Editor's Notes:

• Generated the following recent development review on Luckin, given recent news (potential bid for Blue Bottle), and stock price jump yesterday (~10%), see earlier digest.

• I love Luckin for 3 reasons: (1) low cost advantage at scale, which is a sustainable moat against others, (2) aggressive A+ management that has turnaround a company from fraud and executed both domestic rise to leadership and int'l expansion well so far - M&A may not be value destructive (like most other acquisitions), (3) valuation not crazy given growth - 10x forward EV/EBIT only, (4) multiple catalysts - (a) relisting on main board, (b) successful integration of major M&A, (c) major milestones in int'l markets.

• Main risks include competition (Starbucks China under a more aggressive local PE owner, various domestic competitors - Cotti, Manner, etc.), and rising coffee price).

Luckin Coffee (LKNCY) has demonstrated a remarkable turnaround and aggressive growth strategy, five years after its devastating accounting scandal. The company is actively expanding its market presence both domestically and internationally, while also exploring strategic acquisitions and aiming for a relisting on a major U.S. exchange.

Chronological Narrative of Key Events:

• 2017 - 2019: Luckin Coffee was founded in 2017, rapidly expanded in China with a technology-centric model, and conducted its IPO on Nasdaq in May 2019.

• 2019 - 2021 (Post-Scandal Recovery):

  • 2019-2020: Accusations of artificially inflating sales figures (over $310 million) led to the ousting of several top executives and its delisting from Nasdaq in June 2020.

  • 2020-2021: Settled accounting fraud charges with the SEC for $180 million and filed for bankruptcy in 2021.

  • Post-2020: Underwent significant corporate restructuring, with Centurium Capital becoming the new controlling shareholder and Guo Jinyi taking over as CEO, replacing Lu Zhengyao. The new management initiated a strategic overhaul, focusing on cleaning up the business and aggressive expansion.

• October 2024 - December 18, 2025 (Butter Coffee Series Success): The "Butter Coffee" series, launched in October 2024, achieved over 220 million cups in sales within one year. It was recognized as Luckin's top-selling new product for 2024 and received "Industry Original Case" and "Industry Innovation Case" awards at the "2025 New Consumption Conference."

• October 2025 (Various Dates):

  • Starbucks formed a joint venture with Chinese investment firm Boyu Capital, selling a 60% stake in its China retail operations for $4 billion. This strategic move was a direct response to struggles against fast-growing Chinese startups like Luckin Coffee.

  • Luckin Coffee announced its Q3 2025 earnings release for November 17, 2025.

  • Luckin Coffee's collaboration with the mobile game "Honor of Kings" for a co-branded beverage caused a system crash due to overwhelming demand.

• November 2025 (Various Dates):

  • Early Nov: Luckin Coffee collaborated with Duolingo across over 26,000 stores, selling over 10 million co-branded drinks in two weeks, boosting brand visibility.

  • November 4, 2025: Goldman Sachs noted Luckin Coffee's positive global expansion trend in its "China Strategy: Journey to the World" report.

  • November 10, 2025: Luckin Coffee announced a 3 billion yuan investment in an innovation industrial park and a new roasting facility in Xiamen to enhance its supply chain and reduce costs.

  • November 12, 2025: Centurium Capital, Luckin's major shareholder, was reported to be evaluating a bid for Coca-Cola's Costa Coffee, valuing it at £1 billion ($1.3 billion) or more. This news caused Luckin's ADRs to fall by 4.5%. Luckin Coffee's CEO, Guo Jinyi, stated the company is actively promoting its return to the U.S. main board market, though no specific timeline has been set, with current priorities on business strategy and development.

  • November 13, 2025: Lei Hui was appointed as the new Chairman of Luckin Coffee.

  • November 15, 2025: J.P. Morgan initiated coverage on Luckin Coffee with an "Overweight" rating and a $55.00 price target, identifying it as a top pick in China's "bubble and brew" sector.

  • November 17, 2025 (Q3 2025 Earnings): Luckin Coffee reported Q3 2025 financial results. For the nine months ending September 30, total net revenues reached RMB 15.3 billion, GAAP operating profit was RMB 1.8 billion, and GAAP net profit was RMB 1.28 billion. For the quarter, revenue was $2.15 billion (beating analyst estimates of $1.94 billion), while EPS was $0.64 (missing consensus of $0.65 by $0.01). Monthly active transacting customers exceeded 100 million, with cumulative customers reaching 420 million.. Same-store sales grew by 14.4%.

  • November 18, 2025: Luckin Coffee's Chairman, Lei Hui, stated that the Chinese coffee market is still in its early stages with significant growth potential, despite intense competition. CEO Guo Jinyi confirmed the company is accelerating its expansion in the U.S. market.

  • November 19, 2025: Chairman David Li indicated the company maintains profitability even with 9.9 yuan ($1.40) coffee prices due to effective product and category management.

  • November 21, 2025: Luckin Coffee was reportedly considering a bid for Costa Coffee, potentially financing it with a $900 million loan. This move could expand Luckin's global presence to over 50 markets and challenge Starbucks worldwide, leading to a 2.1% decline in Luckin's U.S.-listed shares.

  • November 23, 2025: Luckin Coffee expanded into Malaysia.

  • November 26, 2025: Luckin Coffee's plan to open a cafe in Taipei City, Taiwan, faced regulatory hurdles as Taiwan's economic affairs ministry reportedly had not approved the investment. The company was also noted for its aggressive expansion in China, reaching 29,214 stores (3,008 new in Q3).

  • November 28, 2025: Luckin Coffee was mentioned to have over 29,000 stores globally. Luckin's CEO clarified that self-pickup remains the long-term strategy, with delivery being a temporary supplement impacting profit margins.

  • November 30, 2025: The consensus analyst price target for Luckin Coffee increased from $48.24 to $49.95.

• December 2025 (Various Dates):

  • December 1, 2025: Luckin Coffee expanded its international presence by opening multiple stores in Manhattan, United States.

  • December 3, 2025: Luckin Coffee partnered with ApexBrasil for a national "Brazil Season" campaign, expecting to sell 400 million Brazilian-branded cups in December and solidify a supply agreement for up to 120,000 tons of Brazilian coffee worth $500 million. Analysts projected Luckin's free cash flow to reach CN¥5.4 billion by 2035.

  • December 9, 2025: Luckin Coffee and Cotti Coffee aggressively expanded in international markets, eroding Starbucks' market share in China.

  • December 17, 2025: Luckin Coffee expanded its footprint in Singapore to 68 outlets. The company was also noted to be considering a bid for Nestle SA's Blue Bottle Coffee to enhance its brand profile and expand into the premium coffee segment.

Synthesis by Topic:

1. Ambitious International Expansion:

Luckin Coffee is aggressively expanding its international footprint:

• U.S. Market: Opened its first stores in New York City in 2025, with plans for further expansion and tailored menus to compete with Starbucks on its home turf. This move is partly driven by slowing domestic spending in China and the potential for higher profit margins abroad.

• Southeast Asia: Expanded its presence in Singapore to 68 outlets within two years and entered the Malaysian market.

• Taiwan: Planned to open a cafe in Taipei City but faced a regulatory denial from Taiwan's economic affairs ministry.

• Global Ambition: The company's exploration of acquiring premium coffee brands like Nestle's Blue Bottle Coffee and Coca-Cola's Costa Coffee signifies a strategic pivot to boost its brand profile, expand into the premium segment, and achieve global scale. A potential bid for Costa Coffee, valued at £1 billion ($1.3 billion), could be financed by a $900 million loan and would significantly increase Luckin's global presence from 4 to over 50 markets, bringing its total stores to over 33,000 (nearing Starbucks' global total). News of these potential acquisitions caused Luckin's U.S.-listed shares to slide by 7.6%.

2. Intense Competitive Dynamics in China:

Luckin Coffee has fundamentally reshaped the Chinese coffee market, surpassing Starbucks in both sales and store count.

• Market Leadership: Luckin Coffee now operates nearly 30,000 stores in China, significantly more than Starbucks, leveraging affordability, speed, localization, and aggressive pricing (e.g., 9.9 yuan lattes).

• Impact on Starbucks: Starbucks' market share in China declined from 34% in 2019 to 14% in 2024, with falling sales and profitability pressures due to Luckin's competitive pricing.

• Starbucks' Counter-Strategy: In response, Starbucks formed a joint venture with Chinese investment firm Boyu Capital (Boyu acquiring a 60% stake for $4 billion) to localize offerings, accelerate growth (targeting 20,000 stores in China), and strengthen its competitive position. This move is expected to intensify competition for Luckin.

• Other Rivals: Luckin also faces competition from other rapidly expanding local chains like Cotti Coffee and Lucky Cup (which surpassed 10,000 stores), as well as Manner Coffee, which is planning an IPO to fund its own expansion.

3. Analyst Sentiment:

Analysts maintain a positive outlook on Luckin Coffee's prospects.

• JPMorgan initiated coverage with an "Overweight" rating and a $55.00 price target in November.

• Macquarie maintained its $52.00 price target in September.

• CMB International maintained a "Buy" rating, while DBS Bank upgraded to a "Moderate Buy."

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.