咖啡行业的资本游戏，到头了The capital game in the coffee industry has come to an end

Author | Chaoyang Capital Blast

By 2027, Luckin Coffee will celebrate its 10th anniversary.

By relying solely on its own efforts, Luckin Coffee has brought coffee consumption from boutique to the public, and its equal rights in coffee consumption are indispensable.

As of the end of May, Luckin Coffee's global store scale exceeded 35000.

This inevitably reminds people of the bold words made by Kudi, founded in 2022, at a media communication conference in February 2025:

The company maintains its target of 50000 store terminals by the end of 2025 unchanged.

More than a year has passed, and as of early June, the peak number of Kudi stores was 16000, which is still 34000 short of the target of 50000.

Leaving aside the past experiences of the two founding teams and whether coffee or store scale wins the business, the industry is already feeling a clear chill as it develops to 2026.

The first and foremost issue is the coldness of capital.

At its peak in 2021, the industry raised 37 funds with a total amount of nearly 6.9 billion yuan (according to data from Forward looking Research Institute).

By 2026, as of now, the only coffee brand that has truly raised money is Novartis, with hundreds of millions of yuan in Series C.

As for Kaiye Technology, it is a commercial coffee machine that has raised nearly 400 million yuan in Series B.

Capital is profit driven, and not investing in coffee brands may be because the industry is indeed unprofitable.

The industry is experiencing a comprehensive shake up, and the reshuffle is underway

The coffee industry in 2026 is truly turbulent.

The most difficult thing is Seesaw, a boutique coffee brand that was first funded in 2017 and officially entered bankruptcy liquidation in June this year, without surviving the 10-year cycle.

Another boutique blue bottle was acquired by Dazheng Capital (the big shot behind Luckin Coffee) for less than $400 million in March this year, almost halving its valuation of $700 million when Nestle acquired it in 2017.

In addition, Starbucks' China business was also sold in April this year, with Boyu Capital taking over 60% of the controlling stake and Starbucks retaining 40%, making it difficult to survive in the Chinese market alone.

Fine and high-end coffee are like this, even low-priced chains are not doing well.

Last year, an average of 140 coffee shops closed every day, and a total of over 50000 coffee shops closed throughout the year (according to data from Narrow Gate Restaurant).

In the first half of this year, the speed of opening stores could not catch up with the speed of closing stores.

According to the monthly report on China's freshly made tea and coffee industry, as of April, the total number of top 50 tea and coffee brand stores in China was 230800, with an overall growth rate of about 5.85% for the year. The month on month growth rate in March and April was around 1%

Two years ago, this number was often in double digits, and Luckin could net an increase of 3000 stores in a single season.

As for the high-end brand benchmark Starbucks in the industry, in the second quarter of the 2026 fiscal year (as of March 29), the total number of stores decreased to 7991, a net decrease of 20 from the previous quarter, which is a rare negative growth in stores since Starbucks entered the Chinese market.

(The above table shows the number of stores and changes in store closures of industry-leading companies, sourced from financial reports and media disclosures)

Closing a store is superficial, not making money is the real harm.

Taking absolute leader Luckin Coffee as an example, according to official disclosed data, the total net revenue for the whole year of 2025 is 49.288 billion yuan, a year-on-year increase of 43.0%, and the net profit is 3.6 billion yuan, a year-on-year increase of 21.8%.

However, in the first quarter of this year, there was a significant increase in revenue without profit, with a total net income of 11.995 billion yuan, a year-on-year increase of 35.3%, but a net profit of 506 million yuan, a year-on-year decrease of 3.6%.

And Luckin's situation is already the result of being a top student in the industry.

As the second largest chain brand in the industry and a marketing expert, Kudi has been struggling even harder this year. The most direct feedback is at the level of franchisees.

Franchisees have revealed to the media that one batch after another, with guaranteed cancellations, reduced subsidies, and inefficient and strict KPIs for community recruitment, have sparked a wave of internal transfers and store closures.

While the franchisees of Kudi are struggling, Kudi still spends a lot of money on advertising. From sponsoring Argentina for the World Cup to signing the female lead of the dark horse movie "A Love Letter to Grandma", Li Sitong, as a quality recommendation officer, hundreds of millions of yuan in marketing expenses continue to be invested in brand upgrades, but the response from the end market has always been lukewarm.

As for the industry benchmark Starbucks, it's not much better. Its revenue in the Chinese market has already been surpassed by Luckin Coffee.

According to the financial report, Starbucks China's Q2 revenue for the 2026 fiscal year was 799.8 million US dollars (approximately 5.522 billion RMB, less than 50% of Luckin Coffee), a year-on-year increase of 8%. However, same store sales plummeted from 7% in Q1 to 0.5%, and the average order value turned from positive to negative to -1.6%. Starbucks, which wanted to "sink", was targeted by a price war.

Why is capital collectively declining?

It can be seen that by 2026, the entire coffee track will become like walking on thin ice. Why?

The reason still lies in the business model and market supply and demand of coffee chains.

The profit model of the coffee industry has always come not from the end, but from the supply chain; Not from consumers, from franchisees.

Taking Kudi as an example, from the perspective of financing path, Kudi, which had no external financing in the early days, always followed the light asset route of "zero financing+joint venture realization".

The entire business logic is to leverage franchisees' funds with zero financing, exchange low price subsidies for store growth, maintain investment attraction through scale stories, and achieve maximum expansion during the coffee track window dividend period.

The headquarters' cash flow comes from the price difference and gross profit margin of equipment and raw materials sold to franchisees.

According to Tech Planet, a Kudi franchisee who was among the "first batch of alliance partners" by the end of 2022, has closed only two stores. Old shops are forced to add coffee machines when renewing contracts, and even if business is not good, they are required to add coffee machines. The headquarters does not consider frontline situations and only requires the purchase of company equipment.

This mechanism allows regional teams to prioritize store opening speed as a core KPI, and the site selection review is relaxed to the point of "approval upon application", ultimately resulting in extreme internal competition reported by franchisees as "two to three peers competing within one kilometer".

With the company's subsidy reduction and the cancellation of the minimum guarantee policy, the survival space of franchisees has been rapidly compressed.

Especially with the introduction of the "guaranteed recycling" policy in 2025 to attract franchisees, the cooperation model at that time was that if the operation did not meet expectations for 6 to 9 months, the headquarters would recycle the equipment in the franchisee's store at a discount.

But the policy will officially terminate on June 30, 2026, and the reasons behind it are also very practical.

With the increase of loss making stores, the equipment recovered by the headquarters is difficult to quickly digest, and the pressure of asset impairment continues to rise. Ultimately, the only option is to cancel the bottom line and fully return the risk to the market.

This directly leads to a large number of franchisees rushing to sell before the window period, listing and selling stores to escape the vortex of losses. Even though May to August is the traditional peak consumption season, they would rather prioritize stop loss, fearing that it will be more difficult for stores to sell during the off-season.

Franchisees don't make money, essentially it's not easy to do a 9.9 coffee business.

A 9.9 yuan American style cup, 5.7 yuan for raw materials, 1.5 yuan for packaging materials, 1.9 yuan for labor, 1.8 yuan for rent, plus 0.2 yuan for water and electricity expenses.

If there is no subsidy, it means losing one cup at a time and competing with new energy vehicles.

At the store terminal, franchisees' gross profit is compressed to only 1.5 to 2.5 yuan, and if the daily average is less than 100 cups, they will fall into losses.

The brand's profit on this cup of coffee is about 1.3 to 2.2 yuan, almost on par with franchisees, but it does not bear any fixed store risks.

What does this mean?

The profit of the coffee industry does not come from terminal retail, but from the "scissors gap" at the supply chain end.

The true profit logic of brand owners has never been to make money by selling coffee to consumers, but by selling equipment, raw materials, and brand authorization to franchisees.

Franchisees pay a deposit and equipment fee for each store they open; Every month when purchasing goods, the brand earns a price difference in raw materials; For every cup of coffee sold, the brand will receive an additional revenue share.

Regardless of whether the store is profitable or unprofitable, these revenues are rigid.

Franchisees are the "super customers" of the brand - they are the ones who truly contribute profits to the brand.

Luckin Coffee has increased its gross profit margin to 63.8% through large-scale procurement and self built baking factories, eating up the profits of intermediaries; Kudi is essentially more like a coffee supply chain company; The revenue of Novacoffee mainly comes from the sales of supply chain materials, franchise service fees, and sales revenue from cooperative stores.

Selling coffee at the terminal is a 'low profit', while selling raw materials and equipment in the supply chain is a 'high profit'.

This is also the fundamental reason why capital has recently started investing in coffee specialty equipment manufacturers and abandoned terminal brand merchants.

For example, in June 2026, commercial fully automatic coffee machine brand CAYE Coffee Technology announced the completion of nearly 400 million yuan in Series B financing, and boutique coffee supply chain company Leyin Innovation also completed a billion yuan Series B+financing.

Capital is no longer investing in the 'next Luckin Coffee', but in the 'coffee machines and baking capacity that anyone who opens a shop must use'.

What to play in the second half?

In the past decade, the winner of the first half of the coffee track has been speed. Whoever raises funds quickly, opens stores aggressively, and has strong marketing strategies can seize the opportunity.

In the second half, there were only two winners: competing for supply chain efficiency on affordable tracks and competing for scene value on high-end tracks.

For the affordable track, the supply chain is the only moat.

Future brand owners have only one core competitiveness: pushing the cost of a cup of coffee to the extreme.

The lessons of the past few years are already profound enough.

Kudi's current sluggishness proves that relying solely on franchisees' money to support scale and subsidies to increase order volume will ultimately lead to a dead end of "opening more stores and losing more".

The affordable brands that can survive in the future must meet two conditions: self built production capacity and digital operation.

In this regard, everyone is well aware that the collective is starting to compete for production capacity intensity.

Luckin Coffee has built four baking bases with a total production capacity of 155000 tons, and the cost of self baking is 15% to 20% lower than external procurement; Kudi has established a 360000 square meter supply chain base in Anhui province; After building its own roasting factory, Novacoffee reduced raw material costs by 5% and labor costs by 40%.

Capacity is the bottom line for survival.

Brands without their own supply chain will always be 15% to 20% more expensive than top players in terms of cost, and this gap is like the distance between life and death in the era of low profits.

As for digital operations, it is even more straightforward.

Store location selection relies on thermal models rather than manual judgment, pricing is dynamically adjusted according to weather and time periods, inventory is automatically replenished based on real-time sales volume, and marketing is accurately reached through private domains. The efficiency of each link is improved by 1%, but when combined, it results in poor capability.

As for the high-end track, we need to consider where the brand premium comes from when the "third space" is no longer scarce?

The answer given by Starbucks used to be the social value of space, but as more stores opened, scarcity disappeared; Once the mindset of 'one Starbucks equals three Luckin Coffee' solidifies, the brand foundation begins to loosen.

The breakthrough point lies in brand stratification: flagship stores in core business districts maintain their tone, office and community stores adapt to lightweight efficiency, and small stores in sinking markets compete with brand momentum.

Covering different scenes with the same sign allows you to survive without engaging in price wars.

At present, the story of the scaling up of premium coffee has been debunked.

The halving of the valuation of Blue Bottle and the bankruptcy liquidation of Seesaw reveal a cruel law: the natural contradiction between quality and scale.

Persisting in producing high-quality products is not enough, and rapid expansion dilutes the tone.

The boutique stores that will survive in the future will not be the 'next Starbucks', but small scale stores rooted in the community and managed by IP.

The essence of high-end coffee is not to sell better coffee, but still to sell space, tonality, and identity.

In the long run, coffee remains a good business, but it is no longer an easy one.

Players who respect business laws and create real value for users will always be able to cross cycles, rather than "paper giants" built on stories and leverage.