The Fall of Luckin Coffee

China’s upstart Luckin Coffee Inc. grew at a blinding pace who was born with a silver spoon in mid-2017, during China’s recent technology funding boom. Luckin built its strategy around a mobile app, with which it sent vouchers for free coffee to tens of millions of people, and coupons for deep discounts on later purchases. The shock brought a screeching stop to the three-year-old juggernaut, sending its stock plunging 75% overnight. It turns out that Luckin sold vouchers redeemable for tens of millions of cups of coffee to companies that had ties to Luckin’s chairman and controlling shareholder, Charles Lu, according to internal documents and public records reviewed by The Wall Street Journal. Their purchases helped the company book sharply higher revenue than its coffee shops produced. Meanwhile, other internal documents showed a procurement employee called Lynn Liang, the woman described as fictitious processing more than $140 million of payments for raw materials such as juice, delivery and human-resources services.

Luckin’s fabrication not only caused great trouble to itself but also harmed many other companies and markets. It’s fall has rekindled long-running tensions over the U.S. Securities and Exchange Commission’s inability to inspect financial records of Chinese firms to protect investors.

How should Chinese brands balance short-term interests and long-term brand building to grow bigger stronger and create sustainable future business?

The DeTao Brand Master, Florin Baeriswyl, Professor of Brand Strategy and Management at Shanghai Instititue of Visual Art, emphasizes that a brand is based on 3 cornerstones: Truth, Quality, Consistency. Truth is one of the most important factors for success. A true and consistent behavior creates shareholder value and commercial success as consumers trust the brand and get emotionally attached. Consistency requires delivering the same quality of a service, product or message, internally and externally. Successful brands are based on a transparent strategy, communicated well to stakeholders, shareholders, management and staff to continually grow the brand bigger and stronger.

Prof. Florin Baeriswyl chose this article so every student understands that cheating has short legs and strong brand, great value.

Article link: https://www.msn.com/en-us/money/companies/behind-the-fall-of-chinas-luckin-coffee-a-network-of-fake-buyers-and-a-fictitious-employee/ar-BB14IDGl