Core Viewpoint - The Chinese coffee market is undergoing a significant "value deconstruction," with prices being driven down to as low as 4.9 yuan, transforming coffee from a luxury item into an accessible consumer good [1][6][28] Group 1: Market Dynamics - Luckin Coffee and Kudi initiated a price war by normalizing the 9.9 yuan coffee price, which has now been further undercut by tea brands like Cha Bai Dao and Gu Ming, bringing prices down to 6.9 yuan and 4.9 yuan [1][3][6] - The coffee market is expanding under the influence of low prices, leading to a bifurcation between affordable and premium offerings [1][7] - The shift in consumer behavior has moved from "going out for coffee" to "picking up coffee on the way," indicating a change in consumption scenarios [6][28] Group 2: Competitive Landscape - Tea brands are entering the coffee market, leveraging their existing customer base and aiming for increased sales, with Gu Ming reporting a 10% average sales increase after introducing coffee [3][5] - The ongoing "subsidy war" in the delivery sector is further driving down prices, making coffee more appealing to consumers who are already purchasing tea [5][28] Group 3: Profitability Concerns - The price war raises questions about profitability, as the cost of quality coffee beans often exceeds the selling price, leading to concerns about how companies can sustain profits [10][14] - Kudi's coffee cost structure indicates that selling coffee at 9.9 yuan may not cover costs unless sales volumes are sufficiently high, suggesting a reliance on scale for profitability [11][14] - Despite the price pressures, major brands like Luckin and Kudi continue to report significant revenues, although their profit margins are under strain due to aggressive pricing strategies [27][28] Group 4: Future Trends - The coffee market is likely to see a split between low-cost, high-frequency consumption brands and premium, experience-focused independent cafes [28][29] - Consumer perceptions are also diverging, with some viewing coffee as a daily necessity while others still value the premium experience associated with high-end coffee [29]