By Liang Chao

Luckin Coffee’s recent expansion into the US marks the culmination of a remarkable comeback. Once delisted from the NASDAQ amidst a financial fraud scandal, the Chinese coffee giant opened its first two US stores at 755 Broadway and 800 Sixth Avenue in Manhattan on June 30, 2025, followed by another store at 901 Eighth Avenue in New York less than two months later. Another store would be open by the end of August, with a fifth store also currently being planned. Beyond the company’s remarkable individual story, this expansion also represents yet another example of an established Chinese brand seeking further success overseas.

As the company goes from strength to strength in its home country, the question now is whether Luckin Coffee’s unique business model can succeed in an American market accustomed to a very different approach to the beverage business. Here, CEIBS Associate Professor of Operations Management Liang Chao analyses Luckin Coffee’s unique history, its US expansion strategy, and the implications of its ongoing push in the American market.

A Brief History of Luckin Coffee

Founded in 2017, Luckin Coffee pioneered a new retail model characterised by an app-driven end-to-end transaction process, pickup-focused stores, and system-led operations. In its early stages, the company pursued rapid expansion in China with aggressive store openings, massive financing, and large subsidies for customers. By 2019, the number of its stores had exceeded that of Starbucks in China, reaching 4,789. In May of the same year, Luckin was listed on the NASDAQ.

In early 2020, an anonymous party submitted a report to short-selling firm Muddy Waters, accusing Luckin of fabricating financial and operational data. In April of the same year, Luckin admitted to financial fraud, leading to an over 80% plunge in its stock price and the evaporation of over $5 billion in market value. In June, it was delisted from NASDAQ and moved to the OTC Pink market, pushing the company into an existential crisis.

In July 2020, Luckin’s founder Charles Lu stepped down as chairman, and former head of Luckin’s supply chain, Guo Jinyi, took over as chairman alongside a broader organisational restructure. After the new team took charge, it temporarily abandoned the aggressive expansion strategy and focused on refining operations to achieve profitable growth.

The results have been impressive. On the one hand, Luckin leveraged digitalisation to enhance customer retention and reduce marketing costs. It developed customer retention strategies and built private traffic pools based on extensive user data gathered through its APP, WeChat Mini Programme, and WeChat Work. Through private traffic operations, it achieved precise customer reach and increased repurchase rates and monthly order frequency, while maintaining low marketing expenses.

On the other hand, Luckin also used digitalisation to drive new product development. It established a unique digital R&D system covering product analysis, menu management, product development, testing, and optimisation. At the same time, it continuously optimised the production process to ensure stable product preparation in stores. It launched 77, 113, and 68 new products in the first half of 2020, 2021, and 2022 respectively, yielding frequent hits with customers.

In addition, Luckin focused on meticulous store operations and continuously upgraded and strengthened its supply chain to drive more effective scaling. It insisted on cooperating with the top 10% of suppliers in the industry. Since 2021, it has skipped middlemen to directly source coffee beans, and has also invested in its own roasting factories, saving the 10%–20% premium charged by third-party factories.

Through digital empowerment, product innovation, operational optimisation, and the upgrading of supply chains, Luckin Coffee has transformed its business model from one of loss-driven expansion to profit-driven growth. In 2024, it achieved total revenue of RMB 34.47 billion and net profit of RMB 2.93 billion, firmly establishing a well-deserved position as a leading brand in the Chinese coffee market.

Luckin Coffee’s model in the US market

In kicking off their US expansion, Luckin Coffee first opened two stores in New York, selecting prime Manhattan locations (one near New York University and one in the commercial district surrounding the Empire State Building), striking at the heartland of Starbucks, their most obvious established competitor.

American coffee culture emphasises the “third place” experience, with consumers paying a premium for ambiance and a social setting. Luckin, by contrast, emphasises efficiency, cost-effectiveness and novel experiences centring on cashless transactions and quick pick up. This aligns more with instant, fast-paced needs and suggests a higher likelihood of success in cities like New York that are defined by “fast pace and high demand. However, in slower-paced US cities that value community interaction, the model may not be easily replicable.

Luckin Coffee stores adopt a “100% no cashier counter” design: all orders must be placed and paid via the app or in-store QR codes, with no in-person counter ordering option. This model lowers store operating costs and improves order fulfilment efficiency, in turn laying the foundation for rapid expansion.

However, it also creates a polarising user experience. For fast-paced New Yorkers, the efficiency of app ordering is appealing and reduces the friction that can arise from communicating complex individual preferences in products. But for customers accustomed to interactive consumption or unfamiliar with app operations, the model feels somewhat impersonal, lacking in human interaction and emotional connection. Some customers may simply avoid the stores due to the absence of in-person service, creating a barrier to consumption. In addition, supporting only online orders and not accepting cash raises compliance concerns regarding payment methods.

As for pricing, Luckin attracts consumers with immediate discounts and generous promotions, including $0.99 coffee for new users, $1.99 drinks for referrals, and breakfast combo deals, establishing a sharp contrast with Starbucks. Starbucks’ membership points system requires long-term spending to accumulate benefits and does not directly reduce the cost of a single purchase, whereas Luckin’s discount strategy more easily attracts price-sensitive new customers.

Building on previous expansion experiences in Singapore and Malaysia, Luckin will continue to implement a “coffee as a beverage” strategy in the US. It retains domestic bestsellers like its Coconut Latte and Cold Brew while introducing fruit-forward specialty drinks tailored to US tastes, such as “Dreamy Strawberry” and “Pink Sunrise”, and offers various plant-based milk options. Luckin also skips over traditional seasonal product launch logic and maintains consumer novelty through frequent new launches, demonstrating a clear advantage over its competitors in new product development.

Luckin Coffee was one of the earliest chain brands in China to achieve vertical integration of the upstream coffee industry chain.  Its supply chain can therefore support overseas expansion and lays the groundwork for entering the US market, where it will rely on scale to further reduce costs.

The implication of Luckin’s expansion into the US

Luckin’s expansion into the US market is a crucial strategic move for the company following its expansion into Southeast Asia in 2023 and the opening of stores in Hong Kong in 2024. This is not only a test of its business model’s international viability, but also a move to gain experience amid fiercer competition and elevate its global brand influence.

As of the end of 2024, Luckin’s 51 directly-operated stores in Singapore are still operating at a loss; competition is intense in Indonesia and Malaysia with low-priced local coffee brands offering alternatives; in Thailand, a copycat brand effectively stole the company’s logo (although Luckin won the lawsuit this year). Taken together, these examples show that, for Luckin, expanding overseas is proving significantly harder than expanding in China.

In China, Luckin is a pioneer in educating the market and guiding consumers to embrace coffee. However, in many overseas markets, established brands have long dominated; brands like Starbucks have built deep brand recognition and robust supply chains. As a latecomer in these markets, Luckin must overcome barriers in product localisation, local operations, and brand awareness.

After delisting from the NASDAQ in 2020, Luckin has successfully rebuilt investor confidence through its stellar business performance. Its performance in the US market will further affect its capital market recognition. The company’s entry into the US market is a vital component of its global market strategy and, while it will be difficult to achieve profitability in the short term, its strategic significance is clear: this is an inevitable step that Luckin must take in order to raise its growth ceiling amid fierce competition, and expand into a broader global market.

Liang Chao is an Associate Professor of Operations Management at CEIBS. Her research concentrates on the impact of digital and intelligent technology on operations, behavioral operations management (human-AI interaction, impact of different consumer behaviors on operations), and supply chain management.