What does the Cotti Coffee price increase mean for a coffee store?

Cotti Coffee built its name on 9.9 yuan cups, opening more than 5,000 stores within ten months of founding, then ran 9.9 yuan promotions and an 8.8 yuan Douyin deal that sold over 1.53 million cups in two weeks. In July it quietly cancelled several of those promotions and raised prices, and franchisees are complaining.

The pressure comes from thin margins, an underbuilt supply chain, and competition with Luckin, which held its own 9.9 yuan offers and gained ground with a Moutai co-branded latte. For anyone running a coffee store, the case shows how hard it is to exit a price war once customers are used to the low number.

Cotti Coffee, which once quickly opened up the market with a low price of 9.9 yuan, has recently quietly adjusted its pricing strategy and canceled multiple promotional activities. This shift has not only drawn consumer attention but also left franchisees complaining bitterly. While rapidly expanding its stores, Cotti faces multiple challenges such as declining sales, insufficient supply chain, and intensifying internal competition. This article will deeply analyze Cotti Coffee's price increase decision and its impact on franchisees, and explore its future development prospects. At the same time, we will also pay attention to the performance of brands such as Front Street Coffee in industry competition.

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Cotti Coffee, which once gained fame with its ultra-low price strategy of "9.9 yuan per cup," is now going to raise prices across the board. Does this mean it will bid farewell to the price war?

Last year, Cotti Coffee entered the coffee track with a high-profile stance. Less than 10 months after its founding, according to official data, its number of stores nationwide had exceeded 5,000.

In February this year, Cotti launched a low-price offensive and introduced a two-month promotional campaign, with more than 70 products selling for as low as 9.9 yuan per cup, and also launched activities such as inviting new users to drink coffee for free at 0 yuan. Starting in May, Cotti once again launched the "Summer Iced Drink Season, 9.9 Every Day" campaign, and rolled out an "8.8 yuan any purchase" activity on Douyin. These measures quickly made Cotti popular, and within two weeks of the campaign launch, sales exceeded 1.53 million cups.

Faced with such an impact, Luckin could no longer sit still. In May, it launched 9.9 yuan coupons, and in June announced the launch of a regular weekly 9.9 yuan discount. However, in the same 9.9 yuan price war, how long can they hold out? Judging from the data, Luckin's 9.9 yuan price can still barely be profitable, and with the viral success of its co-branded "Sauce-Flavored Latte" with Moutai, it has opened up a considerable gap with Cotti Coffee.

But Cotti Coffee's sales situation is not optimistic.

Due to a clear decline in sales, Cotti quietly raised prices in July. In early July, Cotti first set the 9.9 yuan Douyin group-buying coupon as limited-purchase and introduced coupons such as 13.5 yuan and 14.9 yuan; in early August, it directly canceled the "9.9 yuan every day" activity, and at the same time removed the 8.8 yuan store-exclusive coupon, with only Coconut Latte eligible for the 8.8 yuan discount.

For franchisees, Cotti's model of not charging a franchise fee may seem to have a lower threshold, with an investment of about 300,000 to 600,000 yuan, but the actual costs after entering are often higher. Because a store's influence in the early stage of opening is limited, and combined with Cotti's low-price promotions, they also need to pay the headquarters a service fee of 10%-25% each month, basically leaving them with nothing but losses. Data shows that from January to June 2023, the number of Cotti Coffee store closures reached 318, averaging one closure per day!

In addition to sales problems, Cotti's shortcomings in the supply chain have also been frequently exposed. Problems such as delayed supply chain preparation, slow product quality control and material delivery, and incomplete equipment have appeared one after another.

Under these circumstances, many Cotti Coffee stores have closed down, and franchisees have complained one after another that the 8.8 yuan drink price makes it difficult to profit, while sales at normal prices cannot rise, making it hard for franchisees to persist.

Many franchisees also said that not long after their stores opened, two more Cotti stores opened within a 1-kilometer radius, creating internal competition. As a result, many franchisees withdrew one after another and exposed their complaints online, discouraging other prospective franchisees from joining.

However, on July 17, Cotti Coffee announced through its WeChat public account that its East China supply chain base would be located in Dangtu, Ma'anshan, Anhui, with a total project investment of about US$200 million, making it Cotti Coffee's first supply chain base. The base is positioned to integrate R&D, production, and quality control, and will officially begin operations in the second half of 2023. It is unclear whether franchisees can hold on until then. In the final analysis, Cotti, which has raised prices, cannot retain consumers. How long can Cotti, which relies on franchisees for blood transfusions, last?

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