Speaking at the 36Kr WISE2024 summit, Cotti’s chief strategist detailed how pricing and supply chain efficiency are driving the brand’s rapid expansion.

Held in Beijing from November 28–29, the 36Kr WISE2024 summit attracted a stellar audience, garnering a strong response from China’s business community. Now in its 12th year, the event has become a platform to showcase the resilience and potential of Chinese businesses in a rapidly changing world.

The year 2024 has been marked by uncertainty, defined more by transformation than stability. While progress has slowed compared to the past decade, the search for new economic drivers has intensified. This year’s WISE conference adopted the theme “Hard But Right Thing,” encouraging participants to explore what constitutes the “right thing” in the face of evolving industry dynamics.

During the main forum on November 29, Li Yingbo, chief strategy officer of Cotti Coffee, delivered a keynote address highlighting the trajectory of the Chinese coffee chain. Li said that Cotti was founded with the mission of making coffee an accessible lifestyle choice for global consumers, emphasizing high-quality products as its core offering. However, to establish coffee as a daily necessity, Li underscored the importance of affordability and availability.

According to Li, delivering the best coffee experience involves balancing brand excellence, superior product quality, and cost efficiency. To achieve this, Cotti leverages the efficiency of Chinese manufacturing to reshape global coffee supply chains and technological systems.

As of October 20 this year, Cotti, just two years since its founding, has opened 10,000 stores across 28 countries and regions, making it the fourth largest coffee chain globally. Yet, in Li’s view, China’s coffee market is still in its infancy.

Li noted that, over the past seven years, China’s per capita annual coffee consumption has increased from six cups to 15 cups. By comparison, Hong Kong’s per capita consumption is 200 cups annually, while in Europe and North America, it ranges from 400 to 600 cups. Li projected that mainland China’s consumption could eventually reach 100–200 cups per person annually, necessitating millions of new stores to meet this demand. Currently, the combined store count of the top 10 coffee brands in China is less than 50,000.

To drive sustainable growth, Cotti employs a dual strategy: reducing consumer barriers through pricing while addressing cost efficiency on the business side.

On the consumer side, the focus is on lowering consumption barriers by adopting a pricing strategy of RMB 9.9 (USD 1.4) per cup of coffee, a market cultivation approach that Li anticipates will remain in place for at least three years.

On the business side, the strategy emphasizes two key areas. The first is cost reduction, achieved by developing a robust supply chain. This foundation enables the company to sustain its RMB 9.9 pricing. Notably, even before opening its first store two years ago, Cotti had already begun planning its supply chain to ensure optimal cost efficiency from the start.

Currently, Cotti has built a supply chain base in Anhui, covering a total construction area exceeding 360,000 square meters. Equipped with fully automated production equipment, Cotti said the base can meet the supply needs of both international and domestic stores. It includes China’s largest coffee roasting plant, with an annual capacity of 45,000 tons of coffee beans. Other products, such as syrups, coconut milk, cups, lids, straws, and packaging bags, are also produced in-house.

Cotti is also taking steps to lower the barriers to store ownership. In addition to its quick-service and standard stores, the company has introduced convenience stores, largely operating under a store-within-a-store model. In October, it established strategic alliances with 51 chain brands. Furthermore, Cotti has implemented an equipment leasing model to minimize risks and reduce investment hurdles for franchise partners.

Thus far, the RMB 9.9 strategy has achieved notable results. According to Li, over 95% of Cotti’s 10,000 stores have maintained positive cash flow for the past five months. Since its inception in 2022, the company’s cumulative store closure rate has remained low at just 3.6%.

Li attributed this success to the efficiency of its supply chain, which underpins the low pricing strategy. This approach not only offers consumers value but also ensures profitability and sustainability for franchise partners.

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