Positive Reviews: Price Wars Accelerate Industry Shuffle, Promote the Popularization of Coffee Consumption and Supply Chain Upgrades
The Chinese coffee industry is undergoing an unprecedented price revolution. From the 9.9 – yuan era initiated by Luckin and Cudi in 2023, to the price anchor of brands like Guming and Cha Pai Dao dropping to over 4 yuan in 2025, and then to Lucky Coffee and other sinking – market brands breaking through the price floor at 2.9 yuan, this “national coffee price war” may seem like a disorderly market scuffle, but in fact, it objectively promotes in – depth industry transformation and the reconstruction of the consumption ecosystem.
First of all, the price war directly lowers the threshold of coffee consumption and accelerates the transformation of coffee from a “niche and luxury product” to a “mass – market daily necessity”. In the past, the mainstream price range of freshly brewed coffee was concentrated between 15 and 30 yuan. Consumers had to pay for brand premiums, store rents and other costs, which limited the high – frequency consumption scenarios of coffee. Now, products with rock – bottom prices such as 2.9 – yuan freshly brewed Americanos and 3.5 – yuan iced lattes have truly integrated coffee into daily scenarios such as “the morning coffee need of office workers” and “afternoon tea for students”. Data shows that in 2025, the coffee industry had a net increase of 17,600 stores, with 70,600 new stores opened. This indirectly confirms that the low – price strategy stimulates market demand – when the price is low enough, coffee is no longer an “occasional consumption” but a “daily habit”. The formation of this consumption habit lays a user foundation for the long – term development of the industry.
Secondly, the price war forces brands to optimize their supply chains and promotes the industry’s upgrading towards “scale and standardization”. In the 9.9 – yuan era, Luckin and Cudi had already reduced the cost per cup through “a scale of ten thousand stores + centralized procurement”. When the price further drops to 2.9 yuan, brands must achieve a qualitative breakthrough in supply chain efficiency. For example, Lucky Coffee relies on the supply chain system of Missfresh. From coffee bean procurement, warehousing and logistics to store equipment, costs can be spread through group – based operations. Guming and Luckin use the same coffee machines and share the resources of contract manufacturers. In essence, they are reducing marginal costs through “hardware standardization”. This “arms race” in the supply chain is a price competition in the short term, but in the long term, it may promote the maturity of the Chinese coffee industry chain – from the upstream coffee bean cultivation in Yunnan (China has become the world’s sixth – largest coffee producer), to the mid – stream roasting and extraction technologies, and then to the downstream store operations, all will be accelerated due to large – scale demand.
Thirdly, the price war breaks the “category barriers” and promotes the integration and innovation of coffee and tea beverages. The entry of new tea beverage brands such as Cha Pai Dao and Guming into the coffee market is not simply “following the trend”. They have noticed the overlap between “milk tea users” and “coffee users” – young consumers have diverse needs for “caffeine – containing beverages”. They need both the sweetness of milk tea and the refreshing function of coffee. These brands use the cross – promotion of “low – price coffee + existing milk tea users” to not only find new growth points for themselves (for example, the trial stores of Cha Pai Dao sell dozens of cups of coffee per day), but also promote product innovation. For example, the emergence of cross – border products such as fruit coffee (fruit + coffee) and light milk tea (milk tea + coffee) is the result of “meeting users’ diverse needs” under the background of the price war. This category integration may give birth to a “new coffee” form that is more in line with the taste of Chinese consumers.
Fourthly, the price war accelerates the industry shuffle, eliminates inefficient players, and promotes the concentration of resources towards the top. According to data from Narrow Door Food and Beverage, nearly 53,000 coffee shops closed in the past year, while the net increase was only 17,600. This means that the industry is shifting from “wild expansion” to “stock competition”. Small and medium – sized independent coffee shops that cannot reduce costs through economies of scale and niche brands that rely on high premiums are struggling to survive under the impact of the 2.9 – yuan price. Brands with supply chain advantages such as Luckin, Cudi and Lucky Coffee are further expanding their market share through low – price strategies. This Matthew effect of “the strong getting stronger” may cause controversy in the short term, but in the long run, it helps to optimize the allocation of industry resources – leading brands have more funds to invest in R & D (such as Luckin’s new product R & D), supply chain (such as building their own roasting factories) and user operation (such as the precipitation of private domain traffic), thus promoting the improvement of the overall competitiveness of the industry.
Negative Reviews: Price Wars Overdraw Industry Value and May Cause the Risk of “Bad Money Driving Out Good” in the Long Run
However, there are many hidden worries behind this seemingly “win – win” price war. When the coffee price is compressed to 2.9 yuan or even lower, the profit margin of the industry is severely squeezed, brand value is diluted, and some enterprises fall into a vicious circle of “reducing prices just for the sake of it”. In the long run, it may damage the healthy development of the industry.
Firstly, the low – price strategy may lead to “cost inversion”, and the enterprise’s profit model is unsustainable. The cost of freshly brewed coffee mainly includes raw materials (coffee beans, milk, etc.), labor, equipment depreciation, rent, etc. Taking a 2.9 – yuan iced Americano as an example, assuming the cost of coffee beans is 0.5 yuan (calculated based on 15g of coffee beans per cup and a green bean price of 30 yuan per kilogram), the cost of auxiliary materials such as milk/water is 0.3 yuan, equipment depreciation is 0.2 yuan, labor cost is 0.5 yuan (calculated based on a daily sales volume of 400 cups, 3 employees per store and a monthly salary of 6,000 yuan), and rent allocation is 0.5 yuan (calculated based on a daily sales volume of 400 cups and a monthly rent of 10,000 yuan), the cost per cup is close to 2 yuan. If we add platform commissions (usually 5% – 10% for take – out and self – pick – up) and marketing expenses (such as first – order subsidies), the actual profit of the enterprise may approach zero or even result in a loss. A Cudi store manager revealed that “the income from a cup of coffee in the store is only 6 – 7 yuan” and “platform subsidies are decreasing”. The low – price activities of brands such as Luckin and Guming also mostly rely on short – term promotions. If this “trading price for volume” model continues in the long run, enterprises will face cash – flow pressure and may even exit the market due to a broken capital chain.
Secondly, excessive price wars may dilute brand value and lead to the user perception of “low price = low quality”. High – end brands such as Starbucks and Peet’s Coffee are forced to reduce prices (for example, the price of Starbucks’ large – sized products has been reduced by 5 yuan, with the lowest price at 23 yuan). In essence, this is a passive response to the price war, but this strategy may damage their brand positioning of “the third space” and “high – quality”. Once consumers get used to 2.9 – yuan coffee, it is difficult for them to pay for the “brand premium” of 30 – yuan coffee. If low – price brands rely on price competition for a long time and ignore product innovation (such as the quality and unique flavor of coffee beans) and user experience (such as store environment and service), they may fall into the dilemma of “only being able to sell at low prices”. For example, Lucky Coffee attracts customers with a 2.9 – yuan price, but consumers may equate it with “instant coffee” and “low – quality”. If it wants to upgrade its price range in the future, it will face the cost of re – educating users’ mindsets.
Thirdly, the intensification of industry involution squeezes the living space of small and medium – sized brands and may suppress innovation vitality. The “involution” of the price war is not only reflected in price but also in store density. A Cudi store manager mentioned that “there are several Cudi stores within one kilometer, and the order volume has decreased significantly”. This “close – combat” style of expansion leads to a decline in single – store efficiency and a waste of resources. For small and medium – sized brands lacking supply chain advantages (such as independent coffee shops and regional chain brands), they can neither reduce costs through scale nor compete with leading brands in terms of price, so they have to choose to exit the market (nearly 53,000 stores closed in the past year). Industry innovation often relies on the “trial and error” of small and medium – sized brands. For example, niche categories such as hand – brewed and specialty – blended in the specialty coffee field can meet differentiated needs. However, under the impact of the price war, these brands may give up innovation due to insufficient profits and instead imitate the low – price strategy, ultimately leading to product homogenization in the industry and the inability to meet consumers’ diverse needs.
Fourthly, “excessive cost – cutting” in the supply chain may sacrifice quality and damage the foundation of the industry in the long run. When the price war enters the “2 – plus – yuan era”, enterprises may “cut corners” on raw materials and processes to maintain profits. For example, they may use lower – grade coffee beans (such as Robusta beans instead of Arabica beans), reduce the amount of coffee powder (from 18g to 15g), and lower the quality of milk (such as using non – dairy creamer instead of fresh milk). The coffee beverages in Missfresh stores have been criticized by consumers for their “bland taste” because they are brewed with coffee powder. This is a typical case of “compromising on quality” under the low – price strategy. If this trend spreads, consumers may doubt the core value of “freshness and on – the – spot brewing” of freshly brewed coffee, ultimately leading to a trust crisis in the entire industry.
Advice for Entrepreneurs: Break Out of the Price War Trap and Build a “Differentiated + Long – Term” Competitiveness
Facing the coffee price war, entrepreneurs need to have a clear understanding: the price war is a short – term competitive means, not a long – term survival rule. The following suggestions may provide references for entrepreneurs:
- Clarify your own positioning and avoid the “low – price red ocean”: If lacking the supply chain scale of brands like Luckin and Missfresh, small and medium – sized brands should avoid directly participating in the price war in the 2.9 – 5 – yuan range and instead focus on niche markets. For example, focus on “specialty coffee” (such as hand – brewed coffee, single – origin beans), “scenario – based coffee” (such as community coffee shops, quick – pick – up stores in office areas), “functional coffee” (such as decaffeinated coffee, coffee with healthy additives), etc. Meet specific user needs through differentiation and build brand barriers.
- Attach importance to supply chain construction and improve cost – control ability: Regardless of the price range, the supply chain is the core competitiveness of a brand. Entrepreneurs can reduce raw material costs through “centralized procurement + local cooperation” (such as direct cooperation with coffee – bean producing areas in Yunnan), improve labor efficiency through “digital management” (such as self – ordering to reduce labor input), and reduce maintenance costs through “equipment standardization” (such as choosing cost – effective commercial coffee machines). The case of Guming and Luckin sharing contract manufacturers also suggests that entrepreneurs can optimize costs through “resource sharing”.
- Strengthen user operation and shift from “traffic thinking” to “retention thinking”: Users attracted by low prices are easy to lose. Entrepreneurs need to improve user stickiness through “membership systems”, “private – domain communities” and “product innovation”. For example, Luckin continuously attracts users through popular products such as “Coconut Latte” and “Maoxiang Latte”. In essence, it combines “low – price customer acquisition” with “product innovation”. Independent coffee shops can enhance the emotional connection with users through “coffee courses” and “community activities” and transform “one – time consumption” into “long – term repeat purchases”.
- Pay attention to industry trends and layout the “second growth curve”: The integration of coffee and tea beverages is an irreversible trend. Entrepreneurs can explore the “coffee +” model, such as “coffee + light meals”, “coffee + retail (drip – bag coffee, coffee – related peripherals)”, “coffee + health (low – calorie, functional additives)”, etc. Reduce the dependence on single – cup coffee through multiple income sources. The strategy of Cha Pai Dao and Guming using coffee as a “new growth point” also suggests that entrepreneurs can use their existing user base (such as milk – tea users) for cross – sales and reduce customer – acquisition costs.
- Adhere to long – termism and avoid “overdrawing brand value”: Short – term price cuts may bring traffic, but in the long run, brand tonality needs to be maintained. If high – end brands are forced to reduce prices, they can balance short – term sales volume and long – term value through “time – limited promotions + limited – edition products” (such as Starbucks’ “seasonal limited – edition products”). Low – price brands need to gradually improve product strength on the premise of ensuring basic quality (such as upgrading the grade of coffee beans and launching special beverages) to avoid falling into the cognitive trap of “low price = low quality”.
Conclusion: The coffee price war is an inevitable stage in the transition of the industry from “wild growth” to the “mature stage”. It promotes the popularization of consumption and the upgrading of the supply chain, but also exposes the hidden dangers of excessive competition. For entrepreneurs, the key is to maintain strategic determination in the “price melee” – build an irreplaceable core competitiveness through differentiated positioning, supply chain optimization, user operation and long – termism, and ultimately “survive and thrive” in the industry shuffle.
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