Luckin Coffee Inc

Ladies and gentlemen, welcome to Luckin Coffee's fourth quarter and full year 2024 earnings conference call. All participants will be in listen only mode during the management's prepared remarks, and there will be a question and answer session to follow. Please be advised that today's call is being recorded. Now I would like to turn the call over to Ms Nancy Song, head of investor relations of Luckin Coffee. Nancy, please go ahead.

Thanks, operators. Hello, everyone. Welcome to Luckin Coffee's fourth quarter and full year 2024 earnings conference call. We announced our financial results earlier today before the US market opened. The earnings release is now available on our IR website and via newswear services. Today we will hear from Dr. Guo Jingyi, our chairman and CEO, who will share a strategic overview of our business. Following that, Ms Anjing, our CFO, will discuss our financial results in greater detail. Afterwards, we will open up the call for questions. During today's call, we will be making some forward looking statements regarding future events and expectations. Any statements that are not historical facts, including but not limited to statements about our beliefs and expectations are forward looking statements. These statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in our findings with the ICC. In addition, for non-GAP measures discussed today, the reconciliation information related to those measures can be found in our earnings pressures. During today's call, Dr. Guo will speak in Chinese and his comments will be translated into English. Now I would like to turn the call over to Dr. Guo Jingyi, chairman and CEO of Luckin Coffee. Dr. Guo, please go ahead.

Hello everyone, welcome to today's business communication session. Thank you for your continued attention and support for Luckin Coffee. In 2024, the critical year of the development of the coffee industry, we have been focusing on strategic strategies in a complex and complex environment. Our goals are clear and we have carried out our duties to the best of our ability. We have continued to expand our market share and competitive advantage. The company's total annual income has increased by 38% in the same year, reaching 345 billion yuan. The same revenue has increased by 17% and reached 3.5 billion yuan. Especially since the second quarter, the self-sufficiency index has continued to improve rapidly and the operating efficiency has been significantly improved. Through these results, we have further strengthened the market leading position and continued to lead the innovation and rapid development

of the Chinese coffee industry. Hello everyone, welcome to today's earnings conference call. Thank you for your continued interest and support of Luckin Coffee. 2024 marked a pivotal year for Luckin Coffee's robust growth. In this dynamic market, we effectively expanded our market share and competitive edge through strategic focus, clear objectives and strong execution. For the full year, our total net revenues increased by 38% year over year to RMB 34.5 billion, with operating profit increasing 17% to RMB 3.5 billion. Notably, entering the second quarter, our same store metrics for self-operated stores started to improve rapidly, reflecting significant efficiency gains. These achievements have further strengthened our market leadership as we drive industry-wide innovation and continue to shape the development of China's coffee market.

We have further strengthened our scale advantage and have a strong product innovation and development capacity. We not only launched many coffee products that are popular with users, but also successfully expanded the product category, which better meets the needs of consumers, the whole period and the whole scene. In addition, the company's sales volume increased by 48% to 71.8 million in 2024, and the total sales volume of drinks in the year was nearly 3 billion cups, which increased by 55% by the end of the fourth quarter. The total sales volume of drinks in the year was nearly 3.3 billion cups, which increased by 55% by the end of the fourth quarter. We have further strengthened our scale advantage and developed a new market record of Chinese coffee consumers.

As China's largest coffee chain brand by store counts, Locking Coffee maintained an industry-leading pace of store expansion during 2024. With over 6,000 net new stores opened for the year, we further reinforced our scale advantage, reaching a total of 22,340 stores by year-end. Leveraging our strong product innovation and R&D capabilities, we launched a range of popular new coffee products and successfully expanded our beverage portfolio, better meeting customers' diverse needs across all types of day and consumption scenarios. As a result, we saw our number of average monthly transacting customers increase by 48% -over-year to 71.8 million, combined with cups sold of freshly brewed beverages, ranking 55% to nearly 3 billion. By the end of the fourth quarter, we had over 330 million cumulative transacting customers, setting a new record for Locking in China's coffee consumption market. Next, I will provide some highlights of our fourth quarter results and operational progress. Our CFMG will share additional financial details later on in the call.

In the fourth quarter, we saw a double-digit profit rate, which is a positive proof of our overall performance. In addition, we saw a

positive proof of our overall performance. In the fourth quarter, we maintained strong growth momentum as total net revenues increased by 36% -over-year to R&D 9.6 million. Operating profit surged 368%, score around R&D 1 million, while operating margin expanded by 7.4 percentage points -over-year to 10.4%. For the first time, we achieved a double-digit operating margin in the fourth quarter, a period that has traditionally been a low season for the industry. This stands as a strong testament to our enhanced operational efficiency. Notably, as discussed on our previous earnings hold, our same-store sales growth for self-operated stores continued to improve, significantly narrowing from negative 13% in the third quarter to negative 3% in the reported quarter. More encouragingly, this metric turned positive last December. In addition, store-level operating margins for our self-operated stores reached .6% in the fourth quarter.

Facing the current market opportunity and competitive environment, we continue to maintain the leading opening speed of the industry and continue to promote the development strategy of our store optimization layout. In the fourth quarter, China's market increased to 991 stores, including five of Hong Kong's first-ever stores. The total number of stores in China reached 22,289, of which 14,540 were self-operated and 7,749 were joint-owned. The overall scale is a leading market. We believe that as more consumers gradually develop coffee habits, both in terms of the number of users and the volume of people, the demand for domestic coffee markets will continue to steadily increase. We will create a huge opportunity for companies to encrypt high-end cities and expand the lower market. In terms of the international market, this quarter, the Singapore market has added six stores, with a total of 51 stores. In January, we officially entered Malaysia through the special management mode and opened two stores. The overseas market is now one of them. For the overseas market, which is more mature for coffee consumption habits, we will adopt a more flexible and more suitable international market operating mode, accumulate overseas experience, and continue to explore and arrange more market opportunities.

Moving on to operations, we strengthened our competitive edge through focus on three popular people, products, and places. By expanding our scale advantages across store network and customer base, we further increased Lockheed's market share. In terms of stores, we prioritized network expansion to capture market opportunities and stay ahead of the competition, sustaining industry-leading store growth while ensuring high quality and operational efficiency. In the fourth quarter, we added 991 net new stores in China, including the launch of our first five stores in Hong Kong. Our unparalleled scale continues to lead the market, with our total store count in China reaching 22,289, including 14,540 self-operated stores and 7,749 partnership stores. We believe that as more consumers develop coffee drinking habits in China, coffee consumption demand will grow steadily, both in terms of customer base and per capita consumption. This will create significant opportunities for us to increase store density in high-tier cities and further penetrate into lower-tier markets. Relating to our international markets, we added six new stores in Singapore, bringing our total to 51 stores there. This January, we officially entered the Malaysian market via a franchise model, opening the first two Lockheed stores there, another key milestone in our overseas expansion. In the relatively mature international coffee market, we will adopt flexible and tailored operational models to build up our overseas experience while continuously exploring new market entry opportunities.

This will help meet the needs of our customers and boost their potential for consumption. This quarter, we have updated our 18 new drinks and drinks, and released 119 new products. At the same time, we are also working on creating a long-term hot-sale product to support our high-end customers. For example, at the end of September 2020, we have recently launched our new butter and cream latte, which has become the top-two product in the fourth quarter of the year, and is currently in the fourth quarter of the year. The new Apple C-Messi, which is in the fourth quarter of the year, is also a very good product. This has helped us to build a solid customer

base for our products. In terms of products, our deep user insights and data support field continuous product development and innovation, allowing us to better meet customers' evolving needs. With innovative product launches, we continue to create new tastes and experiences for our customers, unlocking greater consumption potential. In this reported quarter, we introduced 18 new beverages and several light drinks, bringing the full year new SKUs to 190. Along with these new offerings, we also focused on creating evergreen best sellers to cultivate a loyal and stable customer base. For example, the Lejo butter latte launched in late September 2024 quickly became the number two best seller in the fourth quarter. Only behind our signature product, coconut milk latte. Another key point is our Apple Americano launched in the fourth quarter. This co-branded offering with Pingu also performed well, delivering promising purchases and starting to build a dedicated group of loyal customers for this product category.

Through powerful product power, we have created a rich and interesting joint activity. We have been using professional and good products to create new users, and we have been driving new users to increase their activity. In this quarter, we have increased the number of new transaction users to more than 25 million, and we have more than 77 million monthly transaction customers. Through

our strong product appeal and engaging co-branded campaigns, our expertly profited and great-tasting beverage portfolio has consistently improved. We have consistently attracted new customers and boosted engagement, steadily increasing the number of active transaction customers. In the fourth quarter, we added over 25 million new customers, with average monthly transaction customers exceeding 77 million. Supported by our accessible store network, we are well-positioned to meet growing customer demands for our products of high quality and high affordability. Throughout 2024, we added more than 100 million new transaction customers, setting a new record and laying a more solid customer foundation for our future growth.

Through our cooperation with the Brazilian Export Investment Promotion Agency, the newly signed Cooperation Network will be able to purchase and purchase coffee beans for two years, and expand to 24 million tons in five years, so that Rui Xing can further lock in a stable high-quality supply in the upstream production zone, and build a solid support network for the global supply chain. In addition, through our strong industrial chain layout, we actively promote the development of the industry's supply and demand, and through our optimization of the joint-purchase policy, we have reduced the total support for the raw materials and the system. This has enabled Rui Xing to share the results of the industry, and increase the potential for investment returns, and increase the ability to continue to expand. This not only reflects our responsibility as leaders in the industry, but also further strengthens our reputation and position in the industry.

Driven by growing customer demand and strong market potential, we are enhancing our supply chain capabilities and integration, paving the way for high-quality, sustainable long-term development. During the fourth quarter, we deepened our strategic cooperation with the Brazilian Trade and Investment Promotion Agency, Apex Brazil, sending a new memorandum of understanding to expand our coffee bean procurement scale from the original 120,000 metric tons over two years to 240,000 metric tons over the next five years. This initiative allows Rui Xing to secure a stable supply of high-quality coffee beans from upstream production areas, building a stronghold for our global supply chain. In addition, leveraging the strength of our industry value chain, we actively drive win-win development across the industry through optimized partnership subsidies, reduced raw material markups, as well as systematic and holistic support. We empower locking partners to share in the industry's success, increasing their investment return potential and expansion capabilities. Our shared interests with partners highlight our corporate responsibility as market leaders while strengthening our industry influence and leadership. Turning to ESG, as China's leading coffee chain brand, working actively and consistently, executes its sustainability strategy, called being a force for a brighter future alongside our rapid growth. We are leading the industry's intelligence and green transformation while deepening multi-dimensional cooperation with global coffee producing regions, addressing quality control of the supply chain, and continuously innovating healthy choices. In addition, we are actively creating a vibrant, value-respecting, and growth-empowering work environment to energize locking's sustainable, high-quality development. In 2024, our sustainable practices garnered several ESG honors and awards, including the 2024 China Best ESG Plow Years by IELTS. Building upon our sustainability roadmap, we remain dedicated to long-term healthy and sustainable development. Working together with our partners to drive more impactful social value for a brighter future.

We will continue to focus on expanding the scale advantage and market share, further enhancing our competitive advantage, and firmly implementing our operating strategy to strengthen our flexibility and mobility, and respond to market change in time. Under the premise of ensuring quality and efficiency, we will maintain the leading opening speed of the industry, fully performing the cost advantage that scale-wise brings, and enhance the operating efficiency through digitalization, and meet the needs of our users with a high-quality product with a high cost ratio and high performance. We will continue to grow healthily.

Looking ahead, we remain confident in the vast growth potential of China's coffee markets. In this dynamic and competitive market environment, we believe locking is strategically positioned to capture these opportunities, driving long-term sustainable and high-quality growth. In 2025, we will remain later focused on expanding our scale and market share to further enhance our competitive edge. As we adopt a balanced and well-paced growth strategy, we will also remain agile and adaptive to market dynamics. In terms of store growth, we aim to maintain our industry-leading store opening pace, with a focus on quality and efficiency. Building on our core competitive advantage of economies of scale, we continuously enhance operational efficiency through our powerful digitalization capabilities. In terms of customer growth, we remain committed to meeting customers' evolving needs with high-quality coffee that offers great value and a distinct appeal, sustaining healthy business development. Finally, we would like to once again express our heartfelt gratitude to the American coffee industry for their hard work and hard work. We would also like to extend our sincere thanks to the over 130,000 individuals who contribute to locking's growth for their dedication and hard work. Working together, we remain committed to building a work-class brand and creating long-term value for our customers, partners, and shareholders. With that, I will turn the call over to Anna and her team to share their thoughts.

Thank you, Jingyi. Good day, everyone. Thank you for joining today's call. We finished the year with solid results. Not only did we expand our leadership position with expanded skills across our store network and customer base, we also achieved notable efficiency gains towards the second half of 2024, a strong placement of the stock market and the economy. This is a big announcement to our robust business model and a solid foundation for future growth. Now, I will share more details on our financial results. In the first quarter, our total net revenue increased by 36% -over-year to RMB 9.6 billion. This growth was mainly driven by increased productive sales supported by our expanding store network and it grows in monthly transaction customers. In terms of the revenue components, revenues from productive sales increased by 43% -over-year to RMB 7.6 billion as a result of our enhanced ability to fulfill customers' diverse and growing needs through the strong appeal of our products and convenient delivery supported by our broad net store network, breaking down our productive sales into three streams. Net revenues from freely brewed drinks were RMB 6.9 billion, about 72% of total net revenues. Net revenues from other products were RMB 496 million, about 5% of total net revenues. Net revenues from others were RMB 147 million, about 2% of total net revenues. Revenues from our partnership store increased by 16% -over-year to RMB 2 billion, reflecting our expanding partner network. This partnership store accounted for 21% of total net revenues. Now to provide further colors on our self-operated stores. Revenues from our self-operated stores increased by 42% -over-year to RMB 7.2 billion. We were particularly encouraged by the improved same store sales growth, which increased notably to negative .4% from a negative .1% in the prior quarter. Our store-level operating profit margin expanded by 6.1 percentage points -over-year to 19.6%. These improvements reflect our enhanced operational efficiency, as well as a more balanced operational pace between store growth and customer growth. Moving on to store expansion, we opened 997 new stores on a net basis during this quarter. Our total store count was 22,340 at a quarter end, comprising 14,591 self-operated stores and 7,749 partnership stores. With more stores falling into our same store sales category, our industry-leading network has paved the way for our sustainable development in the coming years. Looking at our customer growth in the first quarter, we added 25 million new transacting customers. Our average monthly transacting customers increased by 25% -over-year to around 78 million. With a new record of over 100 million new customers acquired in 2024, we expanded our total customer base to over 330 million by year end. Positioning us for sustainable future growth as coffee drinking habits material and overall coffee consumption frequency rises in China. Turning to profitability, I will first highlight a few key expensive items. Cost of materials increased by 10% -over-year to RMB 3.8 billion. Cost of materials as a percentage of total net revenues decreased to 40% from about 50% in the same period of the 2020s rate, resulting in gross margin expansion. This improvement resulted from our stronger supply chain advantages as well as changes in product mix. On the other hand, we did see an upward trend in the price of coffee beans, which could negatively affect this cost item in 2025 to some extent. But we are expecting an over enhanced operational efficiency and the economies of the scale to partially mitigate such impact. Delivery expenses increased by 79% -over-year to RMB 839 million, mainly due to an increase in delivery orders. As a result, delivery expenses as a percentage of total net revenue increased to .7% from .6% in the same period of the 2023. However, delivery expenses per order decreased as a result of a greater economy of scale. Sales and marketing expenses increased by 44% -over-year to RMB 573 million, mainly due to continued strategic investment in strengthening of our brand power among customers, as well as increase the commission fee paid to the third-party food delivery platform. Sales and marketing expenses as a percentage of a total net revenue increased to 6% from .6% in the same period of the 2023. General and administrative expenses increased by 13% -over-year to RMB 638 million as a result of increased investment in research and development, increased share-based compensation and an increase in professional fees, partially offset by reduced payroll costs. General expenses as a percentage of a total net revenues decreased to .6% from 8% in the same period of the 2023, demonstrating enhanced efficiency resulting from our larger operational scale. Turning to profit and margin performance, our gap operating profit increased significantly by 368% -over-year to RMB 995 million. Operating margin expanded by .4% -over-year to 10.4%, marking significant efficiency gains. On a non-gap basis, operating profit increased -over-year to RMB 1.1 billion with operating margin at 11.4%. Net profit increased significantly by 184% -over-year to RMB 841 million with net margin expanding by .5% to .7% for the quarter. On a non-gap basis, net profit increased -over-year to RMB 928 million with net margin at 9.27%. Finally, looking at our balance sheet and cash flow items, in the fourth quarter, our net operating cash inflow was RMB 126 billion. As of December 31, 2024, we had around RMB 5.9 billion in cash, including cash and cash equivalents, restricted cash, term deposits, and short-term investments, compared to RMB 3.8 billion as of December 31, 2023. Our disciplined strategy and strong cash reserves preserve the strength and flexibility of our balance sheet, allowing us to effectively navigate dynamic macro and market environments, as well as to swiftly capture the business opportunities. Before we begin the Q&A portion of the course, I will briefly touch on a few full-year 2024 financial highlights. Compared to 2023, total net revenues increased by 38% to RMB 34.5 billion. Net profit increased by 17% to RMB 3.5 billion with operating margin at 10.3%. Net gap operating profit increased by 20% to RMB 3.9 billion with net gap operating margin at 11.3%. Net profit increased by 3% to RMB 2.9 billion with net margin at 8.5%. Net gap net profit increased by 4% to RMB 3.3 billion with net gap net margin at 9.5%. In closing, we are encouraged by our first quarter and full-year rebounds. Looking ahead, our laser flow test strategy and strong execution provide us with greater confidence in our sustained future growth in the years to come. With that, we will open the call for questions. Operator, please.

Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, you will need to pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Once again, that was star, then 1 to ask a question. And at this time, we will pause momentarily to assemble the roster. And our first question will come from Ethan Wong of CLSA. Please go ahead.

Thank you, operator. Hello, Mr. Kim, hello, Mr. An. I will start with a question in Chinese and then translate it into English. First, congratulations on your performance. Congratulations on your performance. My question is about the copper electricity. I think this is the biggest highlight of this session, which is the continuous improvement of two degrees. And the company also announced that it has been re-established in December. I would like to know how the copper electricity is improving. If we divide it into price and quantity, what should be the corresponding improvement? And if we look at copper electricity from a more -long-term perspective, what do you think the company will be doing? I will translate my question. Good evening, management. So congratulations on the results. And my question is based on the same store sales growth. I think the highlight of these results is improving for the second quarter and already achieving positive growth in December. So if management can help us to break it down into price and volume, that will be very helpful. And for 2025, if we look longer, what is management's contribution on our sales growth? Thank you.

Thank you. In 2023, the Chinese coffee market was in a state of rapid growth and the industry was in a state of competitive growth. We saw a huge market space and a rising customer demand. So under this background, the company made a decisive strategic decision, which was to fully accelerate the opening pace and quickly increase the market share. This has achieved the leading advantage of today's industry. So under this background, the training cycle of the store, the impact of customer consumption habits, and other series of objective factors, the copper electricity index has a gradual fluctuation and decline. We think it is completely in line with the company's strategic judgment. Please translate it first.

Thank you for your question. I will have Anjin to explain in further detail regarding the breakdown between price and volume. Anjin, I will first give you some high level comments on the macro and how we think of the fluctuations of SSG metrics. So SSG metrics is a very crucial operating metric for large chain catering enterprise. We pay very great attention to and very closely monitor these metrics. Overall speaking, its fluctuations over the past few quarters were well in line with our expectations. Our continued improvement in the fourth quarter is also consistent with what we have been communicating to the market all along. Since 2003, China's coffee market has been growing rapidly, while competition has also began to intensify. Looking at these trends, we saw great market potential and thriving customer demand. Therefore, we strategically and defensively accelerated our store expansion pace, effectively gaining market share for sure and standing out from competition with our industry leading scale advantages. So as our stores require time to mature and customer consumption habits take some time to develop, our SSG experienced full term volatility, which is well in line with our strategic judgment and expectation.

Looking into 2025, with our continued growth and growth of our leading position in the industry, the company's scale, cost and efficiency advantages are also beginning to be reflected. Business development is also entering a new stage. We will continue to develop at a high speed and pay more attention to the sustainable performance of our business. Of course, we are also very confident in improving the performance of our power supply indicators in the future. So

looking into 2025, as we continue to strengthen and extend our industry leadership, our economy of scale, cost and efficiency advantages have become more evident. We will give us a new stage in our business development. As we maintain our rapid growth, we will remain deeply committed to healthy and sustainable operations. So we are confident in our ability to further enhance our SSG performance.

Of course, everyone is also concerned about our power supply indicators, what will their growth be in the short term and what will they be in the medium to long term. I will also expand on these two points. I think that in the short term, our focus is on covering the wide range of power supply scenarios, and we will continue to develop our products and expand our products. We will also combine our sales activities with our customers to provide them with more professional and good products, and more emotional value to attract more customer consumption. We will help to improve the performance of our store. In the long term, the biggest feature of coffee consumption is that it has a continuous increase in frequency. In general, our coffee consumption is still at a very early stage. As consumers gradually develop their coffee consumption habits, the frequency of consumption will naturally increase. We think that the volume of coffee is still growing. Of course, this will also give us a stronger motivation to increase our coffee consumption. Please, CF, please add on to the details of the 4G situation. Thank you.

We believe this approach will help us to attract more customers and improve cup sales performance across our stores. So for the long term, one of the key characteristics of coffee consumption is the potential for its increasing frequency. In China, coffee consumption is still at its relatively early stage. As coffee drinking habits continue to develop, coffee consumption frequency will naturally rise, leaving significant room for growth in per capita coffee consumption. This will give us the driver for our future FSD growth. I will have Anjine give more details on the first quarter FSD performance.

Thanks, Dr. Guo. The continuous improvement in our first quarter, SSFG, resulted from the strong execution of our wheel-based expansion strategy. As customer demand is steadily growing, our stock performance continues to improve along with efficiency gains. Looking at our comparable stores, in terms of pricing, our per-cup price in the fourth quarter remained largely stable compared to the same quarter of 2020's rate. In terms of cup sales, rising customer demand drove consistent improvement in cup sales performance, with first-door daily cups sold in the fourth quarter almost returning to the level seen in the same quarter of 2020's rate. Notably, our first-door daily cup sales in December 2024 exceeded those of December 2023, driving positive SSFG for that month. Looking ahead to this year, we expect per-cup price to remain stable compared to last year. As more of our self-operated stores reach maturity, we are expecting a gradual -over-year increase in the number of per-store daily cups sold, supported by our wider selection of high-quality coffee and engaging coffee experiences. This will turn further drive overall FSD improvement. Thanks.

Thank you. Thank you. Thank you.

Thank you. Thank you. The next question comes from Saiji Lin of CICC. Please go ahead.

Thank you, Mr. Guo and Mr. An. I am the analyst of CICC. Congratulations on your performance. I have a question about the price of coffee beans. I would like to ask how we evaluate the impact on the company and what measures we will take to deal with it. Thank you. Thank you, management and Sijie from CICC. Congrats for the strong results. I have one question. Recently, we have seen a significant rise in coffee bean price. How should we evaluate the impact on us? What measures will be taken to address this issue? For example, will we consider to raise price to mitigate the impact? Thank you.

Thank you. Recently, the coffee bean market has been rising. It is basically running at a historical high. It is indeed being closely followed by the industry. I can answer this question systematically. In general, the current price of coffee beans has risen. Because coffee beans are a very important raw material for us. It will bring us some cost pressure. But through the early investment of the whole industry, RuiXin has built a comprehensive supply chain. So we can use the whole scale and efficiency advantage to meet the impact of the consumption of coffee beans in a certain extent.

Thank you for your question. So the rising coffee bean prices indeed draw great attention across the industry and from the broader market. So I will give you more color behind our thinking. So overall, this will create some cost pressure. But we expect to partially mitigate such impact by leveraging our robots. So our scale advantage and enhanced efficiency can give us some buffer to absorb such pressure. So therefore, we think the impact of this rising coffee bean prices is largely manageable for us for the moment.

As you can see, RuiXin has always been concerned about coffee from the beginning to the end. So we have built the whole product chain from the original plant purchase to the import and export trade, to the processing and baking, and to the whole coffee chain layout made by the store. As I said before, last November, we further deepened our cooperation with APEX, the Export Investment Development Agency in Brazil, and the new five-year 24 million tons of coffee beans, to help guarantee the stable supply of high-quality raw materials. This has also built a significant chain of supply advantages. Of course, as the Kanshan coffee factory was in the lead last year, the Qingdao factory is expected to be in the lead this year, too. The Pingnan factory, which was in the lead earlier, will be the first to be in the lead by the end of this year. RuiXin will create a family system with a coffee bean production capacity of up to 100,000 tons every year, to ensure the stable supply of high-quality and high-quality coffee beans.

As you may see, we have been investing across the coffee industry value chain, from upstream sources to end-sales. We have built up our full value chain strength, which covers procurement from producing regions, import and export trade, processing and roasting, all the way down to retail operations. As I mentioned earlier, last November, we deepened our cooperation with Apex Brazil, sending a new MOU to purchase 240,000 metric tons of coffee beans over the next five years. This will provide us with a stable supply of high-quality coffee beans, creating significant upstream supply chain advantages for us. So benefiting from our own roasting facilities, including our Crenshed Roasting Plant, which started operations last year, as well as our Qingdao Plant, which is set to launch this year, and our existing Pingnan facility. So we are expecting we will have an annual roasting capacity of 100,000 tons by this year. This will give us a stable supply of high-quality and high-value for money roasted coffee beans.

In the face of the rising coffee beans market and the growing market competition, we will always keep our original intention, and stick to the values of the moment, and continue to return to our consumers. So back to your price issue, we currently do not have any plans or plans to increase the price. The 9.9 dollar coffee event will continue to expand. We will work hard to train the coffee consumer habits, and make sure that more consumers can use a discounted price to easily enjoy a high-quality coffee experience, and try to make high-quality coffee become part of their daily lives.

We will continue strengthening our marketing and branding efforts to maintain our market leadership. So in the face of this rising coffee bean prices and the market competition, we will remain dedicated to our mission and the customer-centric values. We will continue to reward our customers. And then currently, back to your question, currently we don't have plans to increase selling prices. Furthermore, our 9.9 RMB coffee promotion will consistently be available to our customers. While cultivating coffee consumption habits, we aim to allow more customers to conveniently enjoy high-quality coffee experience at very competitive prices, strive to make high-quality coffee become a part of everyone's daily lives.

Finally, I would like to emphasize that Rui Qing is a leading company in the coffee industry with significant influence. We will work hard to work together with our partners in the upper and lower classes, and work hard to transfer the positive impact of coffee production to the core. We hope to effectively gather a wide range of coffee farmers, promote sustainable coffee trade, and promote long-term co-operation and healthy development across the entire industry. Thank you.

The last thing I want to address is as marketing leader in this industry, we will collaborate with our upstream and downstream partners to pass on this positive impact of driving coffee bean prices to planting regions as well, allowing coffee farmers to ultimately benefit from this trend, promoting a sustainable coffee trade while driving long-term success and healthy development across the entire industry. Thank you.

Thank you, management. That's very clear.

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, everyone, for joining our call today. If you have any further questions, please feel free to contact our IR team. This concludes today's call. We look forward to speaking with you again next quarter. Thanks.

Thank you.

The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.