Tea or Coffee?
China’s Beverage Battle Creates a New Consumer Landscape
Introduction
China’s beverage scene is undergoing a dramatic transformation. The spectacular rise of new-style tea (led by the likes of Mixue Bingcheng and Heytea) and the relentless expansion of coffee chains (such as Luckin and Manner) reflect deeper shifts in tastes, culture, and consumer values. Are tea and coffee rivals, or partners in building a dynamic new market? The answer: both, but the real story is how each is pushing the other into a new era of innovation and crossover appeal.
1. The Rise of New-Style Tea: Not Just a Fad
Brands like Mixue Bingcheng have redefined scale and price in the tea industry, with over 46,000 locations and ultra-affordable offerings. Their mastery of supply chain, franchising, and playful marketing (the iconic “Snow King” IP) has set a gold standard for mass-market beverage expansion.
The affordable, frequent “little treat” culture championed by tea brands has made them an integral part of daily life for all ages, not just the young.
Tea drinks are no longer “old-fashioned.” They’ve become lifestyle statements, sources of creative flavors and social experiences, all while keeping tradition alive in a contemporary form
2. Coffee’s Surge: From Trendy Niche to Everyday Essential
Coffee consumption in China is booming—annual market revenue has now surpassed $24 billion, with expectations to break $30 billion within a few years.
Chains like Luckin and Manner are democratizing coffee by offering lower prices, digital ordering, and local innovation, expanding into smaller cities and directly challenging established players like Starbucks.
The coffee market has adapted by introducing more healthy, convenient, and RTD (ready-to-drink) products, as well as embracing novel blends and lifestyle-focused marketing.
3. Competition or Coexistence? The Blurring Boundaries
“Coffee vs. tea” is becoming an outdated binary. Chinese consumers are increasingly flexible—choosing tea, coffee, or hybrid drinks based on mood, time, and occasion.
Both categories borrow from each other: tea shops serve coffee, coffee shops sell tea drinks. The real rivalry? Winning a greater share of “drinkable moments” in a day.
With cross-category product launches and brands now co-targeting Gen Z’s demand for fun, health, and convenience, the two segments are building a diverse, highly innovative beverage ecosystem, not a zero-sum battleground.
4. Lessons from Mixue Bingcheng: What’s Shaping the Future?
Affordability matters: Price leadership enabled scale and resilience.
Supply chain is king: Owning manufacturing and logistics delivers both cost control and franchisee success.
Emotional branding stands out: From the Snow King mascot to viral marketing, building a playful and recognizable IP is now non-negotiable.
Operational resilience: Surviving downturns with low-cost structures and BAU innovation is vital for market leadership.
International vision: Mixue’s overseas expansion holds a playbook for other Chinese beverage brands on going global.
5. The Real Transformation: “Tea or Coffee” Becomes “Tea and Coffee”
The simultaneous surge of tea and coffee reflects the rise of a multi-beverage, scenario-driven market. Young consumers are just as likely to switch between a milk tea and cold brew as they are to sample a cheese foam latte.
Growth in ready-to-drink offerings, health-centric options, and innovative crossovers (think fruit-infused coffees and high-protein teas) ensure all players must keep evolving.
Both industries are moving from competition to co-creation, sharing the spoils of a rapidly growing, endlessly inventive beverage marketplace.
The future isn’t about tea versus coffee. It’s about the power of both—to energize, comfort, and connect China’s fast-evolving consumer class. The message for global brands, investors, and local start-ups: There’s room for everyone, if you’re fast, innovative, and ready to blur boundaries. In China’s beverage revolution, “either/or” is old news—“and/with” is the taste of tomorrow.
Special Section | When Starbucks Quits China and Luckin Heads to the US: What’s Next for Investors?
Recent months have been filled with dramatic headlines about Starbucks’ future in China and Luckin Coffee’s global ambitions. Here’s what’s actually happening—and what it all means for investors:
1. Starbucks: Not Yet Quitting, But the Pressure Is On
Despite a flurry of media reports, Starbucks has publicly denied any plans for a full exit from China. The company is, however, exploring “strategic options”—including the possibility of selling a significant stake in its China business to local or international partners amid declining market share and rising competition.
Starbucks’ China market share has dropped from 34% in 2019 to 14% in 2024, as local brands (notably Luckin and Cotti) have aggressively expanded with lower prices and faster formats.
Starbucks continues to open new stores and seeks a local partner, reaffirming that China remains a key growth market. But the brand is under pressure to adapt its premium, “third-space” model to the more price-sensitive and innovative local market.
2. Luckin Coffee: From China Champion to Global Disruptor
Luckin, after surpassing Starbucks in total China locations (over 26,000 stores) and achieving 47%+ revenue growth in Q2 2025, has begun its long-awaited expansion into the United States. In 2024, Luckin opened two branches in New York City—launching a “China playbook” built on ultra-efficient app ordering, rock-bottom prices ($2–$3 per drink), and tech-powered store management.
Analysts see New York as a test market; the move signals Luckin’s ambition to challenge Starbucks—and US traditional players—on their home turf. Luckin’s success will depend on its ability to adapt to US customer habits, higher labor costs, and a more brand-driven, less price-sensitive market.
3. Investment Opportunities: What’s the Take?
Luckin’s Global Upside:
Luckin has moved past its 2020 scandal and is now viewed as one of the world’s fastest-growing, most operationally efficient coffee chains. Its rapid expansion, robust margins (upwards of 56%), and focus on tech and affordable pricing provide a compelling growth narrative.
The successful execution of its US and Southeast Asian expansion could mark the beginning of a true “global Chinese beverage brand,” mirroring what Chinese EV and fast-food brands have done worldwide.
For investors, Luckin’s lower valuation (1.5x revenue vs. Starbucks’ 3x) and faster growth rate make it a “high-growth, scalable disruptor”—but international risks and execution challenges mean volatility remains.
Starbucks’ China Dilemma—Pain or Potential?
If Starbucks does divest part of its China business, private equity, institutional, and even Chinese retail/food conglomerates may see an opportunity to buy into a premium Western brand at an attractive valuation. The bidding process—valuing Starbucks China at $5–10 billion—is already heating up.
For global investors, Starbucks could improve efficiency and cash returns by refocusing on core markets and embracing local partnerships, much like Yum China did after spinning off from Yum Brands.
In the short term, uncertainty over strategy and competitive pressure may create entry points for value investors—Starbucks’ US-listed shares remain highly liquid, with the global brand’s resilience and dividend history appealing to defensive portfolios.
China’s Beverage Sector: Structural Growth
The broader market continues to explode: innovations in tea, coffee, and hybrid beverages keep Chinese consumers engaged and fuel investment interest in both listed (e.g., Luckin, Mixue, Nayuki) and private (Heytea, Manner) companies.
For venture or PE investors, backing supply chain, technology, and franchising enablers in this rapidly scaling sector provides a strong thematic play.
Conclusion
Starbucks is repositioning in China rather than a full retreat, but the competitive landscape has shifted dramatically. Luckin’s bold move into the US marks the next potential chapter for China’s beverage disruptors and a real-time test of Chinese business models on the global stage.
For investors:
Luckin Coffee may be one of the boldest growth stories to follow in global F&B in the coming years.
Starbucks remains powerful and may benefit from strategic refocusing.
The biggest opportunities may lie in the pick-and-shovel businesses powering the beverage revolution—tech, logistics, franchising, and supply chain platforms that benefit as both tea and coffee brands keep re-inventing themselves.
In China’s evolving beverage sector, the rivalry is far from over—and the opportunity, for those able to navigate the volatility and spot operational winners, is just heating up.
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