On February 13, Cotti Coffee announced a comprehensive upgrade of its 'Within Reach' plan, introducing a convenience store format and entering the convenience store industry. The upgraded store formats include coffee shops, convenience stores, and shop-in-shops. The company maintains its target of 50,000 store terminals by the end of 2025. While leading convenience store chains like 7-ELEVEn, FamilyMart, and Lawson have successfully created coffee brands to diversify categories and achieve multi-functionality, it is not easy for a coffee brand to operate convenience stores. 'Although coffee, due to its high-frequency and rigid demand attributes, naturally matches convenience store consumption scenarios, this does not mean that coffee brands entering convenience stores is a good business.' Wang Tuo of 'Retail Business Finance' believes that convenience stores and coffee shops are two different systems and categories, with each industry having its own complexities. For convenience store chains, adding coffee might be a natural extension, but for Cotti Coffee, the convenience store format is a challenging subject. In other words, cross-industry expansion into convenience stores is not the best path for Cotti to achieve competitive breakthroughs. Instead, if it learns from Mixue Bingcheng's strategy of targeting the lower-tier tea market, there might still be a glimmer of hope. 'It's important to note that premium coffee has no ceiling. If Starbucks is the head and Luckin is the waist, then Cotti should be the horizon of domestic coffee.'

The Gap Between Blueprint and Reality

Public information shows that Cotti Coffee convenience stores will be coffee-themed, selecting popular product categories from regular convenience stores, such as ice cream, Western-style freshly made egg tarts, and Western-style sausages as best-selling traffic drivers. Additionally, the stores will sell regular convenience store hot food items including Chinese pastries and bento boxes. The stores will be branded as 'Cotti Coffee Convenience Store'.

Image source: Internet

Unlike traditional convenience stores, Cotti Coffee convenience stores have three main differentiating features: First, they focus more on the coffee category. Compared to 7-ELEVEn, FamilyMart, and Lawson, which focus on fresh food and daily necessities, Cotti stores use coffee as the traffic entry point, potentially competing head-on with convenience store fresh-brewed coffee (such as Pike Place, 7-COFFEE) in the 'coffee' category, but the overall product structure is relatively simple. Second, in terms of brand positioning, since the main brand Cotti's product prices are lower than high-end brands like Starbucks, Cotti Coffee convenience stores may adopt a 'low-price' route, tapping into the market increment between head and waist convenience store chains and mom-and-pop shops. Third, the expansion strategy is more flexible, using a franchise model for rapid expansion, sinking into third- and fourth-tier cities to fill regional market gaps.

Image source: Cotti Coffee official website

According to Li Yingbo, Chief Strategy Officer of Cotti Coffee, China's convenience store industry is still in its early development stage. Although there are many stores, a large number of them have outdated management methods and poor profitability. Cotti Coffee will leverage its advantages in brand, category, and digital management capabilities to comprehensively empower the industry and increase per-store revenue. Cotti Coffee convenience stores aim to become a super terminal for consumers' offline eating, drinking, and daily needs, infinitely close to customers, truly making coffee life 'within reach.' 'Cotti already has a complete convenience store procurement and R&D team, with the team's basic capabilities built since last year,' Li Yingbo also revealed. 'Our convenience store model has very controllable overall risk and should produce positive results immediately.'

Image: Cotti Coffee

From an industry perspective, can Cotti Coffee's blueprint for the convenience store format truly be realized? First, Cotti Coffee's convenience store model follows the logic of 'coffee specialty store + light convenience,' targeting urban consumers seeking convenience and value for money, but essentially it still uses the dominant thinking of running a coffee business to run convenience stores, which might be just one of the necessary profit-increasing plans. As seen earlier, Cotti Coffee cross-industry launched bento meal sets, testing 'hot food bento' and 'breakfast pastries' at Beijing stores, including a 13.9 yuan lion's head rice set, a 14.9 yuan chicken leg rice set, and also directly selling braised pork, braised chicken legs, and other braised goods. Clearly, amid fierce competition in the coffee industry, Cotti Coffee is eager to find new market growth.

Second, Cotti Coffee still needs to strengthen its understanding of the convenience store industry's rules and business innovation. After experiencing the germination and exploration period (1980s–mid-1990s), the foreign capital-driven and model introduction period (late 1990s–early 2000s), the rise of local brands (mid-2000s–early 2010s), and the capital-driven national expansion period (mid-to-late 2010s–around 2020), China's convenience store industry is not in its early development stage; rather, it is in a period of digital transformation and diversified exploration (2020 to present). The development characteristics of chain convenience store brands at this stage include online-offline integration (increasing instant retail), intelligent supply chains (AI-based product selection, dynamic inventory), and business format innovation (exploring convenience dining, optimizing community services). Cotti Coffee's 'random punches' cannot yet form a head-on confrontation with chain convenience store brands, nor will it have any substantial impact on traditional mom-and-pop shops. We judge that the coffee category indeed needs to be 'within reach,' but Cotti Coffee mobilizing personnel and resources to do convenience stores is tantamount to being distracted, so the possibility of a flash in the pan is relatively high.

Furthermore, Cotti Coffee's convenience store venture faces many challenges and risks, such as how to find differentiated entry points in site selection, product cost-effectiveness, and service efficiency to avoid homogeneous competition with other coffee and convenience store brands; how to effectively integrate the sales of coffee and convenience store products to improve store operational efficiency and profitability; and how to ensure the quality and safety of convenience store products to maintain consumer trust and loyalty. 'Cotti's diversification also carries high risks, like Luckin's previous Xiaolu Tea which failed. Convenience stores and coffee have different audiences, and management and supply chains are major challenges,' an industry insider said bluntly. The difficulty of SKU management, fresh food supply chains, and inventory turnover in convenience stores far exceeds that of single-product coffee shops. If there is a lack of experience, it may lead to quality control or cost loss. If expansion is blind, it may fall into the dilemma of resource dispersion and losing on both fronts.

Is the Foundation Stable?

Cross-industry expansion is essentially a redistribution of traffic and scenarios. Cotti's diversification attempts reflect the ambition of new consumer brands to extend from 'single-product hits' to 'lifestyle platforms.' But success depends on whether it can maintain core advantages (such as coffee quality and cost-effectiveness) while controlling the marginal costs of new businesses. Looking back at Cotti Coffee's main brand itself, there is considerable room for optimization in products, supply chains, and franchising. For example, in product differentiation, Cotti's core products (such as lattes and Americanos) are highly similar to brands like Luckin and Lucky Coffee, lacking exclusive hits and falling into a vicious cycle of 'low price + subsidies.' Compared to Luckin's high-frequency co-branded marketing and seasonal new product iterations, Cotti's new product development speed and market heat matching are insufficient, with lagging innovation rhythm, making it difficult to form differentiated memory points.

Image: Cotti Coffee product matrix

Moreover, some consumers have reported significant differences in coffee taste across stores, possibly due to franchisees replacing raw materials (such as milk brands) to cut costs or insufficient operational standardization. Additionally, the long-term low-price strategy may lead consumers to form a 'low price = low quality' perception, making it difficult to extend to mid-to-high-end markets. Under the franchise model, supply chain control difficulty increases. Many franchisees have reported material and raw material shortages on social platforms like Xiaohongshu: 'Since this summer, there have been massive shortages, and various drinks are unavailable,' 'Since the new store opened, products have never been complete, and the matcha series is completely unavailable'...

Image source: Xiaohongshu

There are also former Cotti co-operators who were fined for violating company rules, who disclosed on Xiaohongshu that 'due to shortages of new goods, ordering difficulties, and company arrears, they had to order near-expiry raw materials to maintain operations. However, many products they received were only 7 days away from expiration,' and complained: 'If the store had sales and a complete supply chain, would these problems of using expired materials occur?'

Overall, if blindly pursuing the '50,000-store target,' it may lead to overloaded systems in supply chains, franchise management, and talent training, triggering systemic collapse risks. Cotti Coffee still needs to find its own path among scale, quality, and innovation, avoiding the industry's repeated 'expansion–loss of control–contraction' cycle. 'Following Mixue Bingcheng's path' might be the optimal solution.

【New Order · Symbiosis】

The 10th China FMCG Innovation Conference

Time: March 17-19, 2025

Location: Chengdu, China