Luckin Coffee Takes Tea Market by Storm, Sparking Price War with Ba Wang Cha Ji

Luckin Coffee, which has been battling Kudi Coffee in a year-long price war, has now turned its 9.9 RMB strategy towards Ba Wang Cha Ji.
Yes, Luckin has ventured into the tea segment, directly mimicking Ba Wang Cha Ji's product lineup.
Social media is abuzz with discussions on Luckin's new product "Light Jasmine," which many netizens allege is a substitute for Ba Wang Cha Ji's "Bo Ya Jue Xian."
Not only do the flavors not differ significantly, but the packaging style is also strikingly similar, further fueling the imitations claims.
Previously, both brands had tried to emulate Starbucks to carve their niches in the beverage market.
While Luckin's triumph over Starbucks was in overall revenue, Ba Wang Cha Ji's goal is to surpass Starbucks' China revenue by 2024. Ba Wang Cha Ji's 2023 revenue, according to LatePost, is around 4 billion RMB, showing there's still a gap to bridge.
The competition intensifies as Luckin leverages its familiar tactics of celebrity endorsements and aggressive pricing. On August 11th, Luckin announced that Liu Yifei is their Chief Tea Officer and launched a campaign offering "1 billion cups of 9.9 RMB afternoon tea." The combination of a popular celebrity and attractive pricing has garnered positive feedback online.
According to Luckin’s app, "Light Jasmine" is a flagship product in their new "9.9 RMB afternoon tea" series, positioning itself to capture both milk tea and light coffee consumers.
From a consumer's perspective, the difference between "Light Jasmine" and "Bo Ya Jue Xian" is barely noticeable, primarily due to the similar taste profiles and competitive pricing.
The persistent issues of product homogenization and price wars continue to plague both brands. Despite Luckin's commendable performance with two million stores, the anxiety for growth remains.
Since the onset of the 9.9 RMB price war with Kudi, Luckin's gross margin has significantly dropped.
As indicated by Luckin’s financial reports, their profit margin fell from 18.9% to 3% in the third quarter following the initiation of the price strategy.
The overlap between tea and coffee further complicates the product differentiation challenge, with ongoing price wars driving prices lower.
Industry experts believe that tea and freshly brewed coffee brands ultimately compete through their supply chains.
Both tea and coffee brands are expanding their product lines to meet more diverse customer needs and increase brand loyalty.
The competitive landscape suggests that there will be more battles ahead for beverage brands to sustain themselves amid intense competition and price wars. Chinese consumers' taste preferences continue to evolve, offering substantial market potential.
This environment presents opportunities for Luckin to further expand its brand offerings.
However, the dominance of Ba Wang Cha Ji, known for integrating cultural elements into its packaging, also underscores the importance of brand identity and intellectual property protection in maintaining competitive advantage.