Interface News reporter | Lu Yibei

Interface News Editor | Xu Yue

April twenty _ ninthPhiliveybaccaratCOTTI COFFEE announced that the current store subsidy policy will be extended to December 31, 2026, which covers existing stores and new stores in the future. Different stores can get different amounts according to different factors such as rent and competition.PhiliveybaccaratThe maximum subsidy per cup can be up to 14 yuan.

Kudi Coffee told the interface news that the extension of the joint store subsidy policy will further ensure and enhance the profitability of stores.

This means that Coffee Coffee intends to continue the price war for two years. The setting of this time may be due to the fact that Guo Jinyi, chairman and CEO of Luckin Coffee, announced at the performance communication meeting in the second quarter of 2023 that he would put 9.PhiliveybaccaratThe 9-yuan activity will be carried out regularly, and it is "decided that this activity will last at least two years."

But right now, Cudy and Ruixing are each against 9.PhiliveybaccaratThe attitude towards a price war of .9 yuan seems to have changed.

After returning to work after the Spring Festival holiday on February 18, Interface News reported that the weekly "9.9yuan coffee" promotion launched by Luckin Coffee since May last year was decreasing, with only 10 products that could use 9.9yuan coupons on APP. The topic of "Lucky 9.90 yuan a cup shrinks" once went viral on Weibo.

Then Kudi Coffee reacted quickly.

On February 26th, 2024, Coffee Coffee announced the launch of a three-month "unlimited number of good Coffee" promotion at a time when the number of stores worldwide reached 7000. During the event, except for a few stores such as transportation hubs and tourist attractions, drinks in all the other stores are on sale at 9.9 yuan, regardless of category and quantity.

Kudi also disclosed that the above activities will continue the subsidy policy of stores, providing different subsidies for joint businesses according to store location and rent, with a maximum subsidy of 14.5 yuan per cup, and the total subsidy for the event is expected to reach 200 million to 300 million yuan.

Compared with the current Kudi subsidy policy, the maximum subsidy per cup has been reduced from 14.5 yuan to 14 yuan. This may be an adjustment made by Kudi for the sake of a longer front, but on the other hand, the reduction in subsidies may also reflect the high and heavy cost of a price war for brands.

Photo shoot: interface news Fan Jianlei

Take Ruixing as an example, this promotion has led to a sharp increase in its sales and marketing expenses, which was reflected in the third quarter of 2023.

According to the financial report, Luckin Coffee's sales and marketing expenses in the third quarter also increased by 141.3% compared with the same period in 2022. In the fourth quarter, sales and marketing expenses were 399 million yuan, up 130% from 170 million yuan in 2022. The reasons include an increase in advertising and other promotion fees, an increase in commission payment to third-party distribution platforms, and subcontracting service fees to support the company's e-commerce business and promotional activities.

Lucky also said in the financial report that due to seasonality, Wandian festivals and fierce industry competition and other factors, profit growth has slowed down, but in line with the company's expectations.

According to a Luckin Coffee investment report obtained by Interface News, 9.9 yuan is the current price limit under Lucky's operational efficiency.

This is also a pricing strategy made under the extremely large scale and supply chain, and under the comprehensive cost of rent, labor, discount and so on. As a long-term activity, it has a certain competitive advantage compared with brands with smaller stores. However, as the number of stores continues to rise and the cup volume declines naturally in the off-season (winter), the growth rate of the coffee industry is expected to slow in the future, and how to balance cup volume and promotional activities is a more challenge for brands.

For Kudi, although the price war is heavy, it needs to stabilize the confidence of franchisees by "showing muscle" at this time.

On April 7, not long ago, Tianyan check information showed that Lu Zhengyao, founder of Luckin Coffee and Kudi Coffee, and his partner Li Huan were listed as executees by the Beijing Municipal fourth Intermediate people's Court, with a target of more than 1.89 billion yuan.

Prior to this, Lu Zhengyao had three other executive messages in March 2023, July 2023 and January 2024, with a total amount of more than 1.1 billion yuan-plus the new executed information on April 7. Lu Zhengyao has been executed nearly 3 billion yuan in about a year.

Lu Zhengyao founded Coffee Coffee in October 2022. In response to the above enforcement message, Kudi responded to the interface news, which had no effect on Kudi Coffee. In fact, at the level of company operation, the legal representatives of a series of Kudi Coffee companies are represented by Qian Zhiya. Lu Zhengyao's risks such as debt and being restricted from high consumption do not affect the normal operation of Kudi Coffee.

But above business ethics, these snowballing enforcement amounts also make people think more about the business ethics, capital management and risk aversion of Lu Zhengyao and his core team. For example, the enforcement case related to Lu Zhengyao will make franchisees doubt the development of Coffee Coffee-especially at a time when major coffee and tea brands are opening up to join and snatching franchisees.

In addition, Coffee Coffee has responded to its long-maligned shortcomings in the supply chain.

The regular operation of the coffee brand chain is to start building a supply chain when there is a certain scale of expansion to ensure the supply capacity of major raw materials, but Cudi expanded at its most ferocious time in July 2023. It was only announced that the first supply chain base with an investment of 200 million US dollars was located in Dangtu, Maanshan, Anhui Province.

This is equivalent to paving the way for franchisees with their money, while making high cups, expanding their scale and attracting a new round of franchisees through a price war. the result of this dangerous game is that when the supply chain capacity cannot cover the current expansion scale, or when a large number of franchisees begin to withdraw, it will tighten the capital chain, or even collapse.

At the same time as the subsidy policy was extended, Coffee Coffee announced that its global supply chain base in Anhui had been officially put into production. The base has a total construction area of about 360000 square meters and has supply chain projects including coffee roasting, food raw materials, packaging materials and other supporting projects. After more than half a year of construction, the base has been put into production in the near future.

Li Yingbo, chief strategy officer of Kudi Coffee, said that the commissioning of the base will ensure a fundamental improvement in the cost of raw materials, quality assurance, stable supply and innovation.

Li Yingbo also said that Cudi Coffee adopts a fully joint venture business model, and store profits are the foundation of the company's business. In the coming April, the positive cash flow rate of Cudi Coffee stores across the country was approximately 95%, maintaining a healthy and steady growth trend.