(Yicai) May 18 -- Luckin Coffee has launched two specialty alcoholic drinks at its cafes across China, marking the leading coffee chain’s entry into the “slight buzz” segment as it seeks to tap new sources of growth amid intensifying competition.

Following today’s launch, the two new products were not being sold at every Luckin outlet in Beijing, Yicai found. They taste like fruity coffee beverages with a mild alcoholic aftertaste, and their preparation is more complex than for coffee -- being more akin to mixing cocktails.

The drinks contain 15 milliliters of gin and whiskey, respectively, pushing their alcohol content above 0.5 percent vol, according to store staff. Per China’s classification standards, both drinks fall under the category of alcoholic beverages, so they are only available for in-store pickup and cannot be sold to minors.

Luckin launched the co-branded Moutai latte with Chinese liquor giant Kweichow Moutai in 2023, but because that product had an alcohol content of less than 0.5 percent vol, it was not classified as an alcoholic beverage.

Luckin reported last month that net profit fell 3.6 percent in the first quarter of this year, despite a 35 percent gain in revenue driven by an accelerated store rollout and an increase in the number of monthly active customers. The Xiamen-based company expanded rapidly last year amid booming coffee consumption in China and it operated 33,596 stores globally as of March 31.

The prolonged price war among Chinese food delivery platforms is also squeezing profit margins at coffee chains, making new revenue streams and operational efficiency more important.

Luckin piloted a variety of alcohol-infused new drinks at selected stores in Shenzhen and Shanghai earlier this year, using spirits including gin, plum wine, and whiskey, industry sources close to the company told Yicai.

The launch of the two new specialty drinks nationwide stems from solid sales in the earlier trial runs, but whether they will become standard offerings will depend on sales, according to the sources.

Jiang Han, senior researcher at Pangu Think Tank, said Luckin is hoping this product innovation can maximize in-store resource utilization and boost overall profitability.

He pointed out that the freshly brewed coffee industry has exited the high-growth phase driven by rapid market expansion. Competition is shifting away from simply acquiring new users and opening more stores and toward extracting more value from existing customers and filling in market and usage gaps, he said.

Alcoholic beverages can bring additional revenue growth for coffee brands, but they also require adjustments in store material preparation and staff management, according to Zhu Danpeng, vice president of the Guangdong Food Safety Assurance Promotion Association.

Zhu cautioned that new business models should be tested in a small number of stores first and expanded gradually, rather than being copied and rolled out en masse without careful validation.

Editors: Tang Shihua, Tom Litting