Saying goodbye to price wars and delivery cost pressures: the challenges and opportunities behind Luckin's 2025 revenue and profit growth

Luckin Coffee recently announced its 2025 financial report, showing the company’s total annual revenue reached 49.288 billion yuan, a year-on-year increase of 43.0%, with a net profit of 3.6 billion yuan, up 21.6% year-on-year. In terms of store scale, Luckin continued its expansion, reaching a total of 31,048 stores as of December 31, 2025, a net increase of 8,708 stores for the year, including 20,144 company-operated stores and 10,744 franchise stores.

Despite impressive annual performance, Luckin faced the challenge of “increased revenue but not profit growth” in Q4 2025. The total net revenue for the quarter grew 32.9% year-on-year to 12.777 billion yuan, but net profit declined 39% to 518 million yuan, with GAAP operating profit margin decreasing by 4.1 percentage points compared to the same period in 2024. This phenomenon is closely related to cost pressures from the delivery wars. The financial report shows that delivery costs in Q4 reached 1.631 billion yuan, a 94.5% increase year-on-year, with total delivery expenses for the year amounting to 6.879 billion yuan, more than doubling compared to 2024.

Luckin’s CFO, An Jing, pointed out that the growth in delivery costs was mainly driven by a significant increase in takeout orders, but the average delivery cost per order decreased year-on-year, reflecting operational efficiency improvements from scale expansion. However, these efficiency gains were not enough to offset rising costs. Raw material costs in Q4 increased by 33.2% year-on-year, store rent and operating costs rose by 32.8% year-on-year, and combined with delivery expenses, these created a “triple cost pressure,” directly leading to a sharp decline in net profit.

Luckin’s co-founder and CEO, Guo Jin Yi, stated at the earnings conference that the coffee business will gradually shift back to a self-pickup-oriented model. He noted that the high proportion of delivery fulfillment costs is highly sensitive to single-cup pricing, and delivery times can affect coffee taste and consumer experience. In contrast, the self-pickup model allows for dense deployment across all consumption scenarios and closer proximity to customers, which is Luckin’s core advantage and long-term growth foundation.

The price war in the coffee industry also saw a turning point in 2025. In February 2026, Kudi Coffee announced that only a few products in the promotional zone would be maintained at low prices, while other products would revert to regular prices of 11.9 to 16.9 yuan, marking the official end of the 9.9 yuan coffee era. This change is closely related to rising coffee bean costs. Due to factors such as Brazil’s reduced output, extreme weather, and supply chain tensions, Arabica coffee futures prices on the New York Mercantile Exchange surged by a total of 170% over the past year, reaching a peak of 335 cents per pound, a 13-year high.

After the price war subsided, coffee brands began shifting toward refined operations and user mind-share battles. Luckin, through new product development and IP collaborations, achieved a 26.5% year-on-year increase in monthly active transaction customers in Q4, reaching 98.35 million. The total number of new transaction customers for the year exceeded 110 million, with cumulative transaction customers surpassing 450 million. These figures laid a foundation for Luckin’s user competition after the price war.

In terms of scale expansion, Luckin is not alone. In 2025, Luckin Coffee and Nova Coffee each surpassed 10,000 stores, forming part of China’s four major coffee brands with over 10,000 stores alongside Luckin and Kudi. Behind this expansion is the effect of scale, which enhances brand influence and dilutes costs. More stores mean stronger bargaining power in the supply chain and lower logistics costs, supporting product pricing and profit margins.

The competitive focus in the coffee sector is shifting from price wars to system efficiency and operational capabilities. Starbucks’ strategic partnership with Boyu Capital to establish a joint venture for retail operations in China is seen as a sign of the cooling of the third space model, highlighting the market’s increasing demand for efficient operational models. Luckin Chairman Li Hui has emphasized that the company’s advantages lie not only in scale but also in continuous improvements in system efficiency, which has been a core focus since reshaping its business model in 2020.