On February 8, Luckin Coffee opened its 30,000th store in China, located at the Shenzhen Xinghe Twin Towers. Reaching this milestone from 10,000 stores in just one and a half years, Luckin has pushed the scale ceiling of China's coffee industry to unprecedented heights. However, behind the record-breaking numbers, Luckin's recent moves are showing a shift from its traditional strategy.
The new store, named an "Origin Flagship Store," spans 420 square meters across two floors. It is equipped with semi-automatic machines, experienced baristas, exclusive specialty drinks, and a pour-over menu, clearly signaling a move towards a more premium positioning. Market observers speculate that amid intense industry competition, Luckin intends to revive a "large-store model" to capture social demand溢出 from brands like Starbucks and address its own lack of presence in "slow-paced" consumption scenarios.
Yet, for creating more incremental growth, Luckin's focus is turning towards county-level markets where coffee penetration remains low. Recently, Luckin announced a strategic agreement with Supply and Marketing Daj Group Co., Ltd., explicitly aiming to bring the coffee consumption experience down to counties and townships. Supply and Marketing Daj, as a long-established force with decades of experience in county-level commerce and the only nationwide listed company within the "supply and marketing cooperative system," is poised to become a powerful springboard for the coffee giant's expansion into these markets. The competitive landscape of the county-level coffee market may soon see significant changes.
Luckin's "New Ally"
As Luckin stands atop its 30,000-store peak, the battlefield is no longer just a one-on-one rivalry with Cotti Coffee. By 2025, both Lucky Cup and Nowwa Coffee had joined the "10,000-store club," emerging as formidable new competitors. The former, backed by Mixue Bingcheng's extensive supply chain, sweeps through lower-tier markets with extreme affordability, employing a "surround the cities from the countryside" strategy. The latter utilizes a capital-light "shop-in-shop" model, efficiently capturing franchisees eager to improve per-square-meter efficiency.
This evolution in the competitive landscape signals two key points: First, the coffee consumption potential in lower-tier markets still has room for release. Second, finding partners with strategic synergy and achieving resource integration through "team combat" is becoming a critical way to break through in scaled competition. Supply and Marketing Daj might be the "express elevator" Luckin has found for its下沉 market push.
This long-established listed company, formerly known as Xi'an MinSheng, saw its controlling stakeholder officially change to the All-China Federation of Supply and Marketing Cooperatives in 2024, following periods of capital volatility under HNA's control. For the first three quarters of 2025, Supply and Marketing Daj's revenue fell 15% year-on-year to 1.2 billion yuan. While it returned to profitability, the company expects a full-year net loss for 2025 due to declines in the fair value of commercial properties and asset impairment charges.
In terms of assets, Supply and Marketing Daj owns over 2 million square meters of self-owned properties, forming a four-tier network extending from provincial capitals down to counties and townships. Beyond flagship department store assets in cities like Xi'an and Haikou, its reach extends deep into the core of county trade through supermarket chains, civil defense commercial spaces, and hundreds of Shunkelong stores. Additionally, the company manages five operational trade and logistics parks, such as those in Xiangzhong International, Jiangyong, and Wufeng, with a total operating area exceeding 700,000 square meters.
Amid policy tailwinds aimed at deepening modern circulation systems and boosting county-level consumption, Supply and Marketing Daj's need to revitalize its存量 low-efficiency assets aligns logically with Luckin's endogenous demand for growth from the grassroots. Supply and Marketing Daj holds numerous underutilized properties and基层 sites that urgently need revitalization through digitalization and chainization. Introducing Luckin can transform these traditional spaces into social consumption scenarios, enhancing asset returns and precisely targeting young consumers in counties.
For Luckin, the traditional expansion model involving point-by-point negotiations is costly in terms of time and manpower. Partnering with Supply and Marketing Daj allows for the integrated use of its dispersed channel resources, enabling efficient, large-scale下沉 deployment. The core of their collaboration focuses on three dimensions: co-creating scenarios by developing distinctive coffee spaces within Supply and Marketing Daj's physical network; channel下沉 by leveraging the supply and marketing system to boost brand penetration; and supply chain integration by connecting logistics to build a coordinated urban-rural distribution network.
While the capital market logic is smooth, returning to commercial fundamentals, this partnership still faces practical challenges. Coco, a China coffee training system operations instructor, pointed out a key question: How many of Supply and Marketing Daj's outlets actually fit Luckin's site selection model, and what are the renovation costs? Furthermore, with competitors like Lucky Cup and Nowwa already engaged in fierce competition in county towns, which brand are local consumers more willing to pay for?
Navigating the County Coffee Market
For Luckin and others, the urgency for下沉 stems primarily from a shift in growth drivers. According to GeoQ Data's monitoring, Luckin's expansion from 20,000 to 30,000 stores focused less on entering new cities and more on increasing store density within existing provinces and municipalities. During this process, the number of provinces/municipalities with over 1,000 Luckin stores grew from 5 to 11. In Q3 2025, Luckin attracted over 42 million new transacting customers, with monthly average transacting customers reaching a record 112 million.
However, even with strong incremental growth driven by intensive delivery subsidies, the growth rate of raw material purchases by Luckin's partnership stores has begun to lag behind the growth rate of store numbers. This indicates a dilution effect in per-store output. Coco noted that if the economic fundamentals don't qualitatively improve and nationwide demand for coffee quality fails to cross a critical threshold, the room for maneuvering in the存量 market is indeed limited.
Currently, Luckin has entered 1,550 counties and county-level cities, covering over 80% of China's counties, with more than 7,400 stores in these areas. Yet, in the vast lower-tier markets, its scale advantage over brands deeply entrenched at the grassroots, like Lucky Cup, is not fully established. An executive from a chain coffee brand suggested that capturing the county market is not just about digging for增量; it's about seizing the discourse power in "consumer education," attempting to play the role Starbucks played in cities decades ago.
Currently, the coffee war in lower-tier markets hasn't escalated to the intense "street-by-street combat" seen in first-tier cities. Lucky Cup's strongholds are concentrated in Henan and Shandong provinces, while Guming has built a tight delivery radius in the Yangtze River Delta. The underlying reality is that there are few players with sufficient capability to systematically develop this vast market.
In下沉 markets, the highest cost often isn't rent but logistics. The ability of Lucky Cup and Guming to establish solid low-price advantages essentially relies on their "supply chain going to the countryside" capability. Lucky Cup leverages the massive centralized procurement and bargaining power of the Mixue Bingcheng system to price a cup of freshly ground coffee as low as 5.9 yuan. Guming, by densifying warehouses within regions and building its own cold chain, achieves a high-frequency, short-distance delivery loop, even promoting prices as low as 2.9 yuan during promotions. These brands may not need to consciously "go下沉" because their business models are inherently rooted in the vast hinterland market. This innate DNA means their supply chains are deeply matched from the start with the consumption scenarios and cost structures of counties and townships, forming a natural operating radius.
In contrast, for a long time, Luckin's core strength was its "quick pickup" model based on high-potential locations. This model stripped away spatial redundancy, retaining only the shortest path for production and pickup, reducing area to boost per-square-meter efficiency, and then rapidly saturating the market with relatively low prices and high-density outlets. However, lower-tier cities often lack the business and office environments that support high-frequency quick pickups. The demand for coffee there is less about "staying awake" and more oriented towards "socializing." In county towns, coffee shops often serve as important venues for afternoon tea, gatherings, and even matchmaking.
When cup volume cannot be supported by high-frequency essential demand, the foundation of Luckin's original high-efficiency myth is undermined. This means that beyond leveraging platforms like Supply and Marketing Daj for channel下沉, Luckin must make choices regarding product pricing and spatial attributes. One potential direction is to move away from the quagmire of ultra-low prices and tilt the competitive model towards "social spaces," using added "space value" to support higher per-cup premiums. Recent trends show this emphasis, such as the newly listed snack brand Mingo emphasizing its leisure and entertainment experience, and Starbucks continuously promoting its "Third Place" concept in county markets.
But this might not be sufficient alone. Coco believes that "Luckin-style digital efficiency and Guming-style supply chain networks are areas where all future coffee brands must 'catch up'." In下沉 markets where cup volume is uncertain and logistics access costs are high, the model relying solely on external suppliers may struggle to support the cost structure. This explains why Luckin has frequently targeted the supply side in the past two years.
In 2024, Luckin secured a source of high-quality beans in Brazil valued at over 10 billion yuan. On the production capacity front, roasting bases and fresh fruit processing plants from Kunshan to Baoshan in Yunnan have commenced operations. In June 2025, Luckin began construction on its fifth factory in Xiamen, planned to have an annual roasting capacity of 55,000 tons, making it the largest in China upon completion. Efforts to build a "global origin cluster" have intensified: securing coconut milk supply from Indonesia's Banggai Islands and establishing a direct jasmine procurement base in Hengzhou, Guangxi, directly targeting the flavor origins of hit products like "Raw Coconut Latte" and "Jasmine Tea Coffee." The aim is to gain long-term, stable marginal cost advantages through deep control over key upstream raw materials.
When Luckin finally attempts to compete head-on with players like Lucky Cup in the county markets, this comprehensive, self-controlled supply chain system will be its ultimate trump card, supporting its scale of over 30,000 stores and helping it overcome barriers.
Comments