Introduction:The competition in the coffee market has expanded from storefronts to the supply chain. Jihe Food has become a new supplier for Luckin’s rival, Kudi Coffee, while still supplying Luckin. Luckin is accelerating the construction of its own roasting facilities, with an annual production capacity expected to reach 45,000 tonnes. The two major brands share the same founder, and their price war has escalated from 9.9 RMB to 8.8 RMB. How will the competition on the supply side reshape the market landscape? Delve into the underlying logic and impact of this commercial battle.
The flames of the global coffee market are spreading from the visible price war in front of consumers to the behind-the-scenes battleground of the supply chain. Recently, Jihe Food, hailed as the “first stock in non-dairy creamer,” revealed in its 2023 semi-annual performance report that it officially became a supplier to Kudi Coffee starting in May this year, providing a variety of products including coffee beans, coffee liquid, and coffee powder — with coffee beans making up the largest proportion of the supply. It is worth noting that the company’s subsidiary, Suzhou Jinmao Coffee, has established a complete supply chain system encompassing raw material procurement, production and processing, customized R&D, and logistics distribution, and stated that its current partnership with Kudi is stable.
The coffee business has been identified by Jihe Food as a crucial second growth curve for the future. In May this year, the company announced plans to raise no more than 750 million RMB through financing, of which 550 million RMB will be used to expand its coffee production projects. According to the plan, the project is expected to be completed within 24 months. Once operational, it will achieve an annual production capacity of 16,000 tonnes of roasted coffee beans, 3,000 tonnes of ground coffee powder, 8,000 tonnes of cold and hot brew coffee liquid, 10,000 tonnes of RTD ready-to-drink coffee, and 610 tonnes of freeze-dried and flavored coffee. Such a large-scale production layout means Jihe Food urgently needs stable, long-term customer support — and Kudi Coffee, which has already surpassed 5,000 stores, fits that need perfectly.
However, Jihe Food is also a supplier to Luckin Coffee. In response to external concerns, the company stated that its current cooperation with Luckin is still within the contract period, the partnership remains normal, and has not been affected for the time being. But the company also admitted that it will not be blindly optimistic in the future and will prepare in advance to cope with market changes.
On the other hand, Luckin Coffee, which had already exceeded 10,000 stores as early as June this year, has begun actively building its own supply chain. Its second roasting factory is located in Kunshan, Jiangsu, with a total investment of up to 120 million USD, and is expected to have an annual roasting capacity of 30,000 tonnes, with plans to commence official production in 2024. Once fully operational, Luckin’s total annual roasting and processing capacity for coffee beans will reach45,000 tonnes, significantly enhancing its supply independence.
As Luckin gradually improves its backend supply chain, its reliance on externally sourced roasted beans will greatly decrease. This may also be one of the key reasons prompting Jihe Food to shift its partnership to Kudi. On the front lines of the market, the competition between the two brands has already reached a white-hot stage.
Notably, Luckin and Kudi share the same founder. This year, both brands launched large-scale promotional campaigns. Luckin was the first to push the price per cup down to9.9 RMB, and Kudi further reduced it to8.8 RMB, using low-price strategies to attract consumers. In response to Kudi’s aggressive market push, a senior executive at Luckin publicly stated: “The old Luckin is dead. Speculators who lack the right values, do not respect the market, and do not respect consumers will ultimately be fleeting.” Though no names were mentioned, the market generally believes the comment was pointed.
Under current consumer trends, acceptance of tea and coffee continues to rise, while attention to health, safety, and flavor profiles is also growing. Against this backdrop, the price war between brands extends beyond store promotions to the competition for supply chain resources — including green bean procurement, roasting techniques, and logistics efficiency. This competition not only impacts the development of individual brands but will also further drive the maturation and popularization of the overall coffee market.
Whether it’s the price battle between Luckin and Kudi or the strategic layouts behind the supply chain, the ultimate outcome will affect the product choices and quality available to consumers, while also accelerating the penetration of coffee culture among broader audiences. For coffee enthusiasts, this commercial battle is not just a fight between brands — it’s also an opportunity for the upgrade of the entire industry chain.
The above content is compiled by CoffeeHunters, a coffee news website.
