ng the competition in 2022, Cotti Coffee has been rapidly expanding its presence within China and globally, with a network of 7000 stores across 28 countries and regions, which makes it the world’s fourth-largest coffee chain by number of stores. The coffee chain was founded by Charles Ly and Jenny Qian, both of whom held executive roles at Luckin Coffee before leaving the chain after the financial scandal in 2020 when the company confessed to falsifying its earnings. How does Cotti Coffee’s business model support its rapid growth? “Unlike traditional franchising or direct management models, Cotti Coffee has adopted an innovative partnership approach,” Yingbo Li, chief strategy officer at Cotti Coffee, told Inside Retail. “The company forgoes any brand usage or franchise-related fees initially, opting instead for a profit-sharing arrangement, aiming to share risks with its partners, reduce the threshold and risk of opening stores for partners, maximise partners’ enthusiasm, leverage each other’s strengths, and rapidly create economies of scale.” The company also introduced single-store and regional partnership models for international markets. Li explains this model helps Cotti Coffee to capitalise on the local market knowledge and regional resources of its partners, while the latter will bring to the table the supply chain, operational and other strengths. In addition, Cotti Coffee’s lifetime partnership system allows the collaboration to extend indefinitely if the partner’s location permits long-term or lifetime use. If a partner chooses to exit, the company offers a depreciation buy-back option for the equipment, significantly lowering the threshold for potential partners to initiate and sustain their businesses. Li also stated that scalability was a key factor in the brand’s rapid growth. The company partnered with Dutch payment company Adyen to provide a single API integration of locally preferred payment methods in the different markets Cotti Coffee is entering. “We have also iterated on store formats. Our stores include shop-in-shop, grab-and-go, standard, flagship, and outdoor, among others, with grab-and-go being the primary store type. This represents a significant innovation as we shift from large-scale stores to smaller outlets, significantly reducing both rental and labour costs,”Li said. “Cotti Coffee’s rapid development has been driven by the combined forces of market capacity, user demand, and its unique partnership model.” The officer remarked the international market presents significant growth opportunities for Chinese enterprises and entering each market requires careful consideration of various factors, including market potential and maturity, culinary traditions, consumer habits, supply chain infrastructure, product development, pricing strategies, and marketing approaches. “When it comes to opening new stores, our foremost consideration is the profitability of the store,” he said. “We strive for every store to be financially viable, which is why we prioritise store location selection and detailed operations, with a strong focus on further optimising both products and experiences. This is also our central area of focus for this year.” Technology at its core “Technology plays a vital role in supporting and securing rapid market expansion and large-scale store operations,” Li said. “We have established an international supply chain hub in Anhui, now operational, which employs fully automated processes to reduce raw material costs and ensure consistent supply to our global network of stores.” The company has also developed an intelligent operational framework that leverages intelligent information systems, intelligent IoT systems, and intelligent marketing systems to reduce store management and production costs while boosting store revenue. “In January, we unveiled our human-robot collaboration strategy, which involves scaling up the use of commercial robots in stores worldwide. This strategy will be implemented concurrently in both Cotti Coffee and Tea Cat brand stores,” Li said. “This holistic approach has yielded significant improvements in overall operations, cost management and store efficiency, enabling us to deliver high-quality, affordable coffee products consistently. “At the same time, we have established local branches abroad to oversee end-to-end processes, including local supply chains, store management and operations, warehousing, and distribution logistics. This concerted effort aims to expand our brand presence in overseas markets, introduce our products to more consumers, and establish our own distinctive brand identity.” Variety of collaborations to attract young customers The coffee chain is best known for its sponsorship of the Argentine National Football Team since the brand’s inception. However, it has also been increasing its visibility among younger customers through collaborations with trendsetters such as Wang Yibo and global icons like SpongeBob SquarePants and Spy x Family. Additionally, partnerships with Frida Kahlo Corporation, which manages the work of the Mexican artist, the popular mobile game Honor of Kings, oat milk brand Oatly, and international brand Smiley have further expanded its appeal. “These collaborations enable us to engage with the younger generation across various channels they love, fostering curiosity, interest, and affinity towards the Cotti Coffee brand,” said Li. According to Li, compared to mature coffee consumption markets, China’s coffee market is still in its nascent stage with vast room for growth. “This is an opportune moment for market expansion and our concerted efforts in market exploration and development.” Anil Prabha contributed reporting.