Cotti Coffee and the Race to Undercut Luckin

 

China’s coffee price war shows how quickly an affordable cup of coffee can change an entire market. Cotti Coffee entered the scene in 2022 and challenged Luckin Coffee with a simple offer: make coffee cheaper, open stores faster, and reach customers wherever they are.

The strategy helped Cotti expand rapidly. But it also raised a difficult question for the industry: can a coffee chain keep growing when low prices put pressure on the people running its stores?

A challenger built on familiar ground

Cotti was founded in October 2022 by former Luckin Coffee executives Lu Zhengyao and Qian Zhiya. They understood the appeal of app-based ordering, aggressive promotions, and a business model built for rapid expansion.

In February 2023, Cotti introduced its ¥9.9 coffee promotion, equivalent to roughly US$1.40 at the time. Luckin responded with its own discounts, turning the competition into a price war that extended beyond the two brands.

For customers, the attraction was obvious: freshly prepared coffee at a price that made regular purchases easier. For both companies, the challenge was turning those purchases into a sustainable business.

Growing without traditional cafés

Cotti pursued expansion through partnerships and a relatively low-cost store model. Its approach also included compact outlets and store-in-store formats, allowing coffee counters to operate inside other businesses rather than requiring a full-sized café.

This creates opportunities in locations where rent and space are major concerns. A small outlet near offices, residential areas, or transport hubs may serve customers without the expense of a large seating area.

Cotti’s reported network exceeded 15,000 stores by June 2025. However, that figure included around 3,000 outlets that had not yet opened, so it should not be treated as a count of fully operating stores.

Rapid expansion can build brand visibility, but it also makes staff training, supply management, equipment maintenance, and quality control harder to manage.

The problem with selling coffee too cheaply

A low price attracts customers, but every cup still has costs: coffee, milk, cups, rent, wages, delivery commissions, and utilities.

When the selling price falls too far, franchisees may struggle to cover those expenses. Cotti used subsidies to support participating operators during its expansion, but relying on subsidies raises questions about what happens when that support changes.

Industry reporting also documented store closures during the early price-war period. The reported figures should be treated cautiously, but they illustrate the risk of expanding faster than individual outlets can build sustainable sales.

The issue is not whether cheap coffee can attract customers. It clearly can. The real question is whether each store can earn enough from those customers to remain viable.

From price war to value

In February 2026, Cotti ended its unlimited ¥9.9 promotion across the full menu and moved many regular-priced drinks back to their listed prices. Some drinks remained available at ¥9.9 through a special-price section.

This was a change in the promotion, not the disappearance of all low-price offers. Nevertheless, it marked a shift away from presenting the entire menu at one heavily discounted price.

For coffee chains, this highlights an important distinction: low price can encourage trial, but value is what brings customers back. Value includes taste, consistency, convenience, portion size, and the overall experience not just the number on the menu.

What coffee businesses can learn

- Use discounts with a clear purpose. They can introduce a brand to new customers, but repeat purchases must eventually support the business.

- Choose the right store format. Small outlets can reduce rent and setup costs when the location supports takeaway demand.

- Protect franchisee margins. A growing store network is not necessarily a healthy one if operators cannot make money.

- Keep quality consistent. Affordable coffee still needs reliable recipes, trained staff, and proper equipment.

- Compete on more than price. Product quality, convenience, location, and customer loyalty can create reasons to return even when a rival offers a discount.

Cotti has shown how an aggressive pricing strategy and a flexible store model can accelerate expansion. Its longer-term challenge is making that growth sustainable. In the coffee business, winning customers with a cheap cup is one achievement; building a network that can keep serving them profitably is another.