Scale is winning, margins are paying
- Luckin ended 2025 with 31,048 stores, giving it a huge footprint in China coffee.
- Revenue is still led by freshly brewed drinks, which were 70.2% of 2025 net revenue.
- Partnership stores supplied 23.5% of 2025 net revenue and help Luckin enter lower-tier cities.
- The main worry is store-level profit: self-operated store margins fell to 17.8% in 2025.
- Delivery volume helped growth, but delivery costs reached 13.9% of 2025 net revenue.
Big chain, thinner cups
Luckin has built one of the largest coffee store networks in China. At the end of 2025 it had 31,048 total stores, including 20,234 self-operated stores and 10,814 partnership stores. That scale gives it buying power, a huge app-based customer base, and more places to sell morning coffee and afternoon tea drinks.
The bull case is simple: Luckin can keep taking coffee occasions from smaller shops because it is cheap, fast, and close to the customer. Its digital model helps it launch products often, push coupons, track demand, and stock stores with less waste. Non-coffee drinks also now matter, with management saying they were more than 20% of total cups sold for full-year 2025.
The bear case is now real, not theoretical. Self-operated store-level operating profit fell from 22.2% of self-operated store revenue in 2023 to 19.0% in 2024 and 17.8% in 2025. Price wars, delivery platform behavior, and rising input costs are taking a visible toll.
The next test is whether margins stop falling in H1 2026. Investors should also watch Malaysia franchise execution and the early U.S. pilot, where Luckin is much smaller and has less brand power.
Cheap coffee, many formats
Luckin makes most of its money by selling drinks and other products from self-operated stores. Customers usually order through Luckin's app or other digital channels, then pick up or receive delivery. The model favors speed, high order volume, and repeat use over high pricing.
Partnership stores are the second pillar. These are run with partners, often to reach lower-tier cities more efficiently. Luckin earns from materials, equipment, store construction-related materials, delivery services, profit sharing, franchise fees, and other services tied to those stores.
Scale is the cost weapon. Luckin can source coffee beans and other inputs in large amounts, run a large supply chain, and use store data to match inventory with demand. That helps offset low prices, but it does not erase the problem if coupons, delivery fees, or coffee beans move against the company.
International growth is still small. At the end of 2025, management reported 160 overseas stores, including Singapore self-operated stores, Malaysia franchise stores, and a small U.S. pilot. This gives Luckin optional growth, but also adds new market risk.
Coffee plus cold drinks
Freshly brewed coffee
This is the core product family and the largest revenue line. It includes everyday coffee drinks sold through self-operated stores and partner-linked channels.
Iced and flavored drinks
Luckin leans into iced, sweet, and flavored drinks that fit local tastes. These products help drive repeat orders and seasonal spikes.
Light milk tea and fruit tea
These drinks extend demand beyond morning coffee. They also help Luckin compete with tea chains and cover afternoon use cases.
Professional coffee lines
Dark roast and single-origin offerings help Luckin look more serious to coffee drinkers. This can support the brand while the company still competes hard on price.
Other products and merchandise
Food, light meals, instant coffee, cups, and other goods add smaller revenue streams. They are useful add-ons, but drinks still carry the story.
Where 2025 revenue came from
The mix is from Luckin's 2025 Form 20-F net revenue breakdown for the year ended December 31, 2025. Freshly brewed drinks, other products, and others are reported inside product sales, while partnership stores are reported separately.
What could break the story
Price war eats store profit
High impact · High oddsLuckin has used low prices and coupons to pull in customers. That works for share, but it is already hurting unit economics. Self-operated store-level operating profit fell from 22.2% in 2023 to 19.0% in 2024 and 17.8% in 2025.
Delivery subsidy hangover
High impact · High oddsFood delivery platform subsidies helped drive volume in 2025. Management later said platforms had scaled back subsidies, and Q4 same-store sales growth for self-operated stores slowed to 1.2%. Delivery expenses also reached 13.9% of 2025 net revenue.
Coffee bean inflation
Medium impact · High oddsManagement warned in Q3 2025 that international green coffee bean prices were high with no signs of moderation. Luckin can use scale and product mix to soften the blow, but low pricing leaves less room to pass costs to customers.
Too many stores too fast
Medium impact · Medium oddsLuckin added 8,708 net stores in 2025 and ended the year with 31,048 stores. More stores can lift sales, but dense expansion can also split demand between nearby shops and raise closure risk. The risk is highest if store growth stays fast while same-store sales cool.
International learning curve
Medium impact · Medium oddsLuckin is testing growth outside China, including Malaysia through exclusive franchise partners and a small U.S. pilot. These markets have different customers, rents, labor costs, and competitors. A good China playbook may not transfer cleanly.
In one breath
Is Luckin Coffee profitable?
Yes. Luckin reported 2025 operating income of RMB5.07 billion and net income of RMB3.60 billion. The concern is not profit today, but whether store-level margins keep falling.
How does Luckin Coffee make money?
Most revenue comes from product sales, led by freshly brewed drinks. Luckin also earns from partnership stores through materials, equipment, delivery services, profit sharing, franchise fees, and other services.
Why does delivery matter so much for Luckin?
Delivery helped drive 2025 volume, especially when food delivery platforms offered subsidies. When those subsidies eased, same-store sales growth slowed, while Luckin still had high delivery-related costs.
What is the main thing to watch in 2026?
Watch whether self-operated store-level margins stabilize. If margins keep falling while same-store sales slow, the scale story becomes less attractive.