Article | Sina Technology Yuan Yiming

Lucky and Cudi had a lot of firepower in the “9.9 yuan hand-to-hand fight”.

Earlier, Lucky launched a 9.9 yuan coupon, but it was revealed that the campaign had shrunk. There were only eight products left to participate in the event, and Cudi recently launched a full 9.9 yuan campaign...

In the minds of more consumers, the price of coffee can no longer be higher than 9.9 yuan.

However, judging from the long-term operation of the enterprise, if the price is kept within the 10 yuan range, the operation will face tremendous pressure.

The “money burning method” of the Internet many years ago was wary of everyone: subsidies are difficult to sustain.

The “9.9 yuan coffee price war” caused the two companies to suffer greatly. Lucky seems to have surpassed Starbucks, but profit margins have been compressed. Lucky's sales and marketing expenses in the fourth quarter were 399 million yuan, an increase of 130% over the previous year. Cudi's investment brochure shows that after the expansion rate of nearly 1,000 new stores from April to June 2023, the number of new stores added from July to October was 873, 623, 375, and 306, respectively, showing a declining trend, and cash flow was questioned.

Looking at it this way, how long can the 9.9 yuan price war for Chinese coffee last?

Subsidized, the brand is still not sticky?

The new round of “frictions” stemmed from Lucky's previous alleged contraction of activities, leaving only eight products to participate in the discount. Shortly thereafter, Cudi launched a three-month “9.9 unlimited amount of good coffee” promotion, with no restrictions on the variety and quantity, and declared to the outside world that Cudi would not mind spending a longer time.

According to a poll initiated by Sina Finance, Lucky currently has a slight advantage in the “fight” between Lucky and Cudi. 44% of consumers say they prefer Lucky, while only 13% of consumers prefer Cudi.

However, 31% of consumers are still “wall crook.” In their minds, it doesn't matter whether it's Lucky or Cuddy; what matters is who is cheaper, and these consumers are the main group of people taken by the two sides in the “price war”.

In the comments section of the above poll, there were supporters on both sides: for example, when evaluating Cudi's American-style coffee, some said it was difficult to drink, while others called “punching” Lucky.

Shen Meng, executive director of Chanson Capital, told Sina Technology that the “love and death” between Lucky and Cudi is due, on the one hand, to their mutual roots, and on the other hand, the high degree of homogeneity between the two sides.

In his view, both Lucky and Cudi drive the market with the goal of meeting the shallow needs of consumers, so their business models are all asset-light, rapidly expanding, and driven by quantitative growth. Instead, they lack the foundation and space to shift to a qualitative growth model.

“This kind of incremental competition can only be a form of competition where it is easy to get popular with bayonets and stick to the bone. Although this model is growing rapidly, it is not sustainable. If it doesn't turn into a long-term driving force, the end result is likely to be a loss for both, or without you.”

Also, from the perspective of the general environment, demand in China will always fluctuate at the high and low end until a mature coffee culture system appears, making it difficult to form a truly large-scale stable middle group. This is also the reason why the low-end dispute is so intense.

Siege and counterattack

In fact, the “rivalry” between Lucky and Cudi has been around for a long time.

Since the Lucky case occurred, Lucky's internal management has been reorganized. In August 2022, Lu Zhengyao, who was out of the game, and his old partner Qian Zhiya, the former CEO of Lucky Coffee, founded Cudi Coffee. The two founders also had a very simple idea of opening a store, and they resolutely “encircled” Ruixing.

In some regions, Cudi's location logic starts right next to Lucky, and they even write the words “The founder of Lucky, please drink Cudi” directly at the entrance of the store.

In fact, Lu Zhengyao knows Lucky's business ideas very well, so today Cudi Coffee's core products, menu, overall store planning, and marketing style are similar — Lucky Coffee invited Yi Yi Qian Xi as the global spokesperson, Cudi Coffee officially announced Wang Yibo; Lucky launched Orange C American style, Cudi launched a citrus latte; Lucky launched a sauce-flavored latte, and Cudi launched a rice-milk latte. The text is “Late-night alcohol hurts your liver, and early morning porridge nourishes your stomach.”

In terms of price war, Lucky offered a weekly discount of 9.9 yuan, while Cudi lowered some products to 8.8 yuan after 9.9 yuan during the trial period.

According to media reports, since last year, Lucky has successively opened new Cudi stores nearby to launch 9.9 yuan coupons. Two months later, Lucky will distribute 9.9 yuan coupons to stores nationwide. Since then, 9.9 yuan has become a competitive price range between Lucky and Cudi.

Who can “have the last laugh”?

“Without Cudi, Lucky probably wouldn't want to take advantage of the low price market.” Many industry insiders said that Lucky, which “came out of nowhere” in the early days, targeted the Starbucks audience. The coffee beans used by Lucky were more expensive than Starbucks, but the price was lower than Starbucks, thus stealing the Starbucks customer base.

Although Cudi got Lucky involved in the low price dispute, Lucky still surpassed Starbucks.

In June 2023, Lucky achieved the achievement of breaking 10,000 stores. In a full year, Lucky added 8,034 new stores; in August 2023, Lucky surpassed Starbucks's revenue in a single quarter for the first time. Recently, Lucky's annual sales volume in the Chinese market surpassed that of Starbucks. According to the annual report, its annual revenue was 24.903.2 billion yuan, an increase of 87.3% over the previous year. It must be acknowledged that Lucky has become the undisputed leader in the Chinese coffee market.

And Cudi's momentum is also strong. The brand achieved “100 Cities and 1000 Stores” within 5 months of establishment. 1 year after establishment, Cudi opened 6,000 stores, and opened stores much faster than Ruixing. Today, Cudi has become one of the top 3 local coffee chain brands, second only to Lucky and Starbucks.

But in fact, if prices are lowered over and over again, can companies “hold on”?

Furthermore, in the face of round after round of price wars, can consumers accept future price rebounds?

Earlier, a post titled “If coffee exceeds 9.9 cups, will you still buy it?” In the vote, 77% of consumers said: No.

Today, it's hard to go back to the price you've been looking at, but the way you burn money is difficult to maintain. Who on the two sides is likely to have the last laugh?

“Looking at it now, Ruixing is more likely to end up laughing. From a financial perspective, Lucky has experienced ups and downs. After breaking up with the original management, it changed its growth model, paid more attention to the healthy balance of the financial structure, improved various aspects of management strategies such as assets, liabilities and growth benefits, and had a more stable business foundation. However, Cudi is in the process of expanding and burning money, and there is still a long way to go in terms of growth model.” Shen Meng said.