Cotti Coffee's Hong Kong Debut: Low Prices, High Costs

Cotti Coffee opened its first Hong Kong store in Sheung Wan on October 30, using a grab-and-go format with prices from HK$10 to HK$20. The low prices attracted curious customers, but reviews of the coffee quality were mixed, with some describing the taste as hard to put into words. The store faces high rents and labor costs in Hong Kong, and analysts estimate it needs to sell over 400 cups daily to break even.

Cotti also struggles with store closures, supply chain shortages, and franchisees exiting, slowing its expansion. While the Hong Kong opening drew attention, whether its low-price strategy can sustain in a high-cost market is uncertain. The company's cash flow is under pressure, and its push into Hong Kong, Macau, and overseas markets may or may not become a turning point. Only time will tell if this approach works.

On October 30, Cotti Coffee opened its first store in Sheung Wan, Hong Kong, operating on a grab-and-go model with prices of HK$10 to HK$20, far below other local coffee brands. In the early days after opening, it attracted quite a few customers looking to check it out, but reviews of the taste were mediocre, and it faces pressure from Hong Kong's high rents and labor costs. Some analysts have pointed out that the store needs to sell more than 400 cups a day just to break even. At the same time, Cotti itself is also facing problems such as store closures, supply chain shortages, and franchisees exiting, and its pace of opening stores has clearly slowed. With its cash flow under pressure, whether expansion into Hong Kong, Macau, and overseas markets can become a new turning point remains to be seen.

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On October 30, Cotti Coffee's first store in Hong Kong officially opened its doors, located in the Sheung Wan area. According to Cotti's store type classifications, this store is a grab-and-go outlet, with no seating inside; customers take their coffee and leave.

After opening, this store attracted quite a few local consumers in Hong Kong, and many people could be seen on social platforms checking in and sharing their visits to Cotti's first store. What sparked the most discussion was actually Cotti Coffee's pricing. Judging from on-site photos, Cotti's prices in Hong Kong are roughly between HK$10 and HK$20, equivalent to about 9 to 18 yuan.

Everyone knows that Hong Kong's cost of living is on the high side. A bottle of ordinary mineral water at a convenience store costs around HK$12, coffee at other coffee shops usually sells for HK$35 to HK$50, while Cotti's Americano is only HK$10. Some netizens also mentioned that by inviting new users through the app, the inviter can get any coffee for free. However, the current low prices are due to a grand-opening promotion; after the promotion ends, prices will return to HK$19 to HK$32.

But judging from feedback from some customers, reviews of the taste are not exactly good. Quite a few people find it "so-so," describing the flavor as "hard to put into words," and some also said, "I hope Luckin comes soon."

However, a considerable number of people are not optimistic about Cotti's prospects in Hong Kong. After all, Hong Kong's shop rents and labor costs are both very high. According to Yishu Business Report, near Sheung Wan, a 40-square-meter shop costs about HK$37,000 a month in rent, while labor costs are about HK$16,000, meaning that on average at least 400 cups must be sold per day just to barely break even.

There is also a cautionary precedent. Previously, the Singaporean brand Flash Coffee imitated the models of Luckin and Cotti, using low prices and rapid expansion to seize the Hong Kong coffee market. But because the profits brought by low prices could not support its continued development, coffee quality kept declining, and in the end no consumers were willing to pay, so it had no choice but to fail and exit the Hong Kong market.

Another point worth noting is the problems of the Cotti Coffee brand itself. While opening stores rapidly, it has also been closing them at no slow pace, shutting 318 stores in the first half of this year alone. At the same time, there have also been many supply chain shortages, and franchisees are bearing the troubles of cost pressure and declining sales.

Cotti continues to pursue its 9.9 low-price strategy and is still in the stage of burning money, with fairly limited profit margins. Moreover, Cotti opened up the market through low prices, and customers' dependence on price is not solid; once prices rise, customers will clearly be lost. This also means that many franchisees earn thin profits after opening, or even keep losing money. At present, Cotti can only maintain things by subsidizing franchisees, but some franchisees still choose to exit outright, and stores are closing and being transferred one after another.

Under such circumstances, Cotti still wants to continue expanding, even moving into overseas markets, but it is clear that its pace of opening stores has already slowed markedly. It opened 1,500 stores in August, but only 480 in September, showing that franchisees are now becoming more cautious about whether to join Cotti.

Having lost the financial support of franchisees and unable to raise prices easily, how should Cotti respond now that a gap has appeared in its cash flow? Whether opening stores in Hong Kong, Macau, or overseas can bring new good news and give franchisees a shot in the arm remains to be seen.

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