As may be evident from its store-in-store strategy and convenience store footprint, Cotti Coffee has never let up in its pursuit of scale.
According to multiple sources familiar with the matter, Cotti now operates more than 15,000 stores, including 3,000 that are not yet open. This figure includes standard outlets, store-in-store units, and convenience stores.
In a recent internal meeting, Cotti founder Lu Zhengyao reportedly said that nearly 90% of standard outlets posted a monthly net profit exceeding RMB 10,000 (USD 1,400) in May. Cotti refers to this threshold as the “green light” indicator.
If accurate, this 90% profitability rate suggests that the company’s aggressive delivery subsidies, implemented since April, have yielded positive results. In recent months, Cotti has ramped up efforts on delivery platforms. According to 36Kr, its total order volume on JD.com alone has surpassed 100 million. Earlier reports indicated that in several regions, franchisees saw their order volume double while maintaining a gross margin of approximately 45%.
Cotti has also leaned on brand collaborations to drive foot traffic. Franchisees told 36Kr that the company has rolled out monthly IP partnerships this year, featuring franchises like Ne Zha, Crayon Shin-chan, and more recently, My Little Pony. The Ne Zha campaign in March, which bundled drinks with themed merchandise, was particularly effective in boosting sales. One franchisee also shared that Cotti’s sponsorship of the Argentina national football team will continue through the 2026 FIFA World Cup.
At a recent franchisee conference, the company disclosed that average operating cash flow per store in May reached RMB 27,000–28,000 (USD 3,780–3,920), marking a record high and a 40% year-on-year increase.
Store count is growing, franchisees are turning a profit, and Cotti, for the first time in a while, appears to have gained some breathing room.
Reflecting on the past year, especially the difficult winter season, the company’s main concern has been scale. Retaining and expanding its franchisee base is central to maintaining its subsidy-driven growth model. Since 2023, Cotti has also invested in supply chain infrastructure, particularly in Anhui, which requires a larger retail footprint to absorb capacity. This may help explain why Lu stated that Cotti aims to reach 50,000 stores by 2025.
When growth in standard outlets began to plateau last year, Cotti launched an initiative to open 8,000 store-in-store units in six months. However, the effort added only about 1,000 locations before it was quietly phased out due to staffing challenges and inconsistent branding.
At the time, a franchisee explained to 36Kr that sharing staff between Cotti and other in-store brands was unworkable. Having untrained personnel prepare beverages led to issues with product quality and shelf life. Budget constraints in the store-in-store model also meant there was little room to hire dedicated baristas.
Still, Cotti has never let go of its obsession with scale. This year, it shifted focus to its convenience store format, presenting it as a new driver of growth. The model offers a relatively low entry barrier: RMB 50,000 (USD 7,000) as a downpayment, with an equal deposit and the balance payable over 36 months.
Yet, no matter how many new formats Cotti experiments with, the goal of reaching 50,000 stores seems increasingly out of reach.
Cotti appears to be adjusting to this reality. Instead of chasing an unattainable number, the company is now turning its focus to improving performance at existing stores.
Earlier this year, a surge in sales was accompanied by a wave of criticism on social media. Customers complained of inconsistent product quality, unhygienic preparation areas, delivery errors, and even drinks missing their coffee shots, as some customers report receiving fruit juice after ordering lattes.
According to a source close to the company, Cotti will deploy 1,100 regional managers across the country beginning in the second half of 2025. “Cotti wanted to do this last year,” the source said, “but franchisees were seeing low volumes during the offseason. Cracking down on store operations too hard would have sparked pushback and potentially increased closure rates.”
Put differently, the pressures of Cotti’s low-price model, where a cup of coffee typically sells for RMB 9.9 (USD 1.4), has hitherto been shouldered by subsidies. The company, stretched thin, has struggled to implement a structured operational framework under these conditions. But one franchisee summarized the company’s new direction this way:
“Cotti’s management will be much stricter going forward. Before, it was all surveillance cameras and fines. Now, with onsite inspections, violations could lead to forced closures and restructuring.”
With 1,100 managers overseeing 15,000 stores, the oversight ratio would improve to about one manager per 14 outlets. A former regional manager told 36Kr that under normal conditions, one person can manage up to 30 stores. “At the peak of growth in 2024, some managers were overseeing more than 90 outlets. Operations were totally disorganized back then.”
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The road from rough-and-ready expansion to standardized management is familiar territory for any leading coffee chain, and a welcome sign of maturity for franchisees.
Still, this moment of reprieve may not last.
Much of Cotti’s recent growth has been supported by delivery subsidies, co-funded by JD.com and the company itself. These subsidies represent a significant financial burden. With the current average price on JD’s platform just under RMB 9.9, any reduction in subsidies is likely to affect order volume. As that happens, store performance will depend more on operational discipline than promotional tactics.
Despite it all, Cotti’s fixation on scale hasn’t disappeared as competition remains ongoing. “Come winter,” one franchisee said, “there will be another shakeout. Coffee isn’t a get-rich-quick business anymore. Survival of the fittest is the only rule that still applies.”
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Zhong Yixuan for 36Kr.