But first, coffee (earnings)... The "Starbucks of China" is already on track to pass Starbucks as the top espresso chain in tea-thirsty China this year. But just 3 months after its IPO in the US, Luckin Coffee shares dropped 17% after its first-ever earnings report. Before we get into why, get to know Luckin and its Bambi-ish logo:
- Gen Z lattés: Luckin was born mobile-first — In its three years of existence, its focus is small stores where you order ahead or order delivery with the app.
- Growth mode: Fast. Sales jumped 648% last quarter as it opened 593 new spots in just the last three months to hit 2,963 total (vs. Starbucks' 3,922 in China).
- It's a homebody: Luckin hasn't applied for a passport yet (but did just sign a deal for Middle East expansion). Its market value is 1/20th of globally-minded Starbucks.
How does Luckin take its coffee?... With other things now. The biggest update in Luckin's earnings was its moves outside the bean. It's now letting customers order food via app and it's dabbling in vending machines to save on real estate costs. Plus, to poetically "capture different consumption moments," it's now doing Luckin Tea.
Is Luckin' a tech company or a coffee company?... Yes. Both. But investors think it's behaving too Silicon Valley, so they dropped the stock. Luckin has aggressively cut prices of a cup of coffee to compete with Starbucks, which could be unsustainable. But that's kinda a tech move — no different than Uber or Lyft dishing out discount codes for rides to get you on their apps.