Luckin Coffee Dominating China's Coffee Price War – CoffeeTalk

China’s largest coffee chain, Luckin Coffee, has announced rate hikes across its product lineup, leaving many office workers feeling the pinch. Starbucks is considering selling a stake in its Chinese operations, while Beijing-based Cotti Coffee has suspended its shop-in-shop franchise model. Industry analysts say these developments indicate that the prolonged “coffee price war” in the Chinese market over the past two years is now gradually coming to an end.

Luckin has raised the prices of many of its offerings by around 3 yuan, with the Americano, previously priced at 23 yuan, now costing 26 yuan. The price of a latte has gone up from 26 yuan to 29 yuan, and the popular coconut latte has seen its price climb from 29 yuan to 32 yuan. Even after discounts, these drinks are now priced at about 15 yuan.

Luckin used to offer a majority of its beverages at a discounted price of 9.9 yuan after using a widely available coupon. However, customers will now be able to claim only one coupon per week. The 9.9 yuan discounts are now limited to just a few select items, such as the Americano, latte, and oat milk latte, and the range of eligible stores has been dramatically reduced as well. According to Beijing-based food and beverage data platform Canyan Data, Luckin Coffee now operates over 21,900 outlets across China.

Luckin’s retreat from the sub-10 yuan coffee arena is widely seen as a harbinger of broader industry trends, as brands try to balance affordability for consumers with maintaining financial viability for themselves, especially in the face of rising input costs that are squeezing profit margins across the industry. The global coffee market has been roiled by significant supply chain volatility recently, with factors such as climate change and rising international logistics costs pushing Arabica coffee futures prices to levels not seen in nearly half a century.

Luckin Coffee signed a 10-billion-yuan coffee bean purchase memorandum with the Brazilian Trade and Investment Promotion Agency in November, which will secure the delivery of 240,000 metric tons of coffee beans to Luckin over the next five years. In December, Luckin announced a reduction in the prices of its raw material supplies for franchisees, effective Jan 1,2025. The dramatic increase in the cost of coffee beans might be a key factor driving price adjustments across the industry.

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