Luckin Coffee Falls into Diseconomies of Scale Again: Can Dacheng Capital's Acquisition of Blue Bottle Solve the "Premium Paradox"?

Special Topic: Luckin Coffee Agrees to Pay $180 Million Fine to the U.S. SEC to Settle Fraud Charges

Produced by: Sina Finance Listed Company Research Institute

Author: Mu Yu

The dust has settled, and Dachen Capital has acquired Blue Bottle Coffee.

According to public reports, Dachen Capital recently signed an agreement with the food and beverage giant Nestlé to acquire all of Blue Bottle Coffee’s global brick-and-mortar store assets for no more than $400 million, responsible for store operations and brand experience. Nestlé will retain Blue Bottle’s fast-moving consumer goods business, including coffee beans, capsules, ready-to-drink beverages, and other retail products.

Founded in California in 2002, Blue Bottle Coffee was once hailed as the “Apple of the coffee world.” It insists on roasting coffee beans within 48 hours, and the brand gained popularity for its freshness, handcrafted brewing, and minimalist aesthetics, with an average price per cup over 40 yuan. In 2017, Nestlé acquired a 68% stake for $425 million, at that time valuing each store at over $12 million. In 2022, Blue Bottle Coffee entered China for the first time, opening in Shanghai’s Suzhou Creek area, and currently has 22 stores nationwide.

What makes this deal particularly noteworthy is Dachen Capital’s identity. After Luckin Coffee was embroiled in a financial fraud scandal in 2020, Dachen Capital, as an early investor, actively promoted debt restructuring and management adjustments, eventually becoming its controlling shareholder. As of February 2025, Dachen Capital owned 31.3% of Luckin Coffee’s shares and held 53.6% of voting rights. In April of the same year, Dachen Capital’s founding partner, Li Hui, was appointed chairman of Luckin. In February 2026, Dachen Capital announced the completion of an internal buyback of 136.2 million Class B common shares of Luckin, reducing its stake to 23.3%.

As the true “helmsman” of Luckin, Dachen Capital has been seeking mid-to-high-end chain coffee targets in recent years. In July 2025, during the Starbucks China acquisition race, Dachen was one of more than 30 participants. Later that year, there were reports of its interest in acquiring Costa Coffee, a subsidiary of Coca-Cola, with a deal valuation of up to £1 billion. Now, Dachen Capital has successfully acquired Blue Bottle Coffee, partly to supplement its high-end brand portfolio, and possibly to ease Luckin’s growth pressures.

According to the latest annual report, Luckin Coffee achieved total revenue of 49.288 billion yuan in 2025, a 43.0% year-over-year increase; net profit was 3.6 billion yuan, up 21.8%. However, the fourth quarter continued the trend of “revenue growth but profit decline.” Quarterly revenue increased by 32.9% year-over-year to 12.777 billion yuan, but net profit plummeted 39.1% to 518 million yuan. By the end of 2025, the total number of stores exceeded 30,000, but only 1,834 new stores were added in the fourth quarter—a significant 39.0% decrease quarter-over-quarter.

All signs indicate that Luckin’s narrative of growth driven by scale is beginning to show signs of fatigue.

Same-store sales growth slowed to 1.2%; quarterly delivery costs surged 94.5% YoY

The “9.9 yuan” price war has eased slightly, but the delivery battle has dealt another blow to Luckin.

This conflict, initiated by the “internet giants” Meituan, JD.com, and Alibaba, has ignited a wildfire in the high-frequency, low-price milk tea and coffee sector. Major platforms have launched massive subsidies, with a cup of freshly made drink originally priced at 10-20 yuan now available for single digits or even “zero yuan” after coupons. However, as orders flood in, customer spend per order continues to decline, while fixed costs at stores remain hard to cut, and fulfillment and service costs keep rising, squeezing profit margins.

This “false prosperity” is also reflected in Luckin’s financial reports. Specifically, the impact of the delivery war on its performance mainly manifests in two areas.

First, the growth rate of same-store sales has significantly slowed. Essentially, the delivery price war is a broader price competition, with platform subsidies pushing brands like Grid and M Stand from mid-to-high-end pricing into sub-10 yuan territory. New tea brands such as Guming and Chabaidao have also launched coffee products to seize market share. Luckin’s core consumers are price-sensitive and seek convenience, overlapping heavily with the target audience of this price war, which has directly impacted its brand loyalty.

Financial data shows that in Q4 2025, Luckin’s average monthly active transaction users were about 98.35 million, a 12.4% decrease quarter-over-quarter. Based on quarterly revenue, the average sales per transaction user during this period was approximately 43.30 yuan, down 4.6% from Q3. Notably, Q4 and Q1 are typically off-peak seasons for freshly made tea and coffee, so declines in transaction users and average order value are normal. However, the fact that transaction users decreased by double digits quarter-over-quarter for the first time in Q4 2025 indicates some target consumers are being diverted by the delivery price war.

User-side pressure has also affected stores. By the end of 2025, Luckin operated 20,234 self-operated stores, generating a net revenue of 9.547 billion yuan in Q4. Simple calculations suggest that the average monthly revenue per store in Q4 was about 157,300 yuan, a sharp 19.6% drop from Q3 and a 4.8% decrease from the same period in 2024—almost returning to the level of Q4 2022. This is the second time since 2022 that both same-store sales and store count have declined simultaneously, the previous being in Q1 2024 during the height of the “9.9 yuan” price war. During this period, the company’s same-store sales growth was only 1.2%, far below the 13.4% and 14.4% in Q2 and Q3 2025.

Second, soaring delivery costs are eroding profits. In 2025, Luckin’s total operating costs reached 44.215 billion yuan, up 43.1% from 2024. Among these, costs for raw materials, rent, and depreciation of fixed assets—rigid costs associated with store operations—grew by 33.4%, 31.6%, and 30.9%, respectively, all below revenue growth. The only notable increase was in delivery expenses, which surged 143.8% to 2.821 billion yuan, raising the proportion of delivery costs to total revenue from 8.2% to 14.0%.

Looking further, in Q4 2025, delivery costs alone reached 1.631 billion yuan, accounting for about 57.8% of the annual delivery costs, a 94.5% increase from 2024. This pushed quarterly operating costs to 11.955 billion yuan, a 38.9% YoY increase, representing 93.6% of quarterly revenue, up from 89.5% in 2024. Despite a 31.64 billion yuan YoY increase in sales in Q4, operating profit decreased by 186 million yuan. During this period, the operating profit margin at stores fell to 15.0%, down 4.6 and 2.5 percentage points from Q4 2024 and Q3 2025, respectively.

Transformation, Going Global, the High-End Road Is Difficult

The delivery war will eventually subside, but Luckin’s more urgent issue now is raising prices.

Public reports indicate that the weekly 9.9 yuan coupons offered by Luckin have been restricted to certain drinks, with fewer “first cup free” or “buy two get one free” promotions. Many consumers have also noticed that some items on the “Weekly 9.9 Yuan” menu in its mini-program now require an additional 3 yuan for purchase, and customization options like “extra large cup” or “concentrate” have increased the average order value to around 10-15 yuan.

Additionally, at its flagship store in Shenzhen’s Xinghe Twin Towers—Luckin’s 30,000th store—Luckin launched a “Ten Thousand Stores Special Brew,” “Ten Thousand Stores Hand Brew,” and “Limited Cold Brew” series, all in 300ml small cups priced at 15.9, 19, and 16 yuan, respectively. Newly baked cakes and tarts are priced at 13.9 and 8.9 yuan. The flagship covers 420 square meters over two floors, featuring an open hand-brew bar, casual seating, and scenic spots, along with wall art, regional flavor maps, and interactive tasting spaces.

Another shortcut to price increases is going overseas. In June 2025, Luckin opened two grab-and-go stores in Manhattan, New York, with product prices ranging from $3.45 to $7.95 (about 23.71 to 54.65 yuan). Basic drinks like American and latte are priced around $5-6, while popular items like fresh coconut latte, velvet latte, and feathered fruit and vegetable tea can cost nearly $8, at least four times the price of similar drinks in China.

This shows that Luckin is cautiously exploring premiumization and experience upgrades in specific scenarios and product lines. However, brand upgrading requires better coffee beans, more complex brewing processes, professional staff, larger stores, and more refined decor—all of which challenge the company’s already tight cost structure. Moreover, the highly mature and saturated overseas coffee market makes it difficult for Luckin to quickly replicate its domestic store model through low prices alone.

More critically, high-end brands must be extremely cautious in expansion to maintain scarcity and niche appeal, which conflicts with Luckin’s usual pursuit of efficiency and standardized business models. The Blue Bottle Coffee acquired by Dachen Capital is a vivid example. When Nestlé bought Blue Bottle in 2017, it had 55 stores; by August 2025, it only expanded to 140 stores, averaging about 17-18 new stores per year. In contrast, Luckin adds nearly 24 stores daily. The 6-12 month store setup cycle erodes consumer patience; choosing commercial real estate for rapid expansion dilutes brand identity. After entering China, Blue Bottle’s popularity waned, and after 24 years, it still operates at a loss.

How much Blue Bottle Coffee, preoccupied with itself, can contribute to Luckin’s high-end journey remains to be seen. The capital market is waiting for an answer.