Coffee, the country will certainly see the emergence of a domestic leader in the coffee industry.”
In the US Pink Sheet Market, Luckin Coffee shares rose 1.56 percent on Wednesday.
