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Diary of a Brand: Luckin Coffee
Nothing lucky about it: How Luckin Coffee brewed the turnaround of the century
Chinese coffee chain Luckin became global news in 2020 when a short seller exposed the chain for fabricating millions in revenue. After admitting to fraud, Luckin was delisted from the Nasdaq, paid a $180M fine to the SEC, and filed for bankruptcy in 2021.
Quietly, Luckin has staged a comeback. The brand is now the number one coffee shop in China with 26,000+ locations and over 10 billion drinks sold. Luckin’s 2025 revenue of $5.7B is up nearly fivefold since its bankruptcy. The stock price is up 3,000%+. Luckin is back in Western media as well, this time with plans to challenge Starbucks on its home turf with its first two locations in the US.
Luckin did not just clean up its revenue reporting. Their team overhauled their strategy, transforming from a cash-bleeding discount coffee shop to a cash-generating premium brand.
“‘Luckin is conducting what is probably the most remarkable turnaround we have ever seen,’ said John Zolidis, who predicted in the summer of 2020 that there would be no value left in the company following its accounting scandal.”
— WSJ
In this Diary of a Brand, I’ll detail how Luckin achieved their comeback and present a framework other companies can use to elevate their own brands.
Luckin’s original thesis: Quicker and cheaper than Starbucks
Luckin was founded in 2017 on an operational thesis. Unlike Starbucks, whose model includes large format spaces and multiple baristas who customize drinks, Luckin would open tiny coffeeshops manned by machine and digital app to offer standardized drinks at low prices. If you live in London or New York City, you might recognize this as the original model of Blank Street Coffee.
However, Luckin’s operational thesis failed to generate significant demand without steep discounts:
“[Luckin’s] aggressive approach to acquiring customers through heavy discounts had backfired into unsustainable financial losses, as the majority of its clientele was drawn by affordability” — Daxue Consulting
The reason for Luckin’s low demand was a misunderstanding of consumer behavior. China is largely a tea-drinking nation, rather than a coffee drinking one. In 2021, the year of Luckin’s bankruptcy, per capita coffee consumption in China was only 9 cups per year, or 2.74% of the United States’ 329 cups per year (Source: Deloitte). Chinese consumers would try Luckin’s coffee when incentivised by a deep discount, but wouldn’t return to pay full price, as they did not like the bitter taste of coffee.
Turning Luckin around: Shifting to a premium business
Luckin brought in new leadership to clean up governance and reporting post-scandal. With this team came a shift in strategy: Instead of a low cost chain that pushed discounts to acquire customers, Luckin would transition to an elevated model that pulled in full-priced audiences with hit products and an elevated brand. It’s the type of result any Chief Marketing Officer would want to oversee.
Luckin would transition to an elevated model that pulled in full-priced audiences with hit products and an elevated brand.
Building a premium brand that sits at the center of culture is not exactly easy. Particularly in a market that does not have interest in your product. But Luckin took three steps that any brand can emulate to make their own transition: They launched in-demand products. They layered them with aspirational associations. And they got these products directly in front of the right consumers.
Step 1: HITS | Launch products informed by consumer insight
The first step in Luckin’s transformation was to shift its product strategy to develop products for Chinese consumers. In other words: launch products people want. Luckin started this transition pre-bankruptcy, when, in 2019, they launched an unexpected hit: their Brown Sugar Boba Latte. Upon reflection, the drink’s success made sense: it leaned into Chinese consumer’s preferences for sweet drinks and tea-based lattes.
Post this drink, Luckin overhauled its product team with a remit to bring in more consumer insight into beverage design:
“In 2019, Luckin made major personnel adjustments to its product group. Prior to this, members of Luckin Coffee’s product department mostly came from industries such as finance, internet, consulting, and automobiles. Since then, more product professionals from the retail industry have joined…Only after did Luckin understand how to use data to maximize its value.” — 36KR
With this new team, Luckin launched a multi-step process for engineering new drinks, which includes (1) assessing consumer trends and preferences, (2) mapping supply chain availability of potential ingredients, (3) conducting taste tests, (4) optimizing menu configuration and messaging, and (5) trialing in-store operations for quick assembly. Each drink that passes these hurdles is then (6) launched in a handful of test stores to confirm demand before store-wide rollout.
Under this process, Luckin now test-launches a new drink roughly every 3 to 4 days, with 100+ drinks tested in 2023. It is this data driven process that is responsible for turning Luckin into a hitmaker, starting with their first major blockbuster: the Coconut Latte, which sold out ‘in one second’ after store-wide launch in 2021.
Like the Boba Tea Latte, the Coconut Latte’s success leaned on designing for Chinese consumer’s tastes:
“An important consideration while designing coconut latte was to use coconut milk to dilute the bitter taste of coffee, which most Chinese consumers did not like…Many consumers, who used to consume bubble tea as students, switch to creamy coffee when they start working. Coconut latte simply tastes better than most dairy-based coffee products.” — Zhou Weiming, SVP, Luckin, The Lowdown Asia
The Coconut Latte was the first in a run of hit products for Luckin, including the Moutai Latte (featuring China’s national liquor Baiju), the Cheese Latte (inspired by cheese foam commonly added to tea drinks), and the Little Butter Latte (designed for smoothness).
“[Luckin] developed coffee-based beverages that are suited to the majority of Chinese consumers who aren’t used to the bitter-sour taste of coffee. It has popularized iced coconut lattes; meteorite lattes containing chewy balls that resemble tapioca pearls commonly found in bubble-milk teas.” — WSJ
Step 2: ASPIRATION | Layer on aspirational associations
Hit products are a path to increased revenue, but they do not create a lasting moat as hit drinks can be easily copied.
Case in point: Chinese research platform Kamen tracked that one year after Luckin’s Coconut Latte launch, 37 out of the 40 top beverage brands in China had added coconut based drinks in their offerings. (The Lowdown Asia).
To stay at the top, Luckin needed to distinguish itself from copycats.
To do this, Luckin shifted its marketing from discounts to investments in brand marketing post bankruptcy (Daxue Consulting). They sponsored Chinese skier and model Eileen Gu in late 2021. When Gu won gold at the winter Olympics five months later, Luckin Coffee sold out of Gu-endorsed drinks (BoF). Gu’s other endorsements with Louis Vuitton, Tiffany, Oakley, and Estee Lauder made her the second highest paid female athlete in the world by 2023, and linked Luckin with high-end, globally recognized brands.
Luckin also pursued a series of high-profile collaborations for each of their major drink launches, associating Luckin’s drinks with the zeitgeist.
They launched 2021’s Coconut Latte in partnership with Coconut Palm, a leading coconut juice provider known for its bold, retro packaging and controversial marketing stunts. Luckin hired award-winning designer Pan Hu to design standout cup sleeves that would make the drink recognizable as it was carried in the hands of early purchasers:
“[Coconut Latte] was launched April 11 with cup sleeves and paper bags that went viral on social media…On April 19, Luckin Coffee said on its Weibo account that they nearly [ran] out of the paper bags and decided to share the source files of the design for free.”
Luckin followed the Coconut Palm collab with a partnership with Moutai, China’s national liquor brand, to create a latte infused with the taste of Baiju. For the Moutai Latte, Luckin launched a campaign to hype up the drink as a way to playfully engage in a bit of Baiju during the daytime. This repositioning into Chinese’ consumers habits was a success; the brand sold over 5.4M Moutai lattes in the first 24 hours, and the campaign became the number one most discussed brand partnership on Weibo.
Repositioning into Chinese’ consumers habits was a success; the brand sold over 5.4M Moutai lattes in the first 24 hours
Luckin struck viral gold again when they launched their Mascarpone Latte, a drink with a cheese foam top similar to bubble tea drinks, in partnership with Warner Brothers’ Tom and Jerry.
The integrated campaign leaned on nostalgia and included themed merchandise and a pop-up booth at the China International Comics Festival in Guangzhou around the National Day holiday. Once again, the campaign caught fire on Chinese social platforms, elevating the brand and firmly placing Luckin at the center of culture.
Luckin tracks each products’ success, and when they have a hit, they annualize the hit product into a yearly event with higher investment. For example, they followed up the Coconut Latte with a Coconut Cloud Latte in 2022, building on the original version with a creamy coconut topping. In 2023, they added limited flavors and themed merchandise including Baby Coconut Keychains and collectible figures. To hype up the ‘sold out’ status of the drink, Luckin sent influencer Lelush (and later, other celebrities for anniversary campaigns) to Hainan, China’s coconut heartland, to film coconut-harvesting short videos, proclaiming that they would never run short of raw coconut again. Chinese standup comedian Fu Hang starred as the “Happy Birthday Officer” in Luckin’s Coconut Latte 4th anniversary ad, which took place on an Indonesian coconut island.
Luckin’s series of collaborations and viral content turned Luckin drinks into more than daily pick-me-ups; they are a way to show you are part of culture. For the brand, the drumbeat of campaigns kept Luckin top of mind in a competitive market:
I think they were just really smart with innovating around the local consumer tastes and doing these like really catchy, consumer friendly collaborations, right? So the Moutai thing, they just always go viral with new things, right? And that’s just so important in the really competitive Chinese consumer market. Like, are you able to get attention? — Bloomberg
3. TARGETING | Get in front of the right customers at the right time
Luckin’s hit products and cultural relevance were complimented by a third pillar: optimal targeting. Similar to their product strategy, the Luckin team developed a data-driven process to select where to place stores. Their process involves researching demographics and traffic flows, and then launching a digital only store on takeout platforms to test demand before actually opening the new store:
Before entering a new city, Luckin will first consider the city’s population density, GDP, education level, income level, urban development trends, urbanization process and other dimensions… After determining the city, through analysis of residential areas, CBD, core business districts, whether there are offices of Fortune 500 companies, and tracking Starbucks trends, Luckin will find three to four core areas where mainstream people flow in the city…Once a location has been aligned on, Luckin will launch the store… sort of. They launch the store on their takeout platform, and offer a high amount of subsidies and coupons to test demand. Only then will they actually launch a new location.
— MDPI
Luckin’s data-driven store opening process has increased the survival rate of newly opened cafes from 63% in 2019 to 93% in 2021 (MDPI).
Luckin’s data-driven store opening process has increased the survival rate of newly opened cafes from 63% in 2019 to 93% in 2021.
Luckin then optimizes its promotions by store, incorporating temperature and weather conditions into the prompts it sends customers via its app and digital promotions. Cold coffee is recommended in places with higher temperatures, and hot coffee is recommended in cooler places. Since rainy days typically have lower traffic than sunny days, Luckin invests in takeout offers and sharing coupons to encourage people to visit Luckin or grab coffee for a friend on rainy days.
The combination of hit product, cultural relevance, and optimized targeting means that Luckin continuously gets in front of customers with in-demand products at the right time and place.
A formula for growing brands: data meets creativity
Luckin’s strategy is simple: launch better products, embed them into culture, and get them in front of the right audiences. But underpinning this strategy is an impressive system of data and technology across the organization:
Guo Jinyi, chairman and CEO of Luckin, said that Luckin’s technological capabilities cover the entire business chain, covering everything from data-supported store location selection, algorithm-driven supply chain procurement to user marketing automation and IoT management of store equipment. -FoodTalks
Luckin’s data helps it identify the products to launch and then decide which to back with more marketing investment, as well as which locations to open and promotions to send. It also helps Luckin optimize its operations, driving supply chain efficiency and decreasing costs throughout the organization. But as Luckin’s team learned, decreasing costs is not just about passing on the margin to consumers in the form of the cheapest possible product. Rather, those investments go further when geared at making a product more desirable.
As AI permeates more business processes, brands have an opportunity to leverage data to both lower costs and elevate their own brands.
What can brands take away from Luckin’s turnaround?
1. Ruthlessly understand your audience to inspire new products
It’s easier to design hit products when you have insight into unmet consumer needs and preferences:
- Luckin applied tea ingredients to coffee, ushering a suite of new beverages that appealed to Chinese consumers’ tastes
- P&G invented the Swiffer after researchers videotaped people cleaning their homes and witnessed people getting frustrated with mops and wiping their floors on their hands and knees
- Lululemon designed their best-selling ABC men’s pant after learning that men wanted the comfort of athletic apparel in clothes they could wear to work
Collect data (like, really collect a ton of data) on your audience’s behaviors and desires. AI allows brands to quantify trends and preferences by scraping online data.
In my role leading brand consulting at the Business of Fashion (BoF), we use a combination of AI social listening and qualitative research to help brands uncover consumer preferences and identify opportunities to expand to new categories, consumers, and seasons. If you run a brand and that’s of interest, send an email to michelle.wiles@businessoffashion.com.
2. Test and test again to separate the hits
Not every new product or campaign will be a hit. Luckin doesn’t aim for a 100% hit rate. Instead, it aims to test many and let the market decide where Luckin should pour more resources. Your brand can take a similar approach. Test new concepts with your core customers only. Launch fake landing pages and see what the demand is. Launch something in one store only before expanding nationwide. If you’re a fashion brand trying to launch a new ‘it’ handbag, host a trunk show of your potential new designs and see where people gravitate. It might surprise you.
3. Double down on winners with more investment and fresh ideas
Luckin turns its hits into annual events and makes them bigger each year. The Coconut Latte had strong fanfare in year one. In year two Luckin added a foam top to improve the product. In year three Luckin added limited flavors and Pop Mart/Labubu collaboration. In year four came celebrity campaigns. Each year, the Coconut Latte’s launch day sales are bigger than the last.
Hits need fresh energy if you want to keep up the heat longterm. Once you have a hit, take a page from movie studios and treat each new year like a sequel that is rooted in the original, but has its own story and campaign. The show Survivor is approaching its 50th season — but maintains its fanbase by introducing new game mechanics and formats each season.
4. Lift brand aspiration
Good product is not enough to hold onto consumers, especially in a world of dupes and fast followers. Instead, your brand also needs to have a role in culture to command outsized attention and loyalty. It’s not a top sushi restaurant, it’s Sugarfish. It’s not a film, it’s an A24 film.
Investing in brand elevation is a decision that cannot be perfectly quantified. But take a list of the brands with strong associations and awareness vs. the brands without it — I’d bet that the ones with cultural cache hold significantly higher valuations than the ones with strong product reviews only. That difference in valuation is the return on brand investment. Luckin demonstrates that investments in the three C’s (celebrities, collaborations, culture) drive brand elevation.
Looking ahead: Luckin’s US ambitions
Luckin launched its first two US stores in Manhattan in 2025 and confirmed the US as a long-term strategic imperative:
“The US is a strategically important market in Luckin Coffee’s global layout. We aim to bring more diverse coffee options and fresh consumer experiences to the US market through our rapid product innovation, digital operations and quality supply chain.” — Dr. Jinyi Guo, CEO of Luckin Coffee, China Daily
Like its Chinese expansion, Luckin has already implied that US expansion will be one rooted in data and a learning mindset in order to understand best how to scale and approach the US consumer:
“Given the maturity, saturation, and competitiveness of the U.S. coffee market, we intend to approach our expansion strategy there with careful consideration and a disciplined execution plan.” -StoneX
How will Luckin approach the US?
The US has its own culture-focused hit-maker chain in Blank Street Coffee, as well as competition from Starbucks, Dunkin’, and fast-growing regional chain Dutch Bros. Luckin both needs to differentiate itself and account for a new set of consumer preferences.
Will Luckin build on growing American interest in bubble tea and leverage their existing recipes to corner this market? Will they reverse their China strategy and Westernize their products to American tastes? Who will Luckin partner with, and how will they approach capturing attention and elevating the Luckin brand in a new market?
I look forward to seeing how Luckin uses their deep bench of data and capabilities in launching innovative drinks to crack the US market.
What’s your bet on the future of Luckin?
