Luckin Coffee no longer looks much like a coffee shop.
Recently, the company launched a cassava and peach gum stewed milk drink across its nationwide stores. Following a series of products including light milk tea, iced milk, yogurt shakes, and Thai tea, the chain has now extended its menu into Chinese-style sweet soups.
Behind this expanding menu lies a divergence between revenue growth and declining same-store sales.
According to the latest third-quarter report, Luckin Coffee Inc. (LKNCY) generated revenue of 17.891 billion yuan, up 17.0% year-on-year, while operating profit reached 2.756 billion yuan, up 55.1% year-on-year.
However, same-store sales at self-operated stores fell 11.1% year-on-year, marking the first double-digit decline since the third quarter of 2024.
Luckin Coffee has chosen to continuously enrich its menu in an attempt to give consumers more reasons to make purchases.
In the third quarter, the company rolled out 41 freshly made beverages and more than 20 light food items, setting a new record for single-quarter new product launches in recent years. Among them, the Thai tea series exceeded 13 million cups sold in its first week on the market.
From coffee to milk tea to sweet soups, Luckin Coffee Inc. (LKNCY) is bringing more freshly made beverages into its nearly 40,000 stores.
Expanding category coverage to span more consumption occasions has become a common strategy for the freshly made beverage industry in pursuit of growth.
But for Luckin Coffee Inc. (LKNCY), which has expanded rapidly on the back of compact store formats, streamlined staffing, and standardized preparation, whether a richer menu can generate enough incremental consumption remains a question this offensive must answer.
Faster and Faster Launches
During the latest earnings call, Luckin Coffee Inc. (LKNCY) management spent considerable time explaining the same-store growth issue.
In the third quarter, self-operated same-store sales fell 11.1% year-on-year, widening from the 5.3% decline in the second quarter.
Chairman and CEO Guo Jinyi explained that high delivery platform subsidies in July and August of last year inflated the sales base, and after subsidies tapered off this year, delivery cup volumes with higher average ticket prices declined, while the recovery in self-pickup cup volumes was not enough to fully offset the impact. From July to September, the same-store decline narrowed month by month.
Guo also emphasized that for a company still in an expansion phase like Luckin Coffee Inc. (LKNCY), same-store performance may fluctuate in waves and should not be viewed in isolation.
One of the company's responses is to continuously broaden its product boundaries.
In its early days, Luckin Coffee Inc. (LKNCY) primarily focused on flavor innovation around coffee. Products such as coconut latte, cheese latte, and butter latte enriched coffee flavors through changes in milk bases and ingredients.
Today, non-coffee products capable of covering idle demand such as afternoon tea have become an important direction for new product development.
In 2024, Luckin Coffee Inc. (LKNCY) significantly increased its non-coffee layout. The "Light Jasmine" light milk tea reached 44 million cups in its first month, becoming a representative product for entering the freshly made tea beverage market.
At that time, Luckin Coffee Inc. (LKNCY) was undergoing same-store recovery after a previous round of store densification and price competition. Light milk tea hit the market's demand for real milk, tea aroma, and a light burden.
Through its "coffee in the morning, tea in the afternoon" marketing campaign, Luckin Coffee Inc. (LKNCY) extended its 9.9 yuan pricing system to tea beverages, rapidly promoted them through its existing store network, and opened up new consumption scenarios.
Afterward, Luckin Coffee Inc. (LKNCY) rolled out its self-developed "Ruiduojing" tea extraction machine to nationwide stores, incorporating tea broth production into a standardized equipment system, and further launched iced tea, iced milk, and other products.
Iced milk typically uses a milk base as the main body, paired with fruit flavors and sometimes tea broth, becoming a popular category in this year's freshly made tea beverage market. ChaPanda's lychee iced milk exceeded 17 million cups within 51 days of launch, and brands such as Goodme and Shuyi Tealicious also successively introduced related products.
In August, Luckin Coffee Inc. (LKNCY) launched its Thai tea series, entering the Thai-style milk tea market already familiar to consumers. In the fourth quarter, it successively introduced pearl milk tea and cassava peach gum stewed milk, extending products to more beverages with solid toppings.
According to an incomplete tally by All-Weather Technology, of approximately 80 identifiable new beverages launched by Luckin Coffee Inc. (LKNCY) in the first three quarters of 2026, non-coffee products accounted for about 45%.
The importance of the non-coffee business in overall operations has likewise increased.
Luckin Coffee Inc. (LKNCY) previously disclosed that non-coffee beverages accounted for more than 20% of cup volumes in 2025; as of the end of May this year, cumulative sales of freshly made tea and other non-coffee products exceeded 20 billion yuan.
A JPMorgan expert interview summary from July this year showed that among the Luckin Coffee Inc. (LKNCY) stores covered by the interviewed operators, non-coffee beverages accounted for approximately 30% of sales during the year.
Guo Jinyi stated at the third-quarter earnings call that enriching product categories is intended to meet the needs of more consumption scenarios and time slots, and to support store network expansion.
Non-coffee is no longer just a supplement around coffee, but is helping Luckin Coffee Inc. (LKNCY) compete for a broader range of beverage consumption.
How the Efficiency Model Can Bear the Load
"Rebuilding Luckin" in the milk tea space places new capability requirements on this coffee chain enterprise.
On the supply chain side, Luckin Coffee Inc. (LKNCY) already has a foundation in large-scale procurement and processing, and ingredients such as milk bases, tea broth, and fruit juice can be reused across multiple new products.
Even though the peach gum cassava stewed milk involves more solid toppings, store preparation can be simplified through factory pre-cooking and pre-packaging, without needing to start from fresh raw ingredients and cook on-site.
Industry insiders say that for a scaled chain enterprise like Luckin Coffee Inc. (LKNCY), procurement and standardized production are not entirely new challenges; what deserves more attention is the supply stability and quality consistency of newly added ingredients.
At the same time, some new products have seasonal limited-edition attributes and are not all sold year-round. By adjusting procurement and inventory, the ongoing costs brought by SKU increases can be reduced, but short-term sales fluctuations may still generate waste.
By comparison, the impact of new categories on front-end stores may be more direct.
In its early days, Luckin Coffee Inc. (LKNCY) expanded mainly through pickup stores of 20 to 60 square meters, achieving high turnover with compact spaces, streamlined staffing, and standardized preparation.
Early coffee products were mainly made using coffee machines and standardized milk bases and syrups. But after light milk tea, iced milk, complex specialty drinks, and sweet soups successively entered the menu, the types of ingredients stores need to handle, preparation procedures, and storage requirements have also increased.
For example, tea broth typically needs to be made in batches in advance. Even if standardized through tea extraction machines, equipment preparation and utensil cleaning still take time; tea broth has a usage shelf life, and when sales are insufficient, it may result in spoilage and waste.
A Luckin Coffee Inc. (LKNCY) store employee told All-Weather Technology that with the increase in new products, pre-opening preparation work at stores has noticeably increased. When the employee first joined, only two types of tea broth and matcha and cocoa pre-mixed liquids needed to be prepared; now four types of tea broth, two types of milk caps, and two types of fruit need to be handled, along with ice transport and disinfectant solution preparation.
According to this person, the store allocates half an hour for opening preparation, which is often difficult to complete in practice, requiring some employees to arrive early; after-closing cleaning work faces similar pressure.
Another interviewed Luckin Coffee Inc. (LKNCY) employee reported that the difficulty brought by new categories lies not only in increased preparation procedures, but also in the conflict between ingredient preparation and normal order taking.
This employee said that during certain periods the system arranges single-person shifts, requiring staff to simultaneously complete beverage preparation, in-store and delivery order packaging, and ingredient preparation. When orders keep coming in, it is often difficult to carve out uninterrupted time for ingredient preparation, and ingredient preparation may in turn affect the speed of subsequent order fulfillment.
According to this person, Luckin Coffee Inc. (LKNCY) includes beverage fulfillment timeliness in store assessments. Under single-person shifts with concentrated orders, added ingredient preparation work may affect timeliness performance.
The impact of new categories on stores must ultimately be measured through per-store output and operating efficiency.
Coco, an operational mentor in China's coffee training system, analyzed for All-Weather Technology that the preparation hours and management hours needed for daily operations increase, and with total hours unchanged, effective operating hours decrease accordingly, output efficiency declines, ultimately leading to lower per-capita cup efficiency and a higher labor cost ratio.
Coco speculated: "Since Luckin Coffee Inc. (LKNCY) chose to do this, it is most likely based on AI scheduling calculations, judging that store work saturation is insufficient, before making this试探. But to a certain extent it is similar to Manner, which will further arouse discontent at the grassroots level."
In the third quarter, the operating profit margin of Luckin Coffee Inc. (LKNCY) self-operated stores reached 23.3%, up 5.8 percentage points year-on-year, basically recovering to pre-delivery-war levels.
However, this round of recovery largely benefited from channel structure changes after delivery subsidies tapered off. As consumers returned to self-pickup, Luckin Coffee Inc. (LKNCY) delivery expenses fell 38.1% year-on-year in the third quarter, a reduction of about 1.1 billion yuan.
The margin recovery does not yet prove that new products have not increased store operating costs. Whether a richer menu can create enough incremental cup volume remains the key to testing the effectiveness of this round of expansion.
What Will Drive the Next Round of Growth
Luckin Coffee Inc. (LKNCY) needs new products, but how exactly new products bring incremental consumption remains a question that needs answering.
In the third quarter, Luckin Coffee Inc. (LKNCY) added more than 28 million new transacting customers, with cumulative transacting customers exceeding 520 million, and monthly average transacting customers reaching 123 million, up 9.6% year-on-year.
Compared with last year's 40.6% growth rate, Luckin Coffee Inc. (LKNCY) user growth has clearly slowed. This is both affected by the high base formed by last year's delivery subsidy customer acquisition and occurs against the backdrop of continuously expanding store and customer scale.
Luckin Coffee Inc. (LKNCY) is still strengthening its convenience advantage through store densification.
A dense store network can cover more office, residential, and commercial scenarios, reducing the time cost of consumer self-pickup; in regional markets, grid-based layout also helps Luckin Coffee Inc. (LKNCY) occupy more high-frequency consumption locations, compete for orders that originally flowed to other brands, and align with its goal of expanding market share.
At the latest earnings call, management emphasized that Luckin Coffee Inc. (LKNCY) monthly average transacting customers and per-capita cup volume both hit new highs. Guo Jinyi believes that China's coffee market is still in the stage of cultivating consumption habits, and both population penetration and drinking frequency have room for improvement.
For higher-tier markets where coffee consumption is relatively mature, non-coffee expansion may first act on the purchase frequency of existing users.
In the past, Luckin Coffee Inc. (LKNCY) mainly satisfied commuting, office, and refreshment needs. The addition of milk tea, fruit drinks, and sweet soups provides more choices for afternoon tea, leisure, and desserts.
A consumer can buy coffee in the morning and then buy a non-coffee beverage in the afternoon; when ordering together with friends or colleagues, purchase cup volume may also increase because of richer product choices.
When stores are dense enough, consumers can visit multiple times for self-pickup at a relatively low time cost, and category expansion and convenience have the opportunity to reinforce each other.
But what Luckin Coffee Inc. (LKNCY) has mainly established is coffee consumption mindshare. Whether consumers are willing to go to Luckin Coffee Inc. (LKNCY) specifically for milk tea or sweet soup, rather than choosing specialized tea beverage brands, remains to be verified.
Therefore, in the short term, non-coffee products may mostly expand the consumption choices of existing users rather than independently attract large numbers of new customers. New products may also replace original coffee orders and may not all convert into incremental cup volume.
If Luckin Coffee Inc. (LKNCY) further penetrates lower-tier cities, the role of non-coffee products may differ.
Compared with coffee, which requires further cultivation of drinking habits, milk tea, fruit drinks, and sweet soups already have a broad consumption base. If these products can attract consumers who originally mainly bought tea beverages, Luckin Coffee Inc. (LKNCY) will have the opportunity to obtain more orders in regions where coffee demand has not yet fully formed.
This means that Luckin Coffee Inc. (LKNCY) potential customer base in the future may not be entirely limited by the local existing scale of coffee consumption.
As of the end of the third quarter, Luckin Coffee Inc. (LKNCY) had 25,402 self-operated stores and 13,507 partnership stores, with a net increase of 2,599 stores in the quarter.
In the first three quarters of this year, net increases were 2,548, 2,714, and 2,599 respectively. Although the pace of store openings in the third quarter slowed slightly from the second quarter, it remained at a relatively high level in recent years.
Guo Jinyi emphasized that Luckin Coffee Inc. (LKNCY) does not set a static long-term upper limit on store count, and future space depends on consumer demand and whether specific regions and locations can form a healthy store economic model.
Non-coffee products may add new consumer demand to this model, but more products do not necessarily support more stores.
Especially against the backdrop of still-declining self-operated same-store sales, Luckin Coffee Inc. (LKNCY) needs to prove that new products can not only create short-term hit products, but also continuously increase existing customers' purchase frequency and bring sufficient real demand for newly opened stores.
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