China set a record this year with coffee shop unit growth that exceeded 20K new outlets. The total Chinese branded coffee shop market grew 31.5% over the last 12 months to reach 87,505 outlets, according to data from World Coffee Portal. That pace of coffee store growth is nearly double that of the U.S.
Market leaders Luckin Coffee (LNCY) and Cotti Coffee added over 12,000 net new stores between them and now make up 50% of the total Chinese branded coffee shop market. The explosive growth is not without an impact on margins, as a pricing war that has broken out in the region and the high level of promotions and discounting are considered headwinds for the Starbucks (SBUX) brand, which recently sold a majority stake in its business in China to Hong Kong-based Boyu Capital.
Other coffee chains scrapping for market share in China include Mixue’s Lucky Cup, Yum China’s (YUMC) KCOFFEE, Manner Coffee, Coca-Cola’s (KO) Costa Coffee, NOWWAA Coffee, Tims China (THCH), M Stand, and Pacific Coffee.
Notably, 80% of Chinese coffee shop consumers surveyed by World Coffee Portal said they drink hot coffee at least weekly, with a quarter doing so daily, in another indication that coffee consumption trends are strong in China. Operators are also said to be increasingly experimenting with cold, flavored, and fruit-infused coffee offerings. Perhaps even more telling, 57% of consumers in the survey said they preferred homegrown coffee chains over international operators.
Looking ahead, Luckin Coffee (LKCNY) is trying to spread its brand to the U.S. The company has five stores located in Manhattan and has indicated it plans to open more U.S. stores in 2026.