For much of the past three years a single price — 9.9 yuan — became a mental shorthand for cheap, everyday coffee in China. What began as an aggressive growth tactic by newcomers has been absorbed into consumer expectation, reshaping foot traffic patterns and forcing incumbents to choose between subsidy-driven scale and a viable business model.
The price-anchor story is straightforward. Luckin’s offshoot Kudi (founded by Lu Zhengyao and Qian Zhiya) popularised an every-cup 9.9-yuan offer in 2023 and sparked a market-wide retaliation that pulled a swarm of chains into the bargain-basement. The headline result was explosive expansion: Kudi’s store count rose rapidly and the country’s coffee market grew by roughly 27% year-on-year in 2023, according to market data from that period.
But the economics behind the numbers were often bleak. Franchisees reported settlement prices close to cost, and some promotions pushed single-cup prices below sustainable margins. With material, packaging and labour costs commonly running 8–11 yuan per cup, a 9.9-yuan retail price left little room to cover overheads. Kudi’s own internal calculus has shifted: the chain recently ended its blanket “9.9 unlimited” promotion and moved most products back to the 11.9–16.9 yuan band, with an average increase of about 40% for affected SKUs.
The broader market has been cooling even before Kudi’s pullback. New store openings slowed sharply in 2024 — a near 46% drop year-on-year in one industry tally — and same-store volumes softened after the initial post-price-war surge. Kudi’s churn of franchisees is visible: in one 90-day window through late 2025 the chain opened 1,655 shops and closed 1,009, suggesting the unit-economics stress is real and pressing.
Not all players have retreated at the same pace. Luckin narrowed its 9.9 coverage but kept the price point as a strategic weapon; niche and premium operators such as Manner and specialty community cafés have avoided the race to the bottom by focusing on quality and experience at the 15–20 yuan price point. Meanwhile, a few new entrants and non-traditional players continue to dangle ultra-cheap offers — from membership cards promising deep discounts to national trial promotions at 4.9–6.9 yuan — ensuring that the cheap-price psychology remains alive.
The pullback signals a market maturing from volume-driven expansion to segmentation and differentiation. As consumers become more familiar with coffee and more discriminating about format and quality, price ceases to be the sole determinant of choice. Chains that integrated coffee into convenience retail or emphasised pick-up speed can still justify lower prices through scale, while premium independents leverage provenance, space and service to command higher margins.
For investors and operators the lesson is less about the death of discounting than its limits. Prolonged subsidy wars can build one-off scale rapidly but they also hollow out franchise networks and shorten the runway for chains without deep pockets. Cost shocks — from record coffee futures to rising dairy and coconut-milk prices — have further exposed the fragility of a model that depended on sustaining razor-thin per-cup margins indefinitely.
Kudi’s cautious step — preserving a small special-price section while raising most prices — reads like a pragmatic test: shed the unsustainable subsidy where possible, but keep tactical discounts where they still stimulate incremental orders via delivery platforms. The industry’s next phase will likely prioritise retention, smarter promotions and product differentiation over blanket price leadership. That shift may disappoint bargain-hunting customers in the short term, but it could make the sector healthier in the long run.
If the 9.9-yuan price point was the coffee market’s opening act, the next act will be about positioning. Chains that can combine efficient operations, nuanced local merchandising and a credible brand promise will survive the unwinding of the price anchor; those that cannot may be forced to consolidate or exit as subsidy-fuelled demand dwindles.