Photo/Zhang Jian (NBD)

Luckin Coffee seems to be pulling back from its price war with rival coffee chain, COTTI COFFEE.

In recent days, many Chinese office workers have noticed that Luckin's 9.9 yuan (about $1.45) discount coupons' application scope has been significantly shrunk, which even became a trending topic on Weibo.

It is unclear whether this price adjustment is a sign of Luckin's victory in the price war, or it is simply a sign that the company has lost too much money.

The battle between Luckin and Kudu has been fierce.

In February, a COTTI COFFEE franchisee named Zhang Cheng (pseudonym) decided to convert his store to a Luckin Coffee store. "It's too difficult to make money with COTTI COFFEE," Zhang said. "Maybe it is better to switch to Luckin Coffee."

A similar situation happened last year, but at that time, it was Luckin Coffee franchisees who were switching to COTTI COFFEE.

The price war between Luckin and COTTI COFFEE has had a mixed impact on the coffee market.

On the one hand, some COTTI COFFEE franchisees have complained that the company is "forcing them to sell alcohol" and has "tight cash flow," which dissuaded many franchisees. Some people also disclosed to NBD that COTTI COFFEE owes a lot of money to its suppliers.

On the other hand, COTTI COFFEE continues to expand aggressively. In addition to signing popular idol Wang Yibo as its spokesperson, the company has also launched a second brand called "Tea Cat" and is continuing to open stores overseas.

In response to the rumors about its price war strategy and cash flow situation, COTTI COFFEE told NBD on February 22 that its marketing campaign is 9.9 yuan for new products (unlimited), and there will be more promotions in the future.

The company also exclusively responded to rumors about its store closures, saying that it has only closed 61 stores since opening in October 2022. The company said that the 826 figure cited by some media outlets is mainly due to the temporary closure of university stores during the winter vacation. These stores will resume normal operations after the start of the new semester.

"We currently have a safe cash flow and have made a 5-year plan and financial model," COTTI COFFEE said.

Zhu Danpeng, a food industry analyst, told NBD that Luckin's adjustment of its discount activities is a normal strategy for companies at different stages of development.

"Luckin Coffee has already gained a first-mover advantage in the competition, so it has a say," Zhu said.

It remains to be seen how the price war between Luckin and COTTI COFFEE will play out.