What the Coffee Industry in Singapore Makes of Cotti's Seoul Move

Cotti Coffee has opened a directly operated store in Gangnam District, Seoul, South Korea, while its 5,000th outlet opened at Sanlitun SOHO in Beijing. The chain started in Fuzhou in October 2022 and has grown at over 500 new stores per month. Closures this year have reached 332, with 152 in the past 90 days, showing that expansion carries risk.

The move draws comparisons with Luckin, which runs 12 directly operated stores in Singapore and has reached about 10,000 locations. South Korea's coffee market is large, low-priced, and densely packed with shops, so foreign brands face tough local competition. Observers of the coffee industry in Singapore note that overseas expansion depends on keeping cup volumes steady once promotional subsidies end.

Cotti Coffee was recently spotted by netizens opening a directly operated store in Gangnam District, Seoul, South Korea, while its 5,000th store in China opened at Sanlitun SOHO in Beijing. From its first store in Fuzhou in October 2022 to its current scale of 5,000 stores, Cotti has raced ahead at a pace of more than 500 new stores per month. But behind this rapid expansion, once the 8.8 yuan promotional subsidy stops, cup volume takes a hit. Store closures this year have already reached 332, with 152 newly closed in the past 90 days. Some netizens compared it with Luckin, which has already laid out 12 directly operated stores in Singapore. South Korea's coffee market is large, low-priced, full of choices, and densely distributed, so whether a foreign brand can gain a foothold remains to be seen. Front Street Coffee follows industry trends and analyzes for you the challenges behind Cotti's overseas expansion.

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On August 4, a netizen posted on social media, saying they had discovered a Cotti Coffee store under renovation in Seoul, South Korea, though at the time it was still impossible to confirm whether the store was real.

Not long after the post was published, a netizen in the comments who claimed to know the situation responded, confirming that this store was a directly operated branch opened by Cotti in Seoul. The netizen also revealed that her husband was a Cotti employee, and that a colleague was about to be sent to work in South Korea.

At the same time, multiple netizens whose IP locations showed South Korea also successively confirmed in the comments that this Cotti store was real. In addition to the one in Gangnam, there is also a Cotti store in Sinchon, which has recently been recruiting baristas.

When it comes to overseas market expansion, many netizens immediately thought of Cotti's competitor Luckin. Luckin has now reached a scale of 10,000 stores and has opened 12 directly operated branches in Singapore. Some people joked in the comments: "Why didn't Little Rui go too, open next to Little Di," "Luckin didn't come this time?", "Little Rui, when you have time, take a look at the shop next door."

As for Cotti's choice to enter South Korea, a market where coffee competition is extremely fierce, some netizens said that stepping into South Korea, where coffee shops are everywhere, as its first step was truly brave, praising it as "wild enough, execution is too strong." Of course, many netizens also took a cautious attitude. After all, South Korea's local coffee is large in volume, low in price, rich in choices, and has extremely dense store distribution, so it is not easy for a foreign brand to compete with local coffee shops. Some netizens said bluntly: "I feel Cotti and Luckin won't survive in South Korea," "Isn't Korean coffee super competitive? Cotti really has some guts."

Cotti's pace of store expansion has always been quite astonishing. In addition to its moves in overseas markets, its number of domestic stores has also reached 5,000. It is reported that also yesterday, Cotti Coffee founder Lu Zhengyao posted on WeChat Moments celebrating the official opening of the 5,000th store, located in the Sanlitun SOHO mall in Beijing.

Since Cotti Coffee opened its first store in Fuzhou IFC on October 22, 2022, the brand has launched the "Coffee Dreamer" plan, adopted a "full joint operation" model, and started a path of rapid franchise expansion. In early 2023, Cotti announced externally the goal of "10,000 stores in three years." Only 9 months after the first store opened, it had already opened 5,000 stores, averaging more than 500 new openings per month.

Behind its high-speed store openings, Cotti relies on an 8.8 yuan low-price promotional strategy on the one hand, and focuses on co-branded marketing campaigns on the other, while investing huge subsidies. But once the subsidy discounts stop, cup volume at Cotti stores is clearly hit, profitability becomes harder, and the payback period is lengthened. For this reason, the number of Cotti stores recently closed is also quite considerable.

According to a report by the media outlet Caijing Tuyu, Cotti's number of closures this year reached 332, with 152 newly closed in the past 90 days, equivalent to 1.7 stores closed per day, far higher than other coffee brands.

Front Street Coffee reminds that while brands expand rapidly, the ongoing operating capability of stores is also worth attention.

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The above content is compiled by CoffeeHunters, a coffee news website.