Coffee "Cup Elevation Battle": Luckin and Cudy Engage in Close Combat

Ask AI · How does the coffee cup upgrade battle reflect new industry competition logic?

China Economic Journal reporter Liu Wang, Beijing report

By the end of March 2026, the coffee market was bustling again, and the market battle heated up from “price” to “capacity.”

Almost at the same time, Luckin Coffee and Kudi Coffee both launched “cup upgrade” campaigns: the former teamed up with Luo Yonghao to recreate classic “meme phrases.” During the campaign, it offered limited daily 30,000 free cup-upgrade vouchers; users who did not win could add 3 yuan to upgrade to a super-large cup. The latter, over nearly 6 weeks, directly offered super-large cup drinks for 9.9 yuan in the special offers section.

In the industry’s view, this seemingly simple cup-upgrade contest reflects a shift in the competition logic of the coffee industry.

Different ways to “upgrade cups”

The reporter from China Business Journal noted that although both brands are running cup-upgrade promotions, Luckin Coffee and Kudi Coffee do not play it the same way.

Luckin Coffee follows a route of “limited quantity + lottery + topic marketing.” The reporter saw on Luckin Coffee’s mini program that on the ordering page, consumers can upgrade their iced drinks to a super-large cup of about 596ml and upgrade their hot drinks to a large cup of about 553ml, with an additional 3 yuan required for both.

At the same time, Luckin Coffee launched a “free cup upgrade” activity: limited to 30,000 cups per day. The campaign runs from March 23 to March 29. Consumers can participate by entering the coupon lottery activity page through searching for “super-large cup” or via other ways, and they have a chance to obtain 1 free cup-upgrade voucher. With the voucher, they can enjoy a free cup upgrade.

In addition, Luckin Coffee also invited Luo Yonghao to serve as the “super-large cup recommendation officer,” reenacting a classic scene from the Starbucks cup-size meme, sparking widespread discussion on social platforms.

Kudi Coffee, on the other hand, is more direct. It launched the “Kudi Super-Large Cup All-You-Can-Drink Season.” The reporter saw on Kudi Coffee’s mini program that from March 23 to April 30, in the special-priced section, some drinks can be upgraded for free to large or super-large cups. Joining a benefits group also allows users to receive a 5.9 yuan per cup super-large cup trial voucher.

Compared with that, Kudi Coffee’s cup-upgrade campaign lasts longer, while Luckin Coffee’s marketing approach is evidently more topic-driven.

Lu Shengzhen, a brand marketing expert, analyzed that the differences in the two approaches stem from the companies’ different brand cycles. “Luckin Coffee is in a period of mutual benefits for both brand and performance, and the overall market foundation is relatively good. At present, it only needs to handle brand-topic heat well and prevent consumer churn. Therefore, its promotions carry more of a topic nature and scarcity-building, with the goal of generating sustained consumer interest.” He also pointed out that Luckin Coffee is, in effect, using the coffee consumption awareness cultivated by Starbucks to carve out the tail-end markets that Starbucks cannot fully reach.

As for Kudi Coffee, Lu Shengzhen believes it is “in a key period for scaling up.” “Kudi Coffee attempts to establish its sphere of influence with higher cost performance and scale by targeting consumers in the same circles as Luckin Coffee and Lucky Coffee. It needs to demonstrate brand value through users’ sense of gain and loyalty, quickly expand franchisees, and then rely on scale to make an impact on the capital market.” Lu Shengzhen said.

Of course, different approaches also produce different effects on their own development. Zhang Yi, CEO of iiMedia Consulting, mentioned that “Luckin Coffee uses limited-quantity lotteries, a 3-yuan cup upgrade, and topic marketing. The core is to control costs and raise order value, using a mature membership system for short-term pulse-driven traffic, while not undermining the existing price system. Kudi Coffee’s long-cycle, non-limited 9.9 yuan cup upgrade is essentially replacing low-price internal competition. It stabilizes price-value mindset, locks in price-sensitive traffic, and alleviates pressure on stores.”

However, Zhu Danpeng, an analyst in China’s food industry, believes that the “cup-upgrade battle” is more a contest of overall strength. “Judging from the current situation, Luckin Coffee is more based on user experience and market share, while Kudi Coffee, as a challenger, needs to consider from more angles.”

The brand landscape behind “cup upgrades”

Not long ago, Luckin Coffee released its 2025 financial report. Total net revenue for the full year grew 43.0% year on year to 49.288 billion yuan; by the end of Q4, the company had a total of 31,048 stores, and the cumulative number of transaction customers surpassed 450 million.

Evidently, as store scale expands, density increases as well—bringing greater pressure on same-store operations. At the earnings call, Guo Jinyi, co-founder and CEO of Luckin Coffee, said that Luckin’s same-store performance and profitability in 2026 may still face phased fluctuations and challenges.

Huayuan Securities previously carried out an estimate based on 2024 urban residents’ per capita disposable income. According to the estimate, Luckin Coffee’s store-opening ceiling is about 39,000 stores. The company’s current store count of 31,000 is already approaching this threshold.

For Kudi Coffee, the scale of more than 18,000 stores likewise brings problems of pressure on same-store operations. There were media reports earlier about franchisees’ profitability issues at Kudi. Kudi Coffee has also recently halted franchise expansion in cities above provincial capitals, slowing the pace of expansion.

At the same time, Kudi Coffee reduced the coverage of its 9.9 yuan activities. Jiang Han, a senior researcher at Pangu Think Tank, pointed out that this adjustment was driven by the company’s own profitability pressure: in the long run, low prices are hard to cover store operation and supply-chain costs. In particular, after the number of stores surges, marginal benefits decline.

From a profit perspective, in Q4 2025, Luckin Coffee’s net profit was about 520 million yuan, down approximately 39.1% year on year. This is also related to the delivery battle. Guo Jinyi said that delivery-platform subsidies clearly shrank during industry off-seasons. Although delivery share fell month on month, it still remains at a high level.

Against this backdrop, in Q4 2025, the proportion of Luckin Coffee’s operating expenses to net revenue increased by 4.1 percentage points year on year, mainly because the increase in delivery orders led to higher delivery costs. The financial report shows that delivery expenses in the fourth quarter were 1.631 billion yuan, surging 94.5% year on year; delivery spending for the full year was 6.879 billion yuan, more than doubling compared with 2.821 billion yuan in 2024. From the data perspective, Luckin Coffee needs to improve both performance and profit margins per store.

In this situation, cup upgrades seem to become a solution. Zhang Yi said, “The marginal cost of upgrading cups is extremely low; it’s a high-quality profit tool. From standard cups to super-large cups, the added cost is only the cost of a small amount of milk and coffee liquid—rent and labor are fixed. When Luckin Coffee adds 3 yuan to upgrade a cup, it’s almost pure profit increment. Kudi Coffee’s 9.9 yuan cup upgrade may offer more benefits, but costs can be covered through scale and supply-chain efficiency.”

Lu Shengzhen analyzed that cup upgrades are a promotional method that boosts sales by relying on popularity. Its cost is only the added ingredient cost, not an increase in operating costs. Therefore, it does not bring a noticeable increase in costs. Moreover, ingredient costs account for a very small portion of a cup of coffee, so it will only promote the brand and performance positively, without dragging down results and without causing cost concerns.

“Luckin Coffee’s +3 yuan, for Luckin Coffee, is a marketing tactic that is essentially no risk and no loss. The cost of upgrading a cup won’t exceed 3 yuan. It not only avoids cost pressure, but also raises the average transaction value, thereby improving the healthy state of Luckin Coffee’s cash flow. Kudi Coffee’s free cup upgrade, in theory, will bring real and tangible cost increases. But that doesn’t necessarily mean it becomes a pressure on Kudi Coffee’s ingredient costs, because there are all kinds of cup-upgrade formats across products. Different products will have different adjustments to the ratio of ingredients. Coffee ingredients, milk, drinking water, and other items may also not increase at the same cost proportion year on year. And for Kudi Coffee, as long as it can maintain heat and momentum, moderate costs are worth it.” Lu Shengzhen said.

A turn in the coffee industry

An iiMedia Consulting report mentioned that among Chinese coffee consumers in 2025, the price range per single cup that consumers find acceptable, with the highest share, was 21–30 yuan, reaching 46.44%. This indicates that most consumers are willing to accept mid-range-priced coffee. Next is the 11–20 yuan range, accounting for 30.34%, showing that consumers are more sensitive to price and prefer coffee with higher cost performance.

Clearly, consumers are not only fixated on price. Today, coffee brands have also shifted their focus away from “price wars.” “Cup upgrades” have become a new lever—not just simple, blunt subsidies. Instead, they do “work” on product perception.

Zhang Yi believes: “Competition is shifting from low-price involution to value reconstruction—this is the direction in the long run. From competing on low prices to competing on large capacity, the industry is saying goodbye to pure price wars. Bigger cups align with the trends of daily consumption and dining-out, and will push coffee to transform from functional beverages into mass fast-moving consumer goods. This will further strengthen the scale effects of leading brands and accelerate industry concentration. In the future, it will also force mid-tier brands to innovate and break through via differentiation.”

However, there are also voices that argue that cup upgrades are not a long-term strategy for brands. Lu Shengzhen said that coffee is a relatively special functional food, and the amount consumed is not necessarily the better. The significance of cup upgrades is that it further lowers the threshold for coffee consumption, making coffee solidify its label as a product for ordinary people. But from the perspective of industry health, large capacity is merely a “camouflage technique” for low prices. It is a successful market strategy, but not a healthy mode of consumption. Like large-cup sweetened tea drinks, it is not conducive to the long-term healthy development of the industry.

(Edited by: Yu Haixia; Reviewed by: Sun Jizheng; Proofread by: Liu Jun)