"While Starbucks focuses on operational profitability-targeting a per-store minimum margin of 15%-Luckin is accepting early losses to build brand recognition and rapidly increase its market presence, Bernstein U.S restaurant equity research analyst Danilo Gargiulo told CNBC. Speaking on Luckin's mindset, Gargiulo said: "I want to make sure that the brand gets recognized on a national basis, even though at the beginning, this means that I might need to be suffering from some smaller losses on a per-store basis.""
"In 2020, the company was embroiled in a massive accounting fraud scandal, with executives admitting to fabricating over $300 million in sales. The incident led to fines, executive firings, bankruptcy proceedings, and a major corporate overhaul, per the SEC. Despite these setbacks, new management and a focus on transparency allowed Luckin to recover, and by 2023, Luckin Coffee was brewing $3.5 billion in net revenue."
Luckin Coffee launched five cashier-less locations in New York City that require mobile-app ordering and offer steep app-based coupons up to 50%, undercutting Starbucks' prices and in-store ambience model. The company is prioritizing rapid brand recognition and market share growth over initial per-store profitability, accepting early losses to scale nationally. Founded in 2017 in Beijing, Luckin operates more than 26,000 stores worldwide and offers Americanos, matcha drinks, fizzy drinks, and creative lattes. The company endured a 2020 accounting fraud scandal, underwent major corporate overhaul, and recovered to $3.5 billion in net revenue by 2023.
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