Chinas Boozy Latte Frenzy Sends Luckin Coffee Shares Surging

US-listed shares of Luckin Coffee Inc. jumped to the highest in more than three years after it rolled out an alcohol-infused latte with Kweichow Moutai Co. as the latter seeks to boost its appeal with a younger crowd.

The stock, which trades over the counter in the US, rose more than 5% to $33.60 on Tuesday, the highest since March 2020. That takes gains since its June 2020 low to about 2,300%. Trading volumes also surged, reaching more than 300% of the three-month average, according to data compiled by Bloomberg.

Luckin said in a Weibo post that it sold more than 5.4 million cups of the alcohol-infused drink on Monday, bringing in more than 100 million yuan ($13.7 million), in a new sales record for a single product. The drink costs 38 yuan, but consumers can get coupons that give them a 50% discount.

The tie-up between China’s biggest liquor company and the fast-growing coffee chain swiftly took over social media, with people wondering whether they could safely drive after consuming the drink and sharing reviews — mostly negative — of its taste.

While the partnership has boosted Luckin’s stock, the impact on Moutai has been muted and shares are little changed this week.

Younger Crowd

Still, analysts predict the product will help boost the liquor firm’s appeal to a younger demographic. The distiller has rolled out similar products in recent years, including a Moutai-infused ice cream that’s sold more than 10 million cups since its launch in May 2022, according to Bloomberg Intelligence analysts Ada Li and Rebecca Ziye Wang.

“Despite the insignificant earnings contribution, those innovative crossover products have amplified Moutai’s recently elevated efforts on innovation and communication” with younger people, who are less frequent drinkers of baijiu — a colorless but fiery Chinese liquor — than middle-aged consumers, Citigroup Inc. analysts led by Xiaopo Wei wrote in a note.

Luckin was delisted from the Nasdaq stock exchange in June 2020 in the aftermath of an accounting scandal, but its business recorded rapid growth since then by offering much lower prices and generous coupons than rival Starbucks. It posted net income of 999 million yuan in the second quarter, compared with a loss a year earlier. It’s the largest coffee chain in China, with more than 10,000 stores versus 6,500 for Starbucks Corp.