Recently, Cotti Coffee announced the launch of a marketing campaign starting from 1 June, during which all beverages will be on sale for 9.9 RMB without limit, except for a small number of special shops. Concurrently, Cotti unveiled the COTTI Express, a new convenience type shop featuring a small footprint, minimal investment, and a low break-even point. These shop-in-shop outlets will be widely integrated into various formats and scenarios, such as convenience stores and restaurant chains.
On 24 May, Cotti Coffee’s Chief Strategy Officer revealed that the company is prepared for a three-year ‘9.9 RMB promotion’. As of February 2024, Cotti Coffee’s global shop count reached 7K, ranking third in the Chinese market.
In February 2023, Cotti Coffee introduced the ‘9.9 RMB coffee promotion’ to capture market share, particularly from competitor Luckin Coffee. The rivalry between Cotti Coffee and Luckin Coffee began when Cotti Coffee’s founder Lu Zhengyao, a former founder of Luckin Coffee, was forced to leave the company in 2020 due to revelations of falsified business data. On 24 May, the Weibo topic #9.9 Coffee War Drags Down Cotti Coffee And Hurts Luckin Coffee# (9.9咖啡大战拖垮Cotti Coffee熬伤Luckin Coffee) attracted 42.06 million views.
For coffee brands, the 9.9 RMB low price strategy inevitably decreases profits, demands significant scale effects and has supply chain advantages. According to Luckin Coffee’s quarterly report released in early 2024, the first three months of this year saw a transition from profit to a net loss of 71.42 million RMB (9.86 million USD). Additionally, in January 2024, some Luckin Coffee shops adjusted their 9.9 RMB promotional activities, leading to consumer complaints about reduced benefits.
For Cotti Coffee, the 9.9 RMB price war has pressured its franchisees into operating with thin profit margins, causing many to close shops. Data indicates that between November 2023 and February 2024, Cotti closed 826 shops. Searches for ‘transfer Cotti shops’ on major social media platforms revealed posts from across the regions. On 29 April, Cotti Coffee announced that the current shop subsidy policy will be extended to 31 December 2026. This policy covers existing and future shops, with subsidies varying based on factors such as rent and competition, with the highest single cup subsidy reaching 14 RMB. This move has somewhat reassured franchisees.
Cotti and Luckin are not alone in this price war. The ‘9.9 RMB’ low price strategy has made the coffee industry one of the most competitive sectors in the past year. Coffee brands such as Tims, Starbucks China, and KCOFFEE are also lowering prices and issuing coupons to join the battle. According to Ge Xian, founder of Jingcai Capital, the economic development cycle’s impact on the consumption environment will likely prolong this price war, with freshly brewed coffee penetration entering a new stage amidst this intense competition.
