What else does Ruixing Coffee need besides burning money?

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Luckin Coffee, an online celebrity brand in the coffee industry, is now spreading the news of financing when it is popular in moments and angry at Starbucks. On June 13, media reported that Luckin Coffee had completed a round of financing with a scale of US $200m to US $300m. In this regard, the Beijing Business Daily reporter to Luckin Coffee relevant person in charge to verify, but the other side said that currently does not comment on financing-related issues. Although Luckin Coffee's new round of financing news has not yet fallen, but from the brand's previously released expansion strategy and the maintenance of "money-burning" marketing, we need enough funds to support it. But it should also be noted that Luckin Coffee, which uses Starbucks as its competitor, still attracts passenger flow in a low-price and preferential way, and what else can it rely on besides price advantage, which is Luckin Coffee's urgent answer.

Rumors of new financing

According to the news released by 36 krypton online media, Luckin Coffee has recently completed a round of financing of 200-300 million US dollars. After completing the financing, the brand is expected to be valued at more than 1 billion US dollars. In this regard, a reporter from the Beijing Business Daily learned from the relevant person in charge of Luckin Coffee that he will not comment on financing-related matters for the time being and will disclose specific information on a scheduled basis.

Although Luckin Coffee did not make a clear response to the financing news, sufficient funds are needed to support both the brand's previously announced expansion strategy and the maintained "money-burning" marketing approach. In February, Luckin Coffee announced plans to open 500 stores across the country by the end of May. According to information disclosed by Luckin Coffee at a press conference in Beijing on May 8, the brand had already conducted a trial operation in 13 cities, including Beijing and Shanghai, and completed the layout of 525 stores.

Luckin Coffee was revealed that the financing news is not surprising. Qian Zhiya, founder and CEO of Luckin Coffee, said in February that Luckin Coffee is expected to launch round A financing in April and is willing to contact all investors, especially those with strategic resources. At the same time, Qian Zhiya also announced the source of 1 billion yuan of start-up funds for Luckin Coffee in the early stage, which is composed of loans from the founding team and Lu Zhengyao, chairman and CEO of Shenzhou Youche. In addition to expanding the market, this fund will also be mainly used for brand promotion and market education.

In addition to burning money

Luckin Coffee's rapid rise has something to do with the brand's way of playing on the Internet, and "burning money" promotion is the most typical marketing method. When a consumer shared his experience of buying Luckin Coffee with a reporter from the Beijing Business Daily, he said that he bought eight cups of matcha latte, latte and cappuccino that day, and finally deducted 192 yuan by using the coupon in Luckin Coffee's coffee wallet in App, while the coffee with the original price of 195 yuan only paid 3 yuan.

In fact, Luckin Coffee's strategy of "burning money" to seize market share is the same as takeout and Didi Taxi in the early years. Specifically, preferential ways such as "buy two get one free" and "buy five get five free" are the main ways for Luckin Coffee to attract passenger flow. Earlier, Luckin Coffee announced that he would invest 1 billion yuan to cultivate the market, and according to Qian Zhiya's recent interview with the media, Luckin Coffee has invested more than 1 billion yuan in the education market, although he is still in a state of losses. but the company is ready to lose money for a long time.

Not only the marketing demand, Luckin Coffee also needs to keep the store expanding. Luckin Coffee also said at a press conference in Beijing in May that he would open different types of stores to meet the diversified needs of users. This requires Luckin Coffee to continue to expand stores and set up more flagship stores to "space consumption" customers. As far as the current location of Luckin Coffee's stores is concerned, they are mostly in the business district, CBD and other crowded areas, and the cost of opening a store will be a major problem testing Luckin Coffee's reserve funds.

In the view of Wang Zhendong, vice president of the Shanghai Coffee Association, financing is a step in Luckin Coffee's development plan. Luckin Coffee's brand influence was very small before April this year, and then increased significantly through the introduction of a series of measures. Luckin Coffee is designed for financing, and the team should have designed the financing rhythm long ago, and even figured out how to exit from the very beginning. If this round A financing is implemented, it is expected that the problem of round B financing will not be too big, and round C is the real challenge for Luckin Coffee. " Wang Zhendong said.

After the discount

In fact, many Internet start-ups have held the same idea, first do large-scale, occupy the market, and then continue to expand through financing and other means. However, in the Internet industry, there are very few enterprises that can make it to the final victory. Lai Yang, executive vice president of the Beijing Association of Business Economics, said that at present, many enterprises believe that flow and scale are the most important in their development, and it is easier to get investment by attracting attention, so they use various means of promotion. As a matter of fact, many consumers come for the preferential treatment. Once the discount is stopped, the key is whether the brand still has the corresponding core competitiveness to retain the traffic it strives for.

Tang Xingtong, a researcher at Taihe think tank, said that the service industry is a slow industry that takes things seriously and requires enterprises to work steadily, rather than an industry eager for quick success and quick profits. Many of the teams behind Luckin Coffee come from advertising companies and are familiar with exposure, hype and other techniques. In the era of capital estimation, the development prospect and commercial value of the company can be seen, and the way of "holding high and beating high" has a great hidden danger to the future development of the enterprise.

Zhu Danpeng, a commentator of the Chinese food industry, believes that if Luckin Coffee can obtain a new round of financing, the money may be used for store expansion, supply chain optimization and preferential subsidies, but Luckin Coffee, as a new brand in the market, still need to pay attention to the construction and cultivation of corporate cultural values, otherwise there is still a short-lived risk. At the same time, he said that at present, Luckin Coffee's brand, products, and model have not formed a unique advantage, and it is easy for newcomers to emulate, which requires enterprises to make more efforts on culture. By contrast, Starbucks' coffee culture and invisible value have formed the core competitiveness of the brand, which is difficult to be surpassed by other brands in a short time.

Beijing Business Daily reporter Guo Shihui Zhao Chao / / Li Jie / watchmaking

Luckin Coffee's development memorabilia

October 5, 2017

Luckin Coffee opened his first store in the lobby of China excellent car headquarters, serial number 0001.

October 28, 2017

Luckin Coffee Galaxy SOHO store is open, Luckin Coffee begins external testing

February 2018

Luckin Coffee announced plans to open 500 stores within 3 months.

May 8, 2018

Luckin Coffee announced the official opening and released the "unlimited scenario (Any Moment)" strategy

May 15, 2018

Luckin Coffee issued an open letter to Starbucks, pointing out that the other party was suspected of monopoly.

June 13, 2018

Luckin Coffee reported the news of round A financing, the financing scale is 200-300 million US dollars.