Luckin Coffee Inc. released its second-quarter 2026 financial results on the evening of August 3, reporting a record quarterly net revenue of 15.9 billion yuan, up 28.5% year-on-year. GAAP operating profit reached 2.12 billion yuan, a 22.0% increase from the prior year, showing improvement from previous quarters where revenue growth did not translate into profit gains. In the first half of the year, Luckin Coffee added 5,039 net new stores, bringing its total to 36,087 stores. In 2025, the company exceeded its expansion plan by opening 8,708 new stores, surpassing 30,000 by year-end. At the pace seen in the first half of 2026, Luckin Coffee could surpass 40,000 stores by the end of this year.
Beyond scale, Luckin Coffee has accelerated its push into multi-category offerings. The launch of "Qing Qing Mo Li · Light Milk Tea" in August 2024 marked a strategic shift into tea beverages. By May 31, cumulative sales of non-coffee products reached 20 billion yuan. In 2025, the company introduced 140 new products, with non-coffee beverages accounting for over 20% of cup volumes. In the first seven months of 2026, roughly half of the approximately 60 new or relaunched products were non-coffee beverages. Externally, two factors have pressured Luckin Coffee since 2025: first, tea brands like Mixue and Guming, each with over 10,000 stores, have accelerated their coffee strategies, making competitors include not just Starbucks and Cotti but also these players; second, the food delivery war exposed cost structure weaknesses, with excessive spending on delivery prompting tighter cost controls elsewhere. Luckin Coffee's same-store sales have declined for two consecutive quarters, dropping 5.3% in Q2 2026. CEO Guo Jinyi attributed this to a high base from last year's delivery orders, which he said was within expectations and would persist for a while.
Beyond external competition, the rapid store expansion and product diversification stem from internal drivers. Based on interviews with affiliated parties and a review of executive statements over the past two years, Luckin Coffee's ambition is to become a "convenience store" in the freshly made tea and coffee segment. This means accelerating store openings so every office building, community, and street has one or more Luckin Coffee outlets within a few hundred meters, while expanding stock-keeping units (SKUs) to break through coffee's consumption time and place limits, reaching more people. This dual approach aims to instantly satisfy most consumers' "need for a drink" from morning to night, regardless of the beverage type. However, this path is not as smooth as the linear growth in store numbers suggests. Rapid expansion strains personnel management. Non-coffee products have more complex recipes than coffee, increasing employee workload and stress. Manager turnover rates have risen, creating staffing gaps, and new stores often open hastily by borrowing staff from existing ones. Keeping partners profitable is another key issue. Franchisees report that more Luckin Coffee stores in the same area dilute individual store performance, with payback periods for new stores opened in 2025 significantly longer than in the past three years. One franchisee described Luckin Coffee as a "capital preservation investment project."
A Net Addition of 5,039 Stores in Six Months
Over the past 18 months, Luckin Coffee's most notable move has been rapid store expansion. By the end of Q2 2026, the company had 36,087 stores, with a net addition of 5,039 in the first half. This growth rate is rare even among coffee competitors. Earlier this year, two other coffee brands with over 10,000 stores, Cotti Coffee and Lucky Cup, both announced a slowdown in new openings. In March, Cotti stopped accepting new franchises in key cities like provincial capitals, shifting to direct-operated flagship stores to improve customer experience. In mid-July, Lucky Cup sent a letter to franchisees stating it would add no more than 2,000 stores in 2026 and only open 1,000 new locations in the second half. After partnering with Boyu Capital, Starbucks announced plans to open 20,000 stores in China but did not specify a timeline. According to a January 2026 plan from its headquarters, Starbucks International expects to open 450 to 500 net new stores in its 2026 fiscal year, with China accounting for half—meaning fewer than 250 new stores this year. The only comparable brand in this race might be Nowwa Coffee, which joined the 10,000-store club last year and opened over 8,000 new stores annually. In the first half of 2026, Nowwa's opening pace is similar to Luckin Coffee. However, Nowwa primarily uses a store-in-store model, often opening in convenience stores or restaurants, which has lower construction costs and difficulty. A Luckin Coffee franchisee noted that a standard store's construction cost is about 700,000 yuan, while Nowwa's latest franchise policy requires only a 49,800 yuan franchise fee, with shared rent and staffing, making it cheaper. Broadening to the entire freshly made coffee and tea industry, the only comparable brand is Mixue Ice Cream & Tea. In 2025, Mixue Group added 13,344 new stores, with Mixue Ice Cream & Tea alone adding about 7,000, excluding Lucky Cup's expansion and the acquisition of Xianpi Fulu Family. Based on publicly available data, Luckin Coffee is China's largest freshly made coffee brand by store count, with over 36,000 stores, followed by Cotti Coffee (over 18,000 stores as of April 2026), while Lucky Cup and Nowwa both surpassed 10,000 stores by the end of 2025. Luckin Coffee's rapid expansion partly aims to hedge against heavy reliance on delivery channels. This encourages in-store pickup rather than dine-in, saving delivery fees paid to platforms. Achieving this requires high store density. In 2025, high delivery costs from the delivery war led to mismatched revenue and profit growth. Full-year revenue reached 49.29 billion yuan, up 43% year-on-year, but net profit of 3.6 billion yuan only grew 21.8%, half the revenue growth rate. In its Q3 2025 earnings call, Guo Jinyi stated that in-store pickup, not delivery, is the future core consumption scenario. He noted that delivery costs are high, customers are price-sensitive for single cups, and unit economics are poor, while longer delivery times hurt the immediacy and coffee taste experience. "We believe the coffee industry will naturally return to a pickup-oriented model over time, though this transition will be long," Guo said. Food and beverage chain expert Wen Zhihong explained that freshly made tea and coffee consumption has three scenarios: dine-in, exemplified by Starbucks' third-place concept, which faces growth bottlenecks; delivery, popular with young consumers but not ideal for brands; and pickup, which Guo emphasized. "A store's delivery radius is usually 3 kilometers. If Luckin Coffee focuses on delivery, many cities can't support such dense store locations," Wen said, adding that Luckin Coffee is expanding stores to boost pickup scenarios.
Expansion Too Fast: Not Enough Store Managers, Not Enough Profit for Franchisees
Rapid store expansion raises the question of whether personnel can keep up. After passing the store manager exam, Zhou Rui took over a new store as manager for the first time during the 2025 National Day holiday. She described the situation as "chaotic." Five days before opening, Zhou was notified and transferred to prepare the store. The store was mostly furnished, but the biggest problem was "no staff." For the first week, all staff except Zhou were borrowed from other stores. She repeatedly asked the regional manager for an experienced assistant manager, but the reply was always "no one available, keep holding on." Some employees believe staffing shortages stem from both new store openings and internal turnover, especially among store managers and assistant managers. Multiple store managers noted that turnover rates have been higher than usual this year. "To reduce turnover, even applying for resignation requires waiting in line," said Wang Yunyun, a store manager in Guangdong who recently decided to resign but had her application stalled because "no one can take over my store." In the past year, five or six new Luckin Coffee stores opened in her area, and the company hired externally to fill management gaps, but external hires often need more adjustment time. A regional manager told Wang that every day, they worry about "how to create more store manager qualifications" and fear that no one will be available to manage new stores. In a northern city, franchisee Zeng Fan's store also lacks an assistant manager. "It's hard to recruit now, and tea and coffee work is very tiring, making it even harder to find managers," he said. More critically, more Luckin Coffee stores in the same area have diluted individual store performance. Zeng became a franchisee in 2022, opened several stores between 2023 and 2024, and added one in 2025. With the same construction costs, the payback period for new stores has lengthened significantly. "Now, Luckin Coffee is just a 'capital preservation investment project,'" he said. Initially, his store had 5,000 to 6,000 Meituan delivery orders per month, but now with four or five stores within a 3-kilometer radius, orders have dropped to 1,000 to 2,000. In this environment, new stores may take three years or more to recoup investment. Same-store sales, a key indicator of mature store performance, have fluctuated significantly over the past three years. In 2023, the only year besides 2025 with over 8,000 new stores, same-store sales growth remained high at 10% to 20%. In 2024, it declined throughout the year before turning positive in 2025. In 2025, same-store sales growth started high, then fell, ending with a slight negative. In Q2 2026, same-store sales dropped 5.3%. Luckin Coffee attributed this to the high delivery base from last year, aligning with its business rhythm expectations. In a mature market, there is a natural conflict between store count and per-store performance. Generally, over-expansion hurts same-store sales. However, Luckin Coffee argues the market is far from saturated. Guo Jinyi stated that compared to mature countries in coffee penetration and per capita cup consumption, China's coffee consumption is still in its early stages of habit formation, with huge growth potential, so Luckin Coffee will maintain a "competitive opening pace."
"It Should Be Renamed Luckin Milk Tea"
Beyond store count, Luckin Coffee is rapidly expanding its SKUs. Guo Jinyi noted that in Q2 2026, the company launched 28 new beverages and several light meals and snacks. In the first seven months of 2026, about half of the roughly 60 new or relaunched beverages were non-coffee products, compared to about 40% in 2025. Luckin Coffee stated in its 2025 earnings call that it launched 140 new products in 2025, with non-coffee beverages accounting for over 20% of cup volumes. Luckin Coffee is not a newcomer to tea. In April 2019, it first introduced tea series within its main brand, then launched "Xiao Lu Tea" as a separate sub-brand two months later, recruiting franchisees nationwide. At its peak, Xiao Lu Tea had nearly 300 stores. However, as Luckin Coffee adjusted its brand strategy, most Xiao Lu Tea stores reverted to the main brand, fading from consumer view. Luckin Coffee did not abandon tea but instead continued offering tea products under the main brand, with the popular "Coconut Yang Zhi Gan Lu" briefly appearing around 2022. In August 2024, Luckin Coffee launched the strategic product "Qing Qing Mo Li · Light Milk Tea" and formally introduced the concept of "coffee in the morning, tea in the afternoon," marking the start of its strategic tea push. Over the past two years, among the 25 products in the "100 Million Cup Club" (single products with sales exceeding 100 million cups), tea drinks like lemon tea, light milk tea, fruit-vegetable tea, and coconut Yang Zhi Gan Lu are included alongside coffee. Looking at the menu, Luckin Coffee's current tea products differ significantly from the earlier Xiao Lu Tea. Xiao Lu Tea was similar to traditional milk tea brands, offering cheese foam, boba, pudding, and pearls, while Luckin Coffee's current tea offerings focus on light, refreshing fruit-vegetable teas and light milk teas, with milkshakes and alcohol-infused drinks as supplements. This shift aligns with Luckin Coffee's product development transformation. In July 2026, Chief Growth Officer Yang Fei told media that the company now emphasizes "healthier" products. According to Luckin Coffee's data, from its founding to May 31, 2026, cumulative sales of freshly made tea and other non-coffee beverages reached over 20 billion yuan. With more non-coffee products, employee workload has been pushed to the max. Previously, making coffee was a simple process, but now, with more tea products, the same cup output time means significantly more work. Many store employees find non-coffee recipes hard to remember and new products difficult to make. Some store managers have even posted on social media that the main reason for leaving is "the new products are getting more and more ridiculous." "It should now be renamed Luckin Milk Tea," said Liu Tao, a former store manager who joined in 2022 and left a few months ago. In three years, he had never seen a faster pace of new product launches, "almost every week." One store manager noted that before a new product launches, stores typically have a week to practice and prepare, which is manageable for experienced staff but not for newcomers. "With so many drinks now, an inexperienced new hire needs at least a week to 15 days of training before being placed on peak shifts," Liu said. Zhou Rui joined in March 2023 and became a store manager six months later. With previous tea store experience, she initially appreciated Luckin Coffee's simple preparation: one person could prepare all materials in 30 minutes each morning—brewing tea, warming the coffee machine, and scooping ice. But now, "the good days are over." For example, cutting oranges for the upgraded Orange C Americano to fresh-cut version requires washing hands four times: once before putting on gloves, once after handling oranges, once after assembling tools, and once after cutting. Strawberry smoothies require even more steps: first, sterilize strawberries with a fruit-vegetable sanitizer, then wash hands, put on gloves, remove stems, clean with drinking water, and finally blend into puree. "It sounds simple, but it's hard to complete within the specified opening time (preparation before business hours)," Zhou said. Recipe memory and errors are not the main issue. Several store managers mentioned that as non-coffee products become more frequent, more ingredients need pre-processing, extending opening and closing times. According to information from multiple store managers, Luckin Coffee strictly controls work hours based on sales and cup volumes. For a store with an average daily volume of 1,000 cups, it typically gets 800 work hours per month. That means all employees' total monthly work hours cannot exceed 800. The company does not pay for overtime, forcing store managers to cover shifts themselves or compensate with personal favors or money. Under company policy, Zhou's store has 30 minutes for opening preparation, but since no one wants the early shift, Zhou takes it herself, waking up early every day. With the largest coffee store network (36,000 stores) and workforce (220,000 employees), Luckin Coffee manages labor costs more efficiently than older competitors. In 2025, store employee wages as a percentage of total net revenue were 13.4%, down from 14.2% the prior year. In comparison, over the past five years, Starbucks' global store wages and benefits as a percentage of total revenue have hovered around 25%. As of press time, Luckin Coffee had not responded to related inquiries.
Cross-Industry Moves and Competition
The crossover between coffee and tea has become a recent industry trend. Luckin Coffee and Mixue Ice Cream & Tea, China's two largest freshly made tea and coffee brands, are now competing directly in each other's domains. The former is strategically adding tea, while the latter began installing coffee machines in some stores this year to pilot freshly ground coffee. Notably, Mixue Group also owns Lucky Cup, a coffee brand with over 10,000 stores, but the discussion here focuses on coffee products within Mixue Ice Cream & Tea stores. A franchisee with multiple Mixue stores told that earlier, Mixue's coffee was primarily instant or filter-based, with low visibility, but after switching to freshly ground coffee, daily cup volumes rose from about 20 to 30 cups. Mixue Ice Cream & Tea recently announced that in several pilot stores, coffee accounts for over 20% of daily sales, with one store selling over 9,000 cups in 53 days, averaging 177 cups daily. Other major tea brands have also entered the coffee space, recently highlighting their coffee results. Guming began testing coffee in 2023 but saw limited success until it launched a "8.9 yuan for all" strategy in June 2025, which opened up sales. In 2025, Guming launched 106 new products, including 27 coffee items, and its "Ku Jin Gan Lai Latte" became a hit at year-end. At a recent partner conference, Guming announced it would invest another 400 million yuan in coffee, aiming to increase coffee's share of total revenue from 10-15% to 20-25%. A Guming franchisee in Shenzhen noted that Guming's coffee strategy includes low-price traffic generation, emphasis on R&D and ingredient quality, and leveraging its shared supply chain, calling it "very mature." His store, located near an office district, sees coffee account for 30% of daily cup volumes. Cha Baidao also entered the coffee space early, launching a sub-brand "Kahui," but scaled up only last year by installing coffee machines in its main brand stores. By June 2026, coverage had surged from about 200 stores at the start of the year to over 2,700. Shanghai Auntie has since this year adopted a "dual-drive strategy for tea and coffee," developing a separate coffee sub-brand while also offering coffee products in main brand stores. Why are tea brands all entering coffee? Xu Zhou, co-founder of Tianlala, told industry media: "The boundaries between tea and coffee are blurring, and their integration is an inevitable trend. With Guming, Shanghai Auntie, and Mixue all ramping up coffee, missing out on this could mean losing future competitive opportunities." It is reported that Tianlala has introduced coffee series in over 1,000 stores. According to incomplete data from Hongcan.com, tea and fast-food brands crossing into coffee now have over 100,000 stores combined, mostly using a "existing store + coffee machine" asset-light model. Zhao Chuanxiang, an early franchisee of Luckin Coffee with several stores and a Mixue Ice Cream & Tea franchise, believes that despite intense competition, it will not shake Luckin Coffee's foundation. He argues that coffee's supply chain, roasting depth, and equipment differences create significant variability, noticeable in the taste. Additionally, he believes location-linked consumer groups are key: "Take Mixue—many stores are near elementary schools, and elementary school kids don't drink coffee." In terms of market share, Luckin Coffee remains China's top coffee brand. According to a report by GuanYan TianXia, in 2025, Luckin Coffee held the largest share of the freshly ground coffee market at about 14.26%, followed by Cotti Coffee at 7.65%, and Lucky Cup at 3.93%. Wen Zhihong believes that Luckin Coffee's move into tea is not a counterattack to tea brands entering coffee but an internal development need. By expanding its product line, Luckin Coffee can significantly boost sales and repurchase rates. In theory, as stores open in more scenarios, new products are needed. Liu Tao, who worked in both office building and community stores, noted clear differences. Office building stores are busiest around 8 AM, selling mostly Americano coffee, while community stores have a more diverse consumer base with higher demand for tea products, "making milk tea until your hands hurt." In the past two years, Zeng Fan noticed a shift in Luckin Coffee's location preferences. Previously, it preferred office buildings to serve working populations, focusing on coffee. "In the last two years, it has moved toward communities. Basically, wherever you walk, you can buy Luckin Coffee within a short distance," he said. In the Q2 2026 earnings call, Guo Jinyi mentioned that Luckin Coffee has built a store network covering all city tiers and diverse consumption scenarios—from first-tier cities to county towns, offices, commercial areas, street shops, communities, campuses, and transportation hubs—continuously expanding consumer reach. Overall, Luckin Coffee's actions can be summarized as refining its store model, building a physical network, and restructuring its tea and coffee product lines around the in-store pickup scenario to "maximize proximity to customers."
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