Is Joining Luckin Coffee in 2023 a Pitfall That Leads to Losses? What Are the Requirements for Luckin Coffee's Instant Purchase Franchise?

Yesterday, Luckin Coffee officially unveiled its 2023 recruitment plan for a fresh round of new-retail partners. The drive covers 80 cities across 15 provinces, including Anhui, Jilin, Liaoning, Heilongjiang, Inner Mongolia, Shandong, Henan, Guangxi, Sichuan, Yunnan, Shanxi, Hunan, Hubei and Guizhou, with a clear tilt toward fourth- and fifth-tier cities.

By the end of September 2022, Luckin's store count had climbed to 7,846, of which 2,473 were joint-operated. More than 70% of those stores sit in first-tier and new first-tier cities, leaving second-tier markets, and especially third-, fourth- and fifth-tier cities, thinly covered.

Every one of the 80 key cities in this recruitment already has a franchised store, but the network is far from dense: on average, each city holds no more than 10 outlets. Read together, the numbers make the strategy plain. Luckin is stepping hard on the accelerator into lower-tier markets.

The Shift to Lower-Tier Markets

Over the past two years, as the pandemic dragged on and flared up again and again, lower-tier markets became a battleground for the coffee industry. Part of the reason is saturation. In first- and second-tier cities the coffee market is nearing its ceiling and competition from within has turned brutal, so deepening brand recognition and pulling in new customers means pushing into third-, fourth- and fifth-tier cities.

The other part is migration. The grind of life and work in major cities has sent more and more people back to smaller towns, and many of them carried a coffee habit with them. Coffee may not be a necessity, but these consumers become repeat buyers all the same.

And lower-tier cities are hardly blank ground. Long before the chains arrived, plenty of independent coffee shops with strong local character had already taken root. County-level coffee has been a persistent topic on social media for two years running.

So it is no surprise that domestic chain coffee brands, new-style tea brands and international coffee chains are all circling the same cake.

Challenges in Lower-Tier Markets

Claiming a slice of it, though, is no easy thing. For one, consumer habits in third-, fourth- and fifth-tier cities differ from those in bigger cities. Where first- and second-tier customers prize convenience and speed, lower-tier markets care about value for money and, just as much, about the space itself.

Luckin is known for affordability, but store space has long been its weak spot. Still, observations show that many Luckin outlets around the country now offer seating areas.

Things that big-city residents take for granted are still something many consumers are waiting to enjoy for the first time. Where the urban workforce chases caffeine, customers in third-, fourth- and fifth-tier cities are chasing a sense of occasion.

Innovation in Retail Formats

Store development is only one front. Judging by what people share on social media, Luckin's push behind "Luckin Express" unmanned coffee machines has gone well. In first- and second-tier cities, the machines turn up in large venues such as shopping malls, hospitals, office-building lobbies and subway stations.

Back in January 2020, Luckin announced its intelligent unmanned retail strategy at a press conference, introducing the "Luckin Express" automated coffee machine. It can turn out the master coffee range, including Americano, latte and cappuccino, plus non-coffee drinks. Every cup is a uniform 16oz large size, product variety and flavor match the standards of a Luckin store, and the machine runs 24 hours a day.

Looking Ahead

Whether it is reopening franchises or rolling out the "Luckin Express" machines, the message is the same: Luckin is stretching coffee sales into every scenario it can, using relentless store openings and terminal deployment to reach a higher density of coffee service nationwide. The fight for share in China's coffee market is only going to intensify.

Image source: Internet

FrontStreet Coffee Recommendation

Watching coffee spread from big cities into smaller ones, it is worth remembering that China has a growing region of its own. Yunnan coffee, often sold as "Yunnan small-lot," is the local name for Arabica. Its history stretches back to 1904, when the French missionary Tian Deneng carried coffee seeds (Typica) from Vietnam into Yunnan and planted the first tree in Zhugula Village, Binchuan County. The region's geography and climate proved so well suited to the crop that small-lot coffee took off. FrontStreet Yunnan Small-Lot comes from the Baoshan growing area and is washed and medium-roasted, pouring a gentle cup of nuts and chocolate sweetness with a light plum acidity. At an approachable price, it is how many drinkers meet Yunnan coffee for the first time.

For a step up, FrontStreet 2013 Sun-Dried Typica is a marker of the region's progress. In 2013, to trace Yunnan's roots, FrontStreet built its own estate and planted a block of Typica. Typica is one of the oldest coffee varieties, carrying pure Arabica genetics and prized for an elegant, clean cup, and it was also the first variety planted in Yunnan, so the estate set out to recover that original taste of place. Only fully ripe red cherries are used, sun-dried and medium-roasted for balance and a brighter sweet-sour profile. The cup brings dark berry character, caramel sweetness, chocolate and a hint of dried apricot, finishing with the lingering echo of black tea.

If you want Yunnan flavor in espresso, FrontStreet Black Cocoa Blend is a barista favorite built from Yunnan small-lot and Brazil Cerrado. The Brazilian beans supply mixed-nut aroma and a balanced body, while the Yunnan beans carry the chocolate and citrus notes. Pulled as an Americano it lands sweet, bright and bitter in equal measure, with nutty and brown-sugar sweetness, and paired with milk it turns a latte silky with almond and cream. It is a forgiving choice for beginners.