Summary: The business is still struggling to normalize.
Produced by Dali Finance
Wen Xuemei
If you want to ask who is the company that is being beaten by the capital market, everyone can blurt out-Luckin Coffee!
Now no one dares to make a conclusion about how far Luckin’s "redemption" journey is. This coffee unicorn that has been a smash hit in the Chinese market in the past two years is paying a huge price for the mistakes it has made. But what's interesting is that the capital market and consumers' attitudes towards Luckin are two different things.
There are various signs that, unlike people's guess that the brand building will collapse and the business will collapse quickly, in the past two months, despite the turbulence at the capital level, Ruixing Coffee has been "deadly" in the business, showing a full "survival" want".
The capital market is cold, and opponents take advantage of the virtual increase
In April of this year, Luckin disclosed that it had fabricated about 2.2 billion yuan in sales revenue from the second quarter of 2019 to the fourth quarter of 2019, and some of the costs and expenses were obviously exaggerated because of false transactions. After the news was announced, Ruixing's stock price suffered a heavy blow. The stock price once plunged 84% that day. After the resumption, its stock price fell for another 4 days.
On May 15, Luckin received a written notice from the US Securities and Exchange Commission requesting delisting. In the more than 50 days of the fraudulent storm, Luckin Coffee has fallen all the way and its market value has fallen to tens of billions of dollars.
In the capital market, Ruixing has become a "fallen dog", and various forces are scolding and screaming. In the industry, opponents have also begun to take advantage of the emptiness.
In Luckin's "darkest moment", opponents in the coffee industry are vying for positions. Recently, Tims Coffee, which is invested by Canadian national coffee brand Tim Hortons in China, announced that it has received investment from Tencent and expressed optimism that the Chinese coffee market will plan to open large-scale stores. Tims entered the Chinese market in February 2019 and opened its first store in Shanghai. Up to now, there are more than 50 stores, most of which are in Shanghai.
At the same time, Bianlifeng, a cutting-edge start-up company in the convenience store field, also tried to take advantage of the situation and released public opinion to the outside world. Since the resumption of work, the sales of convenience peak coffee, which is extremely cost-effective, have been rising...
Luckin's desire to survive and consumer voting
Intriguingly, Luckin Coffee has been in the capital market for 2 months. A large number of consumers in the market seem to continue to pay for the "little blue cup", and the popularity is unabated.
According to data from Qimai, Luckin Coffee did not fall out of the list of "Gourmet Drinks" in the free list of APP downloads. Even in the most recent month, it has consistently ranked among the top three, ranking fourth in only one day. And behind the analysis articles of some media "beating down dogs", there is often a large wave of comments "Luckin don't die, I want to continue drinking".
A franchisee of Luckin Coffee’s Xiaolu Tea told the media before, “I don’t think the company will go bankrupt. In fact, the brand is quite good. This is the subjective idea of your media.”
What is closely related to ordinary consumers is not Luckin's stock price and financial situation, but whether it can conveniently drink a cup of coffee every day with the best price-performance ratio. The support of users seems to somehow confirm the value Luckin Coffee brings to this market.
In fact, after experiencing the indiscriminate bombing of the run in early April and the storm of the capital market, the store level of Luckin Coffee showed all normal operations.
According to the official disclosure of Ruixing Coffee, more than 90% of Ruixing's stores nationwide have resumed work after the epidemic. During the epidemic, Ruixing Coffee faced hard costs such as rent and employee salaries, but it has not only been cashed in, but the supplier's payment is being paid normally, and the money owed to the trust company has also been returned.
In June 2018, Luckin Coffee received a two-year trust loan of approximately RMB 300 million (US$44.7 million) from Tibet Trust. On May 26, Tibet Trust issued an announcement stating that as of April 3, 2020, Luckin Coffee had repaid all the principal of the trust loan.
In addition, Luckin is still opening stores. According to data from foreign research companies, in the second quarter ended May 12, Ruixing Coffee opened an average of 10 new stores every day in China, and the total number of stores reached 6912. In addition, some stores are also optimizing and adjusting, and "close and transfer" stores with poor performance or overlapping customer coverage.
Earlier, Luckin Coffee announced the reorganization of its board of directors and management, termination of the positions of CEO and COO of Qian Zhiya and Liu Jian, and cessation of the positions of six other employees who were involved in fraudulent transactions or were aware of fraudulent transactions. Chairman Lu Zhengyao also withdrew from the nomination and governance committee. The acting CEO Guo Jinyi and other new management have also been selected. Among them, the new directors Wu Gang and Cao Wenbao are new faces who joined Ruixing in 2018-2019 and have experience and background in the multinational restaurant chain industry.
Miao Yinzhi, an associate professor at the School of Law of the Central University of Finance and Economics, believes that high-level restructuring will help maintain the basic operation of the company and cooperate with investigations in order to effectively assume follow-up responsibilities and hold key personnel such as the original CEO.
After the replacement of new senior management, Ruixing Coffee has shown greater efforts to maintain normal business operations.
On April 27, Luckin Coffee carried out a new round of price increases.
At the same time, Luckin's product categories are also adjusting. Some light food products disappeared from the platform, but nowadays popular categories such as Ruanou, Bagel, and Daifuku have been added, and the price still maintains the "Luckin" style. In addition, Luckin is working hard for breakfast. Seven new breakfast products, Japanese breakfast eggs and Dole sweet corn kernels have been recently launched. The official explanation for product changes is "mainly based on normal adjustments based on consumer behavior."
In the eyes of industry observers, Luckin Coffee's recent product adjustments can be seen as continuous efforts in the two scenarios of "breakfast" and "afternoon tea". A Luckin supplier who knows the inside story said, “It is expected that by the end of June and the beginning of July, Luckin’s entire light food products will be refreshed for users, with a richer category and more products.”
Not long ago, Luckin’s CMO Yang Fei’s circle of friends revealed that the boutique hanging ear coffee series co-operated with packaging master Pan Hu at the beginning of the year is ready, and the Luckin hanging ear coffee is on the schedule.
In addition to product upgrades, Luckin's marketing strategy seems to be also upgrading.
Since May, Luckin has established a number of "welfare groups" through APP and small programs, with stores as the dot. A consumer who joined the group said that they can get a 3.8 discount coupon for joining the group. They will receive various benefits from the mini program every day, including full discount coupons and discount coupons for all categories, as well as some live broadcast events. Notice. While continuing to issue coupons in the past, Luckin is striving to be closer to consumers and interact more frequently this year-to do WeChat community operations.
"The delisting is just the impact of Luckin Coffee on the capital side, and it will not have much impact on the operating side for the time being. If the management team has the ability to ensure that the capital chain does not go wrong, the brand still has value." China Food Industry Analyst Zhu Danpeng said Said in an interview with the media.
There have been rumors in the market, including Parkson, China Resources and other industry giants interested in taking over Luckin's existing brand assets. Objectively speaking, this is not a bad thing. Financial fraud will never be tolerated, and the capital market has its own conclusion. Business development is tested by the market. In the business world, the most taboo indiscriminate one-sided denial is not like throwing the child out of the bath water after a bath.
In a sense, it completely denies the new changes that Luckin has brought to the industry in the past two years, including business model, brand and marketing exploration, which is a win-lose in the business sense and even in the social sense.
On the June 1st Children’s Day just past, Luckin Coffee launched a new product "Floating Reina Ice". On the promotional poster, a sentence from Haruki Murakami’s book "1Q48" was used, "Don’t be too entangled in the present, and Don't worry too much about the future. There are no useless experiences in life. After you have experienced something, the scenery before you is different from before."
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