Luckin Coffee Fraud Explained! What ACTUALLY Happened!
Oct 20, 2026 · 12 min · 5 segments
Oct 20, 2026 · 12 min · 5 segments
And what she noticed is that she was working late and consuming lots of coffee, and so were her coworkers as well.
She observed that on average, the average consumer in China would consume about six cups per year compared to the West or in United States where the consumption is about 300 cups per year.
So she noticed the difference between the six and the 300 cups and noticed there could be a big upside and a growth story here that she might be a part of.
And the strategy that the company had was based on Jenny Tian's history or experience with ride sharing or ride hailing.
So the first strategy that she saw here is that mobile first, meaning that consumers are conducting their transactions using their mobile phones more than anything else.
And so the difference here between a Luckin Coffee and a Starbucks would be that you're conducting, you're buying your coffee beforehand on your mobile phone and just walking in into the kiosk or the store and just grabbing your coffee and go in your merry way.
That was the first strategy and the second, was also based on her days from the ride-hailing industry, which is to gain market share fast by offering deep discounts.
So at Luckin Coffee, they were offering discounts, for example, to get a latte, you can get one for about 20 RMB, whereas to get that from a Starbucks will be twice that price at least.
And so these were the two pillars of the strategy that they were using to gain market share in China.
And by 2019, the company had 4,900 locations, and that was officially bigger than the number of location of Starbucks.
And with this enormous level of growth, Luckin Coffee filed for an IPO in 2019 in the month of May, and they were trading publicly under the Thicker Simple LK in the NASDAQ.
For example, in Q3, 2019 they had losses of about 73 million dollars obviously because they were spending so much money on sales and marketing as well as offering deep discounts and their products so they were turning a huge loss at the end by toward the end of 2019 Now we take a look at the events that unfolded in 2020 and this began in January of 2020 with a famous short seller by the name of Muddy Waters Research that published an article saying that they received an anonymous tip that told them that Luckin Coffee basically is a fraud and that all the sales numbers are fabricated and made up.
And what she noticed is that she was working late and consuming lots of coffee, and so were her coworkers as well.
She observed that on average, the average consumer in China would consume about six cups per year compared to the West or in United States where the consumption is about 300 cups per year.
So she noticed the difference between the six and the 300 cups and noticed there could be a big upside and a growth story here that she might be a part of.
And the strategy that the company had was based on Jenny Tian's history or experience with ride sharing or ride hailing.
So the first strategy that she saw here is that mobile first, meaning that consumers are conducting their transactions using their mobile phones more than anything else.
And so the difference here between a Luckin Coffee and a Starbucks would be that you're conducting, you're buying your coffee beforehand on your mobile phone and just walking in into the kiosk or the store and just grabbing your coffee and go in your merry way.
That was the first strategy and the second, was also based on her days from the ride-hailing industry, which is to gain market share fast by offering deep discounts.
So at Luckin Coffee, they were offering discounts, for example, to get a latte, you can get one for about 20 RMB, whereas to get that from a Starbucks will be twice that price at least.
And so these were the two pillars of the strategy that they were using to gain market share in China.
And by 2019, the company had 4,900 locations, and that was officially bigger than the number of location of Starbucks.
And with this enormous level of growth, Luckin Coffee filed for an IPO in 2019 in the month of May, and they were trading publicly under the Thicker Simple LK in the NASDAQ.
For example, in Q3, 2019 they had losses of about 73 million dollars obviously because they were spending so much money on sales and marketing as well as offering deep discounts and their products so they were turning a huge loss at the end by toward the end of 2019 Now we take a look at the events that unfolded in 2020 and this began in January of 2020 with a famous short seller by the name of Muddy Waters Research that published an article saying that they received an anonymous tip that told them that Luckin Coffee basically is a fraud and that all the sales numbers are fabricated and made up.
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