Summary of Key Points
Lucky Cafe (a coffee brand under Mishi Ice Cream City) used to rely on low prices to expand rapidly in lower-tier cities and university towns. Now, it's changing its strategy: opening high-end stores next to Luckin Coffee, targeting office workers. It has shifted from opening stores frantically to focusing on controlling the number of outlets and increasing revenue per store. The brand is upgrading its products, store appearance, and equipment in an attempt to shed its "rustic" image and gain a share of the mature office coffee market dominated by Luckin. However, it remains cautious about expanding in first- and second-tier cities and doesn't aim to overtake Luckin in the short term; its goal is to steal orders rather than defeat it.
Detailed Analysis
1. Major Shift in Market Focus: From “Student-Focused Coffee” to Competing with Luckin’s Office Customers
Lucky Cafe used to be similar to Mishi Ice Cream City's coffee division—small, low-priced stores located mainly in university towns and commercial areas of lower-tier cities, appealing to price-sensitive students and young people. The new strategy is different: the latest store in Shenzhen's Nanshan Innovation Cloud City (next to DJI's headquarters, a typical office area) is right next to a Luckin Coffee, with a larger space (over 60 square meters), seating, and an open coffee island counter, making it look more like a proper coffee shop. The target audience has also changed—Lucky Cafe now targets the white-collar workers who use coffee frequently and have a high demand for it.
How does it compete? By focusing on details that distinguish it from Luckin: while Luckin's stores in office parks close at 10 PM, Lucky Cafe stays open until 11 PM; it recruits employees to promote corporate group purchases and manage online marketing accounts to attract business customers; and it uses semi-automatic coffee machines (whereas Luckin uses fully automatic ones), signaling a more professional approach.
2. Comprehensive Upgrades in Products and Stores: Moving Away from a “Rustic” Image towards Professionalism
To establish itself in higher-tier cities, Lucky Cafe is making significant changes:
- Store Improvements: Opening “Selected Store” and “Flagship Store” locations with larger spaces and more sophisticated decorations (e.g., the open coffee island counters in Shenzhen).
- Product Enhancements: In addition to basic coffee, it offers specialty drinks made with single-origin premium beans (SOE), as well as desserts, light meals, and related merchandise (coffee cups, bags).
- Equipment Upgrades: It uses professional Black Hawk coffee machines and plans to invest 300 million yuan in providing these machines to selected stores, especially in high-tier cities.
- Packaging Updates: The packaging has changed from the traditional bright red style of Mishi Ice Cream City to include orange and brown tones that are more in line with a coffee theme, with larger English logos and the statement “100% Arabica Beans” to give a more international feel.
In short, Lucky Cafe is moving from being about “just getting the job done” to offering a more premium coffee experience.
3. Slowing Down Expansion: From Quantity to Quality
Lucky Cafe’s expansion was rapid—it only had 4,500 stores by the end of 2024 but exceeded 10,000 in November 2025 (doubling its size in just 10 months). However, in 2026, the pace has slowed significantly, with new store openings limited to fewer than 2,000 for the year, and only 1,000 allowed in the second half of the year. The reasons are clear:
- The low-price model didn't work well in higher-tier cities due to higher rent costs and different consumer preferences.
- Mishi Ice Cream Group aims to improve product quality; the focus for 2026 is on increasing revenue per store, not just opening more stores.
- They want to avoid reckless expansion. If they introduce new models too quickly (like the Selected Store concept), they might lose their cost advantage. If they move too slowly, they won’t be able to establish a brand presence in first- and second-tier cities. Therefore, they need to test these new strategies carefully.
4. Competing with Luckin: Leveraging Cost Advantages and Unique Features
Luckin is already a dominant player in the office coffee market, with 36,000 stores and 110 million monthly active users. What does Lucky Cafe have to offer?:
- Cost Advantages: Thanks to Mishi Ice Cream City’s supply chain, it can purchase coffee beans and fresh milk at lower costs.
- Unique Features: Longer operating hours, semi-automatic coffee machines (which might appeal to customers who prefer a more “handcrafted” feel), and a focus on corporate group purchases.
- Narrowing the Experience Gap: By upgrading ingredients (coffee beans, fresh milk, coconut milk) and introducing new drink varieties, Lucky Cafe aims to match Luckin’s quality while possibly offering better prices due to its lower costs.
The goal is not to defeat Luckin but to capture orders from customers who are either unwilling to wait for Luckin or want a change in taste within Luckin’s existing market.
5. Separating from Mishi Ice Cream City to Avoid Internal Competition
Mishi Ice Cream City also sells coffee (it started upgrading its drip coffee to freshly ground varieties in 2026 and subsidizing franchisees to buy fully automatic machines), which overlaps with Lucky Cafe’s basic products. To avoid internal competition, the group has defined different roles for the two brands:
- Mishi Ice Cream City: Uses its existing network of stores to sell coffee and increase revenue (e.g., offering coffee alongside milk tea) while maintaining a “convenient and low-price” approach.
- Lucky Cafe: Acts as an independent brand, focusing on professional coffee shops with better products, environments, and services to attract customers willing to pay for a premium coffee experience.
This separation ensures that both brands target different customer segments and cover the entire coffee market.
In Conclusion
Lucky Cafe is evolving from being a “minor player under Mishi Ice Cream City” to a competitor that can hold its own against Luckin. However, it’s still in the trial-and-error phase, carefully testing its strategies in higher-tier cities. If it can successfully gain a share of the market where Luckin has a strong presence, that will be considered a success.