How did Yongpu Coffee reduce the price of a single concentrate stick from 7–8 yuan to 3–4 yuan?
Yongpu Coffee lowered the price of a single concentrate stick from 7–8 yuan to 3–4 yuan, primarily by leveraging the cost advantages of supply-chain self-control, spreading fixed costs through economies of scale, and adopting a competitive strategy of proactive margin concession to counter the 9.9-yuan freshly-brewed coffee price war.
#Supply-chain self-control reduces unit cost
Yongpu gained cost control over key links by taking equity stakes in or deeply binding upstream factories:
- Raw materials: Direct cooperation with top green-bean traders and establishment of proprietary partner estates in Yunnan (scale expanded ~3× in 2021), cutting out middleman markups;
- Production: Equity stakes in coffee roasting plants, cold-brew liquid factories, drip-bag factories, and packaging factories, with capacity deployed in Qingdao, Guangzhou, Fujian, and elsewhere, avoiding contract-manufacturing profit leakage;
- Warehousing & logistics: Warehouses in Qingdao, Kunshan, Shanghai, and Suzhou shorten delivery routes, reducing spoilage and logistics expenses.
#Economies of scale spread fixed costs
Revenue grew from 20 million yuan in 2019 to 400 million yuan in 2022 (≈20× growth), and per-stick volume surged, significantly lowering the share of equipment depreciation, R&D investment, brand marketing, and other fixed costs allocated to each stick. The ambient-temperature flash-extraction technology enables 365-day shelf-stable storage, further cutting cold-chain warehousing and spoilage costs.
#Competitive strategy: extreme cost-performance vs. freshly-brewed coffee
In 2023, leading brands such as Luckin and Cotti launched 9.9-yuan freshly-brewed coffee, while Lucky Coffee targeted the 5–6 yuan bracket, shifting consumers’ price anchor for “a cup of coffee” downward. Yongpu chose active price cuts over defending a premium tier:
- Single-stick retail price 3–4 yuan; adding milk/water costs ~1–2 yuan, so a homemade latte costs only 4–6 yuan, creating a clear price advantage;
- Retains price-sensitive users with “extreme cost-performance,” sustaining repurchase rates (quarterly repurchase ~26%–28%);
- Expands offline ready-to-drink scenarios through co-branded hits like Hema’s “Ice Ice Cup” (1 million cups sold in the first week).
#Costs and risks
- Margin pressure: Price cuts compress per-unit gross margin, requiring higher turnover to maintain absolute profit;
- Quality floor: Founders stress no lowering of raw-material standards, yet rising green-bean prices (Arabica futures hit new highs in 2024) raise the bar for cost control;
- Low category barriers: Chains like Luckin and Starbucks simultaneously roll out retail coffee concentrates, while veterans Nestlé and Yutagawa also enter the fray, making price wars likely to become the norm.
#Key data comparison
| Metric | Early (c. 2019–2020) | Post-price-war (2023 onward) |
|---|---|---|
| Single-stick retail price | 7–8 yuan | 3–4 yuan |
| Per-cup DIY cost (with milk/water) | ~8–10 yuan | ~4–6 yuan |
| Freshly-brewed coffee price anchor | 15–30 yuan | 5–9.9 yuan |
| Revenue scale | 20M–100M yuan | 450M–500M yuan (expected) |
Summary: Yongpu solidified its cost base through vertical supply-chain integration, leveraged scaled production to spread fixed expenses, and passed savings to consumers to align with the freshly-brewed coffee price band, nearly halving the per-stick price. This strategy defended market share and mindshare in the short term, but long-term success hinges on finding a new equilibrium among low price, quality, and profitability.