Food delivery war burns through 1.6 billion in delivery fees; Luckin's net profit plummeted 39% last year, but revenue hit a new high

Luckin Coffee delivered an impressive financial report last year, with total revenue approaching 50 billion yuan and over 31,000 stores. These numbers are truly eye-catching. Think about it—just a few years ago, it was struggling, and now countless people are holding its cups every day. It’s not easy to achieve this turnaround. But behind the bright numbers, the fourth quarter suddenly hit a brake, with net profit dropping nearly 40%, making people wonder what’s really going on.

The trigger was pretty clear: the nationwide takeaway subsidy war that swept through the beverage industry. In the second half of last year, major internet platforms suddenly ramped up subsidies, delivering coffee and milk tea to customers’ doors almost for free. Thanks to its extensive store network and stable supply chain, Luckin quickly became a major order generator. Many franchisees were thrilled, saying they couldn’t handle the surge, and the subsidies didn’t affect their profits. But at the corporate level, the situation was completely different. Delivery costs skyrocketed, reaching over 1.6 billion yuan in the fourth quarter—almost doubling year-over-year—and the proportion of delivery costs in revenue jumped from around 8% to nearly 13%. Platform commissions and marketing expenses also soared, disrupting the entire cost structure.

Have you ever thought about how people usually order takeaway for convenience, but once subsidies ramp up, the order structure changes? Luckin’s strength was online ordering and in-store pickup, which kept costs low and experience quick. Now, with a higher takeaway share, fulfillment costs become a heavy burden. Plus, with coffee, longer delivery times can compromise taste—by the time the customer gets their cup, it might no longer be hot and fresh. This eats into profits.

Looking at the whole year, Luckin still made a net profit of 3.6 billion yuan, up over 20% year-over-year, but its net profit margin dropped to just 7.3%, declining for two consecutive years. In the fourth quarter, net profit was just over 500 million yuan—almost 40% less than the same period last year. The capital market reacted immediately, with the stock price dropping over 6% at open, finally closing around $36, down nearly 4%. Management said in the earnings call that this was a short-term fluctuation, as expected. But investors weren’t convinced—nobody wants to see scale grow, but profits shrink.

Luckin has never shied away from store expansion. Last year, it added over 8,700 stores—more than the 27 years it took Starbucks to open in China. By the end of the year, it had over 31,000 stores worldwide, with more than 60% being company-operated. With such density, same-store sales naturally face pressure. In the fourth quarter, same-store sales grew only 1.2%, and store profit margins fell by more than 15 percentage points compared to the previous year. On products, last year, over 140 new items were launched, with non-coffee products accounting for over 20%. But truly memorable, repeat-purchase blockbuster products remain scarce. Competitors aren’t idle either—Kudi has expanded to over 10,000 stores with its convenience store model, and big tea brands like Guming are entering the coffee market, fragmenting the industry further.

Ultimately, Luckin aims to become a global brand, and its overseas expansion is accelerating. It’s now the second-largest in Singapore with 81 self-operated stores; 70 franchise stores in Malaysia; and nine stores in the U.S.—still exploring, but at least making progress. However, management repeatedly emphasizes that China remains the most promising growth market, with overseas markets being more about steady growth. After all, coffee penetration in China is still low, and per capita consumption is far behind Europe and America. Once the domestic market stabilizes, they’ll have the confidence to look outward.

This takeaway war also exposed some industry pain points. Subsidies can boost sales temporarily but are like stimulants—they must be paid back later. Luckin managed to withstand this with its scale advantage, but profits were heavily diluted. If the industry continues to compete on low prices and delivery, profit ceilings will remain. Conversely, returning to in-store pickup and focusing on core products might help regain composure. But consumers have become picky, price-sensitive, and whoever raises prices first risks losing market share. Striking this balance is a real challenge.

Don’t you think that the coffee industry, seemingly glamorous, is actually full of calculations? A cup selling for ten yuan involves layers of rent, raw materials, labor, and delivery costs. Luckin’s success today relies on execution and resilience. But with such scale, the growth ceiling is approaching. The high base effect in 2026 will likely keep same-store sales and profits fluctuating. In the long run, whether the brand can truly resonate with consumers and whether products can continuously attract attention are the key to survival.

Honestly, seeing Luckin’s financial report leaves me with mixed feelings. On one hand, I admire how it climbed out of the mud and became an industry leader; on the other hand, I worry that its aggressive scale expansion has eaten into profits during the delivery subsidy war. Was it worth it? Maybe that’s the price of growth. The coffee market is still on a fast track—who will come out on top is anyone’s guess. What do you think? Will Luckin keep expanding rapidly, or focus on refining products and experience first? The answer will probably become clearer in the coming days.