The Tale of COTTI Coffee and Its Founders

Key points of the article:

• COTTI Coffee is a new coffee chain in China that is rapidly expanding.
• The founders of COTTI Coffee have experience with Luckin Coffee, another Chinese coffee chain.
• COTTI Coffee is similar to Luckin Coffee in that it uses similar marketing strategies. However, COTTI Coffee is different from Luckin Coffee in that it focuses on affordability and a different brand image.
• COTTI Coffee faces challenges such as potential fraud risks and the need to balance rapid expansion with quality.

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There’s something brewing in the heart of China, and it’s not just the rich aroma of roasted coffee beans. The story of COTTI Coffee is a blend of ambition, innovation, and a deep-rooted passion for coffee, intertwined with the fascinating journey of its creators. As someone who has navigated through the bustling lanes of China, exploring its diverse coffee culture, COTTI Coffee’s narrative stands out, embodying the modern Chinese entrepreneurial spirit.

COTTI Coffee, known as 酷迪咖啡 in Chinese, is a budding coffee chain that has quickly found its ground in China’s competitive coffee market. It’s the brainchild of Luckin Coffee’s former founders, Lu Zhengyao and Qian Zhiya, who, alongside the original core team of Luckin, embarked on this new venture. As of August 2023, with about 5000 outlets across the nation, COTTI Coffee is not just a name; it’s becoming a new coffee culture phenomenon​¹​.

The inception of COTTI Coffee is a tale of resurgence. After departing from Luckin Coffee due to financial fraud issues in 2022, Lu and Qian announced their re-entry into the coffee industry. They launched COTTI Coffee with its flagship store opening its doors in Fuzhou International Financial Center on October 22, 2022. The brand didn’t stop at national recognition; it went on to become the sponsor for the Argentine national football team in China and the title sponsor for the 2022 Chengdu Marathon​²​.

The connection between COTTI Coffee and Luckin Coffee goes beyond the shared founders. The slogan for COTTI, as flaunted, hints at an upgraded version, crafted by the former Luckin creators, offering a glimpse into the competitive rivalry that brews between the old and the new​³​. The swift growth of COTTI Coffee, which saw a staggering 2500 stores within just seven months since its first outlet in Fuzhou, is a testament to the renewed vigor and refined strategies employed by Lu and Qian​⁴​.

The Genesis of COTTI Coffee

The genesis of COTTI Coffee is a tale of a fresh brew stemming from seasoned beans. At the heart of this new venture are the seasoned entrepreneurs, Lu Zhengyao and Qian Zhiya, who had previously sowed the seeds of Luckin Coffee, another prominent name in China’s coffee landscape. Their journey from Luckin Coffee, which faced financial fraud issues, to the inception of COTTI Coffee, is a narrative of resilience and a relentless pursuit to serve quality coffee to the Chinese populace. The curtains rose for COTTI Coffee with the opening of its first store at the Fuzhou International Financial Center on October 22, 2022, marking the beginning of a new chapter in China’s burgeoning coffee culture.

The vision behind COTTI Coffee is as clear as a well-brewed cup of black coffee – to make good coffee accessible and affordable for everyone in China. Unlike the initial direct-operation model adopted by Luckin, COTTI Coffee prepared to blanket the market using a 100% joint-operation model, which could likely contribute to competitive pricing​⁵​. The pricing strategy adopted by COTTI Coffee right from its early days is a testament to this vision. As the Beijing flagship store opened its doors in November 2022, it greeted customers with a pricing board displaying a friendly price of 9.9 yuan per cup of coffee, alongside additional discounts for members who registered through their mini-program, carrying a reminiscent echo of the customer acquisition strategy once employed by Luckin Coffee​⁶​.

The affordability of coffee at COTTI Coffee doesn’t stop at mere pricing; it’s deeply rooted in its operational strategy. The coffee chain disclosed that the cost of coffee does not exceed 9 yuan, a competitive edge in a market where the love for coffee is growing, but the willingness to pay high prices isn’t quite there yet​¹​. This low-price strategy sparked a price war in the coffee industry, mirroring the early days of Luckin Coffee but with a more sustainable approach​⁷​​⁸​.

The rapid expansion of COTTI Coffee, with over a thousand stores opened in just a month as of April, is not just a testament to its aggressive growth strategy, but also a reflection of its vision to make coffee an affordable luxury for the masses across China​⁹​.

Rapid Expansion

In the less than a year since its inception, COTTI Coffee has dramatically expanded its footprint across China. By August 2023, it had already established about 5000 stores nationwide, showcasing an aggressive expansion strategy akin to that of Luckin Coffee, albeit with a unique spin to create its own brand identity.

The Quick Rise to Prominence

From the get-go, COTTI Coffee displayed an ambitious expansion blueprint. Its first store opened its doors on October 22, 2022, in Fuzhou IFC, announced with much fanfare by the founders Lu Zhengyao and Qian Zhiya, both of whom had previously spearheaded Luckin Coffee’s initial surge in the Chinese market. The pricing at the outset ranged from 18 to 32 yuan, but during the trial operation period, the price dropped to as low as 9.9 yuan, a clear indication of the competitive pricing strategy that COTTI Coffee intended to adopt​¹⁰​.

Notable Milestones and Marketing Stratagem

COTTI Coffee’s rapid proliferation didn’t just hinge on competitive pricing alone; a slew of marketing strategies were employed to bolster its market presence. They initiated a “9.9 yuan” coffee promotion which seemed to have resonated well with the customers​¹¹​​¹²​. Their marketing didn’t stop there; they utilized low-price coffee coupons, frequent marketing activities, and significant sponsorships to stir up conversations and heat around the brand. The marketing approaches appeared to be a leaf out of Luckin Coffee’s book, but COTTI Coffee leveraged them to carve out its own narrative in the market, utilizing the background of the original Luckin team to its advantage​¹³​.

Moreover, during the spring season, COTTI Coffee launched a marketing campaign in collaboration with the social media platform Douyin, China’s TikTok, continually exposing new product posters and leading more than 20 cities’ food charts. This campaign saw a substantial increase in orders and exposure, with short video exposures reaching 345 million​¹⁴​.

A Competitive Edge

The competition between COTTI Coffee and Luckin Coffee particularly heated up with both brands vying for market dominance through competitive pricing strategies. During a promotional event in May, COTTI Coffee even upped the ante with a “Daily 9.9” promotion, keeping the price war against Luckin Coffee ablaze​¹⁵​.

Moreover, COTTI Coffee’s expansion didn’t solely focus on opening new stores; there was a significant emphasis on developing a robust supply chain to support its rapidly growing network of stores. For instance, in September, a subsidiary, Anhui COTTI, was registered to manage supply chain services among other functions. This was part of a larger strategy to establish multiple supply chain companies to fuel COTTI’s ambitious growth plans​¹⁶​.

Synthesis

In juxtaposition with Luckin Coffee, COTTI Coffee’s rapid expansion and aggressive marketing strategies exhibit a clear intent to capture a significant share of China’s burgeoning coffee market. While the shadow of Luckin looms large, COTTI Coffee’s narrative seems to be one of learning from the past, adapting, and charting a distinct path in China’s competitive coffee landscape.

The Connection with Luckin Coffee

The journey of COTTI Coffee is significantly intertwined with the experiences of its founders, Lu Zhengyao and Qian Zhiya, with their previous venture, Luckin Coffee. The foundational team of COTTI Coffee is largely drawn from the core team of Luckin Coffee, which is a testament to the continuity of expertise and perhaps, a shared vision to redefine the coffee culture in China.

The founders’ previous venture, Luckin Coffee, was a stark disruptor in the Chinese coffee market. However, it met with controversies and challenges that significantly impacted its operations and market reputation. Yet, the experiences gained from running Luckin Coffee provided a bedrock of insights that shaped the inception and strategic direction of COTTI Coffee.

When COTTI Coffee was launched, it wasn’t just a new brand hitting the market; it was a continuation of a journey for many of the team members. The transition of the core team from Luckin Coffee to COTTI Coffee is a significant aspect of COTTI’s story. This transition reflects a continuity in expertise, market understanding, and perhaps a shared aspiration to redefine the coffee market in China anew. Moreover, the brand story of COTTI Coffee explicitly mentions that it was established by Qian Zhiya along with the original core team of Luckin Coffee​¹⁷​.

Despite the shared personnel and experiences, COTTI Coffee is carving out its own unique path in the market. Unlike Luckin Coffee, COTTI Coffee is positioned as an extension and expansion of the coffee concept, aiming to introduce a new lifestyle centered around coffee to the Chinese market. This distinctive positioning is apparent right from its inception, where it aimed to recruit associated merchants and aggressively expand, a strategy that was markedly different from the initial developmental path of Luckin Coffee​¹⁸​.

The marketing strategies, store locations, and even the pricing strategies like the “9.9 yuan” coffee promotion, echo a familiar tune from the Luckin days. However, it’s the blend of these strategies with a new vision that sets COTTI Coffee apart. The brand appears to have taken the learnings from Luckin Coffee and is applying them with a fresh perspective to cater to the evolving market dynamics.

COTTI Coffee, while bearing the legacy of Luckin Coffee through its founding team, is keen on forging its own identity in the Chinese coffee landscape. The similarities in strategies between the two brands are undeniable, but the nuanced differences in brand positioning, strategic alliances, and expansion strategies underline COTTI’s aspiration to not just follow in Luckin’s footsteps but to create its own legacy. Through a blend of familiar strategies and fresh market approaches, COTTI Coffee is navigating the competitive coffee market in China with a renewed vision and a refined strategic outlook.

Challenges and Future Prospects

The journey of COTTI Coffee, notably its rapid expansion, has been both impressive and challenging. Your readers might find the similarities and differences between COTTI Coffee and Luckin Coffee especially intriguing given the founders’ history. Here’s a dive into the challenges and future prospects of COTTI Coffee, as well as a brief discussion on potential fraud risks, reminiscent of Luckin’s past financial fraud.

Challenges:

1. Rapid Expansion: COTTI Coffee’s ambitious aim to open a large number of stores in a short span of time led to several challenges. The rapid pace of store openings, aiming to reach about 5,000 stores nationwide by August 2023, faced hurdles like the inability to keep up with construction schedules, and issues related to coffee machine repairs which were not promptly addressed​​​¹⁹​.
2. Market Competition: The coffee market in China is fiercely competitive. COTTI Coffee introduced promotional strategies, like the “9.9 yuan” coffee promotion and even a lower-priced 4.8 yuan voucher through Douyin (TikTok), to gain a market share. However, these pricing strategies presented challenges as the low prices, in some cases, didn’t even cover the raw material costs, leading to financial strain​²⁰​.

Future Prospects:

1. Overseas Expansion: COTTI Coffee has plans for overseas expansion as part of its future strategy to further grow the brand and reach more consumers globally. The aim is to open stores in various countries, starting with Southeast Asian markets like Thailand and the Philippines, by the end of 2023​²¹​.
2. Adjusting Expansion Pace: There’s a realization within the company to potentially slow down the pace of new store openings to ensure better preparation and address the challenges that have emerged from the previous rapid expansion strategy​​.

Potential Fraud Risks:

1. Franchise Model Risks: The aggressive subsidy model, where franchisees were facing losses of 10,000 to 20,000 yuan per month, and challenges in the franchise model posed risks. It’s crucial for COTTI Coffee to ensure a sustainable and profitable model for franchisees to avoid any financial discrepancies in the future​²³​.
2. Reminiscent of Luckin’s Past: The fact that some of the core team members from Luckin, which faced a financial fraud scandal, moved to COTTI Coffee raises eyebrows. While there’s no direct indication of fraudulent activities, the similarities in rapid expansion strategies and aggressive pricing could potentially harbor risks if not managed meticulously​²⁴​.

The shadow of Luckin’s past financial fraud does cast a concerning silhouette over COTTI Coffee’s operations, urging the necessity for transparent and sound financial practices to ensure a sustainable and fraud-free growth trajectory.

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In wrapping up this caffeinated narrative, it’s hard to overlook the phoenix-like recovery of Luckin Coffee post the financial fraud debacle. Their journey has been nothing short of a roller-coaster, and yet they’ve managed to regain some ground, a testament to the resilience perhaps inherent in the coffee market here in China. As someone who’s had the privilege of witnessing the coffee culture evolve in this ancient land, each new venture adds a unique flavor to the brew that is China’s coffee landscape.

Now, having trotted down to a COTTI Coffee outlet myself, I must admit, the experience left a bit to be desired. While the ambiance radiated modern coolness, the main event—the coffee—didn’t quite hit the mark. The taste, which should be the hero of the story, seemed to play a supporting role to the brand’s coolness quotient. Yet, the bustling crowd at the outlet hinted at a promising acceptance among the local populace.

The mantra of coolness that COTTI Coffee seems to be channeling certainly has its appeal. It’s fresh, it’s modern, and it certainly aligns with the digital wave sweeping across the retail landscape. However, whether this coolness can translate into a lasting success remains a question percolating in the minds of many, myself included. The coffee market in China is a robust blend of traditionalism and modernity, and while COTTI Coffee has boldly stepped into this arena, its journey to becoming a beloved brand is a long brew awaiting.

As COTTI Coffee continues to expand its footprint across China, and potentially beyond, it’s clear that the brand is stirring up the market, albeit with a flavor that might need a bit more refining to capture the discerning palates of coffee aficionados. Each step COTTI takes, whether it’s a stride of confidence or a stumble of learning, adds a note to the evolving narrative of China’s coffee saga. And as someone deeply enamored by this narrative, I await with bated breath to see how COTTI Coffee’s chapter unfolds in the riveting tale of coffee in China.