Starbucks China Regroups, Cotti Coffee Attacks with Ultra-Low Prices, and Luckin Drives Growth through Digitalization and Supply Chain — China’s Coffee Price War Intensifies
(By Kelly)
The price of a single cup of coffee has never shaken the market as much as it does today. From Starbucks’ direct price cuts to Cotti Coffee’s extreme offer of RMB 1.68 per cup, China’s coffee market is undergoing an unprecedented reshuffle.
At Starbucks Reserve Roastery in Shanghai’s Lujiazui, the iconic green logo remains visible, yet the global coffee giant’s situation in China has shifted dramatically. In early November 2025, Starbucks officially announced a strategic partnership with Boyu Capital, transferring up to 60% of its China retail business to the latter for US$4 billion, while retaining a 40% stake and continuing to collect brand licensing fees.
The deal values Starbucks China at US$13 billion, marking the entry of the coffee chain—after 26 years in China—into a new era of “global brand + local capital” co-governance. It also adds new fuel to China’s intensifying coffee price war.
A Three-Pillar Market Structure Emerges
China’s coffee market now stands at a critical turning point.
In the first three quarters of 2025, the freshly brewed coffee market exceeded ¥280 billion, up 21% year-on-year. The affordable price range (¥9.9–16) now accounts for 58% of the market, becoming the dominant consumption segment.
Once the undisputed leader, Starbucks has fallen from first place to third. Its market share dropped from 60% at its peak to 14%, trailing far behind Luckin (35%) and Cotti (18%).
The store numbers confirm this shift (as of October 2025):
Luckin Coffee: 26,000 stores
Cotti Coffee: 13,000 stores
Starbucks China: 8,011 stores
According to Hongcan Big Data, as of September 2025, there were over 260,000 coffee and tea beverage outlets nationwide, up 19.9% year-on-year. Qichacha data shows 32,000 new coffee-related business registrations in the first ten months of 2025—matching the full-year total of 2024.
The era of foreign dominance is giving way to the rise of domestic brands.
From Promotions to Direct Price Cuts
Price has become the sharpest weapon in the ongoing battle.
In June 2025, Starbucks China announced a major pricing reform, cutting prices across key product lines such as Frappuccinos, Iced Shaken Teas, and Tea Lattes starting June 10. For a Grande-sized drink, prices dropped by about ¥5 on average, with some available for as low as ¥23.
Starbucks China’s Chief Growth Officer Yang Zhen said,
“A diversified product mix for non-coffee scenarios will operate alongside our core coffee line, enabling customized offerings for different occasions and store types.”
However, Cotti Coffee has gone further. With JD Delivery subsidies, some beverages cost as little as ¥1.68, or ¥2.68 including packaging — cheaper than bottled drinks or even mineral water in convenience stores.
Cotti’s aggressive pricing is not new. Since 2023, it has repeatedly launched “Crazy Coffee Festivals” across 100 cities, offering products for ¥9.9, ¥8.8, ¥4.8, and even ¥1 per cup.
Meanwhile, Luckin Coffee, leveraging its powerful digital management system and integrated supply chain, continues to make profits while holding the ¥9.9 price line.
In 2024, Luckin’s revenue reached ¥34.475 billion, with net profit at ¥3.538 billion.
Three Brands, Three Strategies
Starbucks: Focus on the “Afternoon Non-Coffee” Market
Starbucks’ price cuts are deliberate — targeting its non-coffee range. The company aims to promote a “morning coffee, afternoon non-coffee” model for full-day consumption scenarios.
Food industry analyst Zhu Danpeng notes:
“Starbucks is expensive because it carries both product and emotional value. It will not cut coffee prices easily, since that would damage its brand image. Reducing non-coffee prices, however, helps attract new customer groups.”
Cotti Coffee: Ultra-Low Prices for Rapid Expansion
Founded by Luckin’s original creator Lu Zhengyao and his core team, Cotti adopts a risk-sharing franchise model, initially waiving franchise and brand fees in favor of profit-sharing.
Yet, sustainability is in question. Some franchisees say selling prices below ¥6 during subsidy campaigns fail to cover costs. Subsidies are not evenly distributed across stores, and surging delivery orders have eroded in-store traffic.
Luckin Coffee: Dual Engine of Digitalization and Supply Chain
Luckin’s growth amid the price war relies on its AI-driven management. On Liqiu Day 2025, the brand sold over 20 million cups in one day, with a Shanghai store recording 2,691 cups daily.
Its Xiamen Super Roastery, combined with bases in Kunshan, Pingnan, and Qingdao, forms China’s largest coffee roasting network with 155,000 tons annual capacity, giving Luckin full control of its supply chain.
Lower-Tier Markets: The New Battleground
As first- and new first-tier cities reach saturation, lower-tier cities are becoming the next strategic frontier.
Hongcan Data shows that in 2025, 25.2% of coffee and beverage stores were in new first-tier cities and 22.0% in second-tier cities, while tier-3 and below markets grew faster.
“Lucky Cup” leads the charge, with 71.2% of its stores in tier-3 or lower cities.
Luckin, Cotti, and K-Coffee each have over 30% of stores in such markets.
Starbucks, meanwhile, faces difficulties.
In FY2025, it entered 47 new county-level markets, raising its lower-tier store ratio to 35%, but its pace and profitability lag behind local rivals.
Luckin’s county stores already make up 42% of its total, with per-store investment costs half of Starbucks’.
The core problem: mismatch between supply and demand.
Lower-tier consumers value affordability and convenience over “third place” ambience, yet 40% of Starbucks’ stores there are still full-service spaces over 200 m².
The coffee war now extends beyond products—into business models, technology, and cultural identity.
Supply Chain: The Final Battlefield
In today’s fiercely competitive coffee and tea market, supply chain construction has become the decisive factor.
Luckin’s self-owned production base ensures cost control and quality stability.
Cotti follows suit — in May 2025, its second roasting plant in Dangtu, Anhui began operations, with 75,000 tons annual bean-processing capacity, enough to support 10 million cups per day.
Digital capability defines efficiency.
Top brands use AI ordering systems and user profiling for precision marketing, while private traffic channels reduce customer acquisition costs to one-third of traditional models.
By contrast, Starbucks’ digital infrastructure lags — its ERP-based system results in 28-day inventory turnover, compared to Luckin’s 15 days with AI management.
Innovation is accelerating.
From January to September 2025, 32 of 54 leading brands launched 1,037 new drinks, with tea-based beverages emerging as key growth drivers.
As of November 7 (the Start of Winter), the price war shows no sign of cooling down.
