Luckin Coffee will open in Hong Kong, but it will be hard to bring the "9.9 yuan"

Luckin Coffee may soon open in Hong Kong. Recently, a recruitment advertisement for Luckin Coffee was circulated on the Xiaohongshu platform, which listed the work address as Yau Tsim Mong, Central and other areas in Hong Kong, China. The open recruitment positions include full-time store manager, full-time deputy store manager and full-time or part-time barista, with monthly salary ranging from HK$16,000 to HK$30,000 and hourly wage of HK$65. In terms of benefits, full-time employees enjoy meal and transportation subsidies, performance bonuses, employee drinks, referral bonuses and Mandatory Provident Fund benefits.

Even if it opens a store in Hong Kong, Luckin Coffee probably won't bring the 9.9 yuan coffee here.
From a strategic point of view, Luckin's overseas strategy is different from that in mainland China, and it will not be too aggressive.
Take Singapore, Luckin's first overseas stop, as an example. In March 2023, two Luckin stores were opened at Marina Square and Ngee Ann City on Orchard Road in Singapore. By August this year, the number of its stores in Singapore had increased to 38.
In terms of price, Luckin Coffee did not completely continue the domestic 9.9 yuan market grabbing strategy overseas. For example, Luckin's hit product, the raw coconut latte, is priced at 8 Singapore dollars (about 41 yuan) and sold at a 20% discount; while the price of a cup of Starbucks latte in Singapore is 7.1 Singapore dollars (about 36.7 yuan). Luckin Coffee still maintains the practice of giving away coupons for promotion, but overall, its positioning in Singapore is already mid-to-high-end - previously, many Singaporean media used "Chinese version of Starbucks" to describe Luckin Coffee.

Judging from the environment of the local market in Hong Kong, the low-price strategy may not be sustainable. Before Luckin, Manner Coffee and Kudi Coffee had already opened stores in Hong Kong, and these brands also helped Luckin to test the waters.
In January 2023, the first store of the chain coffee brand Manner Coffee located in the World Trade Center in Causeway Bay officially opened. However, because the brand name has been registered, Manner is called Maners Coffee in Hong Kong, and there is currently only this one store in Hong Kong; in October 2023, Kudi Coffee opened its first store in Infinity Plaza in Sheung Wan, Hong Kong, and subsequently opened 3 more stores in Wan Chai, Causeway Bay, Kwun Tong and other places. Currently, there are 4 stores in Hong Kong.
The store type of Kudi Coffee in Hong Kong is almost the same as that in the mainland, with an area of ​​about 30 square meters, and the price of latte is between HK$20 and HK$25. In the early days of its opening, Kudi Coffee also distributed coupons to attract new customers, but the frequency and intensity were not as high as those in the mainland market. Because the rent and labor costs in Hong Kong are generally higher than those in the mainland, low-level prices may be difficult to sustain.
When Manner Coffee first opened its first store, the price of Americano was HK$20 and latte was HK$35, but after more than half a year, the prices of these two products have quietly become HK$30 and HK$40.
And this entry into the Hong Kong market may be a step in Luckin's large-scale overseas expansion strategy.
Luckin Coffee had planned to launch a large-scale overseas expansion plan from the fourth quarter of 2024 to the first quarter of 2025, focusing on the Southeast Asian and US markets. Singapore was chosen by Luckin as the first stop for overseas expansion, mainly because of the local coffee culture and huge market potential. According to statistics, Singaporeans consume about 2.6 kilograms of coffee per capita each year, making it a country with a relatively mature coffee culture. Starting from Singapore, Luckin Coffee can radiate to Southeast Asian countries.
In the next 3-5 years, Luckin plans to use Singapore as its Southeast Asian headquarters and gradually expand to neighboring countries and regions. The strategy adopted is not a price war, because there are many small and beautiful local coffee brands in the markets of various countries. Luckin's first step in going overseas is more to establish consumers' awareness of the brand.
In fact, in the context of fierce price wars in the coffee market and the emergence of various joint ventures, Luckin's pressure is also increasing.
Luckin Coffee experienced large performance fluctuations in the first quarter of this year. In the first quarter of 2024, Luckin's operating loss was 65.1 million yuan and its net loss was 83.17 million yuan, which made Luckin Coffee return to losses again after two consecutive years of profitability in 2022 and 2023.
Although Luckin Coffee finally got out of losses in the second quarter of this year, its operating profit and operating profit margin under US accounting standards (GAAP) declined to varying degrees. At the same time, in the two quarters of this year, the growth rate of Luckin's same-store sales slowed down, at -20.3% and -20.9% respectively.
The average number of monthly transaction customers fell month-on-month in the first quarter of this year. Although it returned to growth again in the second quarter, Luckin had to deal with the pressure of rapid expansion and the 9.9 price war of competitors.
Luckin obviously needs to find room for future growth, and the pressure on performance has also accelerated its pace of large-scale overseas expansion.