A few things on my radar #33 ☕️ 🍵
A Glimpse at China’s Coffee and Tea Earnings >> the deeper convergence of tea and coffee in China has made it increasingly necessary to discuss them in the same conversation.
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For years, China’s freshly made tea and coffee markets were treated as separate worlds — different price points, different consumers, different operating rhythms. That boundary has dissolved.
Today, tea brands are installing coffee machines by the thousand. Coffee chains are building non-coffee menus that rival their core offerings. They’re chasing the same customers, in the same delivery apps, across the same dayparts. So we’re now looking at a more integrated battleground — and the 2025 earnings offer the clearest snapshot yet of who’s holding up and who’s not.
Some more context: growth in both categories appears to be slowing.
On the coffee side, according to data from Canbaodian (餐宝典) cited by 36Kr, China’s freshly made coffee market was valued at RMB 193.04 billion in 2024 and RMB 223.84 billion in 2025, with year-on-year growth rates of 18.9% and 16%, respectively — a sharp deceleration from the 30%+ rates seen in earlier years.
As for tea, I noted in a previous post: “China now has over 400,000 freshly made tea shops. From 2025 to March 2026, 120,000 new stores opened and 140,000 shut down. It’s a massive market, but it has clearly entered a phase of brutal internal competition and rapid upgrading. In this arena, any brand without real differentiation is destined to be eliminated.”
Plus - even though the usage occasions, production processes, and supply chains of tea and coffee are not entirely identical, but they overlap more significantly over other categories.
Those two points may be few of the key reasons why the two categories have started to compete so directly.
With that backdrop, here’s how the listed players performed 👇.
Tea: Six Listed Companies, Four Profitable, Two in the Red
| Brand | 2025 Profit Status | Key Metric |
| Mixue (蜜雪冰城) | ✅ Solidly profitable, growth decelerating | Revenue RMB 29.75B (+20.5%); adjusted net profit RMB 8.92B (+4.6%) |
| Guming (古茗) | ✅ Profitable, growth leading | Revenue RMB 11.21B (+28.5%); adjusted net profit RMB 3.41B (+73.6%) |
| Chabaidao (茶百道) | ⚠️ Thin profit, second year of decline | Revenue RMB 6.33B (-5.7%); adjusted net profit RMB 598M (-58.9%) |
| Auntea Jenny (沪上阿姨) | ⚠️ Thin profit tier | Industry-adjusted net profit estimated at RMB 400–500M |
| Chagee (霸王茶姬) | ❌ Net profit at parent level, but Q4 operating loss | Revenue RMB 12.91B (+4%); Q4 operating loss RMB 35.5M |
| Nayuki (奈雪的茶) | ❌ Net loss RMB 241M | Revenue RMB 4.31B (-12%) |
The divergence between the profitable and loss-making names is fundamentally a story of two different operating models.
The profitable chains share a lighter, more resilient structure: they anchor themselves in lower price points to capture the largest customer base, control raw material costs through deep supply chain integration, iterate products rapidly, and deliver competitive overall value at their respective price tiers. In an oversupplied market, this model has proven far more resistant to pressure.
This pattern also holds true in the coffee sector — seen most clearly in Luckin's success and the wave of other coffee brands now imitating its small-store model.
On the loss-making side, Chagee and Nayuki face structurally similar challenges — premium positioning, larger stores, elevated operating costs, low table turnover, insufficient depth in product management and innovation, and an expansion of portfolios that quality control can’t keep up with.
These problems mirror the difficulties confronting Starbucks China: when spatial premium is diluted by delivery platforms and by rivals offering a sharper value proposition (lower price combined with higher perceived quality), sustaining both a premium price and healthy volume becomes exceedingly difficult.
Coffee: Two Profitable, Three in the Red — Even the Leaders Are Feeling Unit-Economic Strain
| Brand | 2025 Profit Status | Key Metric |
| Luckin Coffee (瑞幸, consolidated) | ✅ Profitable, but margins softening | 2025 total net revenue RMB 49.29B (+43%); Q1 2026 operating margin 8.3%→6.0%; self-operated same-store sales turned negative at -0.1% for the first time |
| Starbucks China | ✅ Profitable, propped up by non-beverage segments | FY26 Q2 revenue USD 799.8M (+8%); same-store sales +0.5% (transactions +2.1%, ticket -1.6%); Channel Development margin 40.5% |
| Tim Hortons China | ❌ Penny stock, annual loss in the RMB 200–300M range | Share price post-SPAC: $10 → $1–2 |
| Cotti Coffee (库迪) | ❌ Unit economics inverted, wave of store closures | Estimated cost per cup ~RMB 11.1; selling at RMB 9.9 implies a loss of ~RMB 1.2 per cup; 722 stores closed in 90 days |
| Seesaw | ❌ Bankruptcy | Millions in unpaid wages and supplier debt |
The two profitable players represent the sector’s absolute leaders — Luckin standing for the small-format model, Starbucks for the large-format one.
Luckin’s earnings power requires little elaboration.
Starbucks China has managed to remain profitable, and even showed nascent signs of recovery, thanks to a series of forceful adjustments: recalibrating price points, optimizing store sizes, strengthening product innovation, stepping up promotions, and pushing deeper into lower-tier regions.
Remarkably, the roots of the losses at Tims, Cotti, and Seesaw are distinct.
Tims’ “beverage + food” portfolio appears elegant on paper but suffers from serious quality-control failures — its coffee, at the very least, falls dramatically short of reasonable expectations and comes across as even less honest than Starbucks. How such a poor product came to market is a question best directed at its management.
Cotti, the other brand founded by Luckin’s founder, has stubbornly pursued subsidy-driven growth, resulting in persistently inverted unit economics. Its founding motive seems to have been fueled, at least in part, by a sense of revenge — a narrative that has not translated into consumer appeal. Today, its brand perception lags well behind Luckin, which has already cemented itself as the go-to choice for affordable daily coffee. There may be a sense of inevitability here: once a mental moat is formed around a brand, it becomes exceedingly difficult to dislodge it with a similar playbook.
Seesaw’s failure — by consensus, it lies in its prolonged indecision between a specialty-coffee ethos and a scaled chain model, ultimately dragging itself into collapse (though I personally remain less convinced by this view).
Consolidated Observations on both Tea and Coffee Sector
On the “Consumption Downturn” Narrative
“Weakening consumer demand” is frequently invoked to explain the industry’s troubles, but it functions more as a shared backdrop than a specific cause of any single company’s losses.
A more accurate explanation might be that a subdued consumer mood amplifies pre-existing model mismatches — where costs are allocated and whether the model is adapted to China’s structural realities (high delivery penetration, the blurring boundary between tea and coffee) matters far more than the macro climate alone.
On Delivery’s Role
Several disclosed figures reveal just how much delivery now dominates revenue.
At Nayuki, delivery accounted for 52.6% of direct sales; dine-in was below 10%. This means a significant portion of revenue does not depend on in-store consumption — an intrinsic contradiction for a large-format spatial model.
At Luckin, the delivery share was under 40% in Q4 2025 and approximately 30–35% in Q1 2026; Luckin appears to be deliberately lifting average ticket prices and even expanding its proportion of larger-format stores.
In short — the delivery war has never gone away, and it never will, because delivery has become a deeply embedded part of Chinese consumer behavior. For tea and coffee chains, balancing physical space with delivery economics may become one of the central strategic questions navigating the next phase.
On Differentiation
In a market defined by brutal homogenization, cross-category expansion, SKU proliferation, and experiential layering have become the default paths in search of differentiation. But when quality control and innovation fail to keep pace, new SKUs merely disperse supply-chain focus, turning into items that consumers regard as “not terrible, but not worth remembering.”
Meaning — the short-term revenue bump from superficially adding categories and simply piling on experiences rarely translates into durable repeat purchase.
This may be the best product-level explanation for why tea and coffee have so aggressively encroached on each other’s turf. As noted earlier, the usage occasions, production processes, and supply chains of tea and coffee are not entirely identical, but they overlap significantly — especially when it comes to creative drinks. The overlap is far greater than with categories like alcohol, desserts and bakery, or hot food, all of which require a heavier operational model. This shared foundation gives brands significantly more control over both quality and creativity.
On the Unlisted Blind Spot
The analysis above rests entirely on publicly disclosed financials from listed companies, except Seesaw. A considerable number of unlisted brands remain financially opaque, and independent shops are not captured here at all. Any conclusions drawn from current public data should therefore be treated as inherently limited and potentially unrepresentative of the full market picture.