Luckin Coffee price increase signal? When will the chain coffee escape the "9.9 yuan" trap?

The 9.9 yuan coffee is gradually disappearing from people's lives.

Recently, a consumer posted on social media, "I found that Luckin raised prices on a working day in 2025," stating that "multiple items increased by 3 yuan."

Luckin Coffee's "9.9 yuan" strategy has been quietly shrinking for a long time.

As early as February 2024, the 9.9 yuan store celebration coupon for Luckin Coffee was no longer applicable to all freshly made coffee beverages. The purchasing method also changed from direct ordering to adding customer service to obtain coupons to enjoy the 9.9 yuan discount.

Entering 2025, Luckin's discount efforts have further diminished.

Opening the Luckin mini-program reveals that the original homepage "Weekly 9.9 yuan" section has disappeared, replaced by "Afternoon Tea starting from 9.9 yuan."

The catering industry seems to be abandoning low-price strategies. Recently, several companies, including Mixue Ice City and KFC, have raised their prices.

Stopping vicious competition is the current regulatory direction of the economic situation.

The Central Economic Work Conference held in December 2024 clearly pointed out the need to comprehensively rectify "involution-style" competition and regulate the behavior of local governments and enterprises.

Behind this is both the diminishing marginal utility of low-price strategies leading to "involution" and the emergence of Nash equilibrium under a quietly formed market structure.

In early December 2024, Luckin Coffee Chairman and CEO Guo Jinyi revealed that the number of Luckin Coffee stores had exceeded 22,000, with over 300 million customers and 79.85 million monthly active users.

Having accumulated a large consumer base through low prices, Luckin seems to want to take this opportunity to withdraw from the low-price involution of coffee.

With the retreat of this fast coffee chain giant, is the coffee price war about to come to an end? What will happen to the battle between the two main players that once sparked this 9.9 yuan war, Luckin and Kudi?

Stepping Out of the Low-Price Trap?

Although Luckin has never explicitly stated an intention to raise prices, it cannot be ignored that in the past two years, low prices and rapid expansion have damaged the vitality of this coffee enterprise.

In the first quarter of 2024, Luckin Coffee reported an operating loss of 65 million yuan and a net loss of 13 million yuan, marking its first loss after six consecutive quarters of profit.

Despite turning a profit in the second quarter of 2024 under reduced discount efforts, the company's net profit attributable to shareholders still declined by about 18.1% year-on-year in the first three quarters of 2024.

The decline in operating efficiency per store brought about by scale expansion is the reason why stores cannot bear a large number of 9.9 yuan low prices.

From June 2023 to July 2024, over nearly 13 months, the number of Luckin stores expanded from 10,000 to 20,000.

During this period, from the third quarter of 2023 to the first quarter of 2024, Luckin opened more than 2,000 stores in a single quarter, and the overall profit margin of self-operated stores dropped from 23.1% to 7%.

Subsequently, as the pace of store expansion slowed and the price war contracted, in the second and third quarters of 2024, the profit margins of Luckin's self-operated stores rebounded to 21.5% and 23.3%.

However, coffee shops in major cities are already quite dense.

According to data from Jihai Brand Monitoring, as of July 31, 2024, nearly half of Luckin Coffee locations are less than 500 meters apart from neighboring Luckin stores.

In the two major first-tier cities of Shenzhen and Beijing, this ratio reaches 76% and 68%, respectively In the first three quarters of 2024, Luckin Coffee's comparable same-store sales growth rates were -20.3%, -20.9%, and -13.1%, marking three consecutive quarters of negative growth.

Another background for the quietly rising prices is the continuous increase in coffee bean prices, which are an important raw material.

Under extreme weather conditions, major coffee-producing regions such as Brazil and South America are experiencing significant production cuts. According to Wind data, as of December 30, the cumulative increase in U.S. ICE coffee futures for the year is approximately 70%.

Jiang Yibo, founder of Youka Coffee Beans, told TradeWind (ID: TradeWind01) that the industry expects coffee bean prices to rise even higher after the New Year, stating, "Currently, almost all large roasting factories are stockpiling, even buying up some old beans completely."

In response, Luckin has long been preparing for this.

In November 2024, Luckin signed a memorandum of cooperation with the Brazilian Export and Investment Promotion Agency. From 2025 to 2029, Luckin Coffee will purchase a total of 240,000 tons of coffee beans from Brazil, valued at 10 billion yuan.

Many industry practitioners believe that major chain brands currently implementing a low-price coffee strategy have sufficient reserves and will not be directly impacted.

Brands including Luckin Coffee, Kudi Coffee, and TIMS Tianhao China have recently stated that they have not been affected by the rise in coffee bean prices.

However, the pressure is still being transmitted downward.

A coffee bean supply chain person in Nanjing stated that they plan to raise prices for blends containing Brazilian and Colombian coffee beans after the New Year, with an increase of 20%-30%.

According to them, the purchase price for Brazilian beans has risen to 69 yuan/kg by the end of 2024, nearly doubling from the purchase price in the first half of the year.

"Brazilian beans are the most cost-effective and are widely used in affordable coffee." However, they also mentioned that the end coffee prices will not respond immediately.

For large chain brands, coffee beans as a single raw material do not account for a high enough proportion in the cost structure. At least, it is not high enough to shake the price bottom line of 9.9 yuan.

The aforementioned supply chain person stated that even if the cost pressure of coffee beans increases, coffee shops may suppress price increases through various means, such as seeking other blending options or simply lowering the quality of the beans.

"Most brands are unwilling to take the risk of losing consumers by rashly raising prices."

Kudi Has No Choice

In the past two years, the price war has not only stirred the coffee industry's ups and downs but has also deeply ingrained the 9.9 yuan pricing.

A coffee consulting industry insider told TradeWind (ID: TradeWind01) that 9.9 yuan is the bottom line price explored by internet companies like Luckin and Kudi through extensive data analysis, essentially equivalent to the price limit under current operational efficiency.

"Luckin's pricing is already basically above this line. However, any new entrant into the fast coffee market in the future will still need to reference the 9.9 yuan pricing model."

In an environment of low-price competition, Luckin even called out a low price of 6.6 yuan for freshly ground coffee in 2024.

An investor close to Luckin candidly stated, "The only reason Luckin cannot completely abandon the 9.9 yuan price point is Kudi." Since its establishment, Kudi has closely followed Luckin Coffee's low-threshold expansion, using a low-price strategy to counter Luckin and has firmly established itself in the fast coffee market.

Low prices are an important trump card for Kudi to remain competitive.

In the past year, despite being surrounded by negative public opinion due to store closures, supply chain crises, and cash flow crises, Kudi has not given up on its price war plans.

In April 2024, Kudi announced the production launch of its global supply chain base in Tongcheng County and Wuhu Comprehensive Bonded Zone, Anhui. On the same day, Kudi announced the extension of its current store subsidy policy until the end of 2026.

Regarding the rise in coffee raw material prices, a relevant person from Kudi responded to TradeWind01, stating: "We have already made a five-year overall plan when entering the coffee market, including supply chain and brand marketing, and our subsidy scale is also within this overall plan."

Regarding the follow-up plans for the 9.9 yuan promotion, the person stated: "We have prepared for the 9.9 yuan promotion for three years, and it may continue for a longer time, depending on the speed of market cultivation. We believe that three years is a necessary cycle for cultivating this market."

In February 2024, after initiating a price war for a year, Kudi announced that the total number of stores had reached 7,000; in October of the same year, on the second anniversary of its first store opening, Kudi achieved over 10,000 global stores.

The credit may be due to Kudi's launch of the convenient store model "COTTI Express" in May, which only requires setting up a 1.5m x 0.75m counter to place equipment.

The investment threshold for this store model is only 30,000 yuan, which includes a 20,000 yuan quality deposit and a 10,000 yuan equipment deposit, both refundable upon exit; equipment can be rented or purchased. In contrast, the investment amount for Kudi's standard store is about 400,000 yuan.

These rapidly expanding stores may not survive for long.

Long Zhen, founder of Jiangmeng Consulting, stated that the mortality rate of in-store shops is very high, and there has been no successful precedent for this model so far.

"Choosing to open in-store partnerships may have already encountered some issues in terms of traffic and operations. If a brand blindly enters and relaxes its management of site selection and operations, the risk of failure will be very high."

In December 2024, Kudi halted the recruitment of new store models. However, according to the company's previously announced plans, Kudi's regular and convenient stores will enter the locations of Wallace, Suning.com, and Meiyijia in the future.

Based on this, Kudi Coffee aims to achieve a total of 50,000 stores by the end of 2025.

Behind the aggressive store opening strategy is Kudi's urgent need for scale.

Kudi's revenue mainly comes from two parts: selling materials to franchisees and taking a share of the performance from affiliated stores.

Both sources of income require expansion to form economies of scale and increase its bargaining power when dealing with upstream suppliers.

Continuous Close Combat

The confrontation continues, but not solely through low prices.

By the end of 2024, Luckin announced its latest support policy for franchisees: reducing the supply prices of 86 items, including coffee beans, coconut milk, and milk.

In response to the still existing expectations of price increases for coffee beans, Luckin's price reduction this time reached 16.8% For stores with a gross profit of less than 40,000 yuan for total value goods in the month, Luckin Coffee will make up the difference for single-cup profits that are less than 5 yuan.

This will provide franchisees with a higher gross profit margin and a faster possibility of recouping their investments.

While offering discounts to franchisees during the off-season, Luckin also announced a fixed subsidy of 6,000 yuan per month for school locations in February, July, and August. Campus stores are currently a hot spot for many coffee brands and are also one of the best-performing locations for Kudi.

In terms of products and marketing, Luckin continues to increase its efforts in new product launches and collaborations. According to statistics, Luckin conducted 36 collaborative activities in 2024.

In the third quarter, Luckin's marketing expenses increased by 53.2% compared to the same period last year, with an average monthly customer count of nearly 80 million, setting a historical high.

Kudi, on the other hand, is firmly executing a follow-up strategy.

In 2024, after Luckin launched its sauce-flavored chocolate in collaboration with Moutai, Kudi started selling Moutai series liquor in its stores; after Luckin introduced its iced tea series, Kudi quickly followed with several new milk tea products.

The distribution of stores is showing a trend of encirclement.

According to data from Jihai Brand Monitoring, as of July 31, 2024, nearly 80% of Kudi's stores are located within 500 meters of Luckin.

Industry insiders in coffee consulting indicate that the cash flow and account period issues of Kudi, which have attracted external attention, have improved compared to two years ago. However, shortcomings in supply chain management and operations still exist, leading to multiple instances of material shortages during collaboration periods.

In terms of scale, products, and brand presence, Kudi lags behind Luckin, but it does not lack support from new franchisees.

Among them are those who, due to regional, experience, and funding constraints, are unable to join Luckin.

A Kudi franchisee from Fujian Province told Xinfeng (ID: TradeWind01) that his new store will open in January this year, coinciding with a new mall located near an office building.

In his view, entering a mature market requires significant capital and strong relationships, while the controversies in the coffee sector have actually provided opportunities for newcomers like him to participate.

However, as Luckin gradually enters lower-tier regions, the blank market left for competitors will become increasingly smaller. In 2024, Luckin entered the Xinjiang and Tibet markets, achieving full coverage of inland provinces in China.

Some Kudi insiders believe that Kudi's expansion in the domestic market is nearing its ceiling, and "in terms of going overseas, Kudi is on the same starting line as Luckin." To attract Chinese franchisees to open stores overseas, Kudi even proposed to assist franchisees in need by referring them to immigration agencies.

It can be anticipated that both sides will engage in more direct competition in various regions.

In the mutually stalemated situation where "no one can kill the other," whether the price of 9.9 yuan will continue to exist as one of the bargaining chips in their competition is a matter of great interest.

In a public statement in December 2024, Luckin Coffee co-founder and chairman Guo Jinyi denied that 9.9 yuan is a price war tactic. "Under a reasonable price structure, some products can be sold for 9.9 yuan, and 9.9 yuan has its sustainability."

He also described the relationship between Luckin and Kudi: Luckin needs the blue army. But importantly, the blue army must not win against the red army