China’s Coffee Supply Chain Revolution: How High Raw Material Costs Are Driving a New Industrial Era

 Since 2025, the international coffee market has continued to operate at historically high levels. In 2024, Arabica coffee futures repeatedly broke record highs, and the resulting price volatility rippled through the entire supply chain. Domestic small and medium-sized roasters faced increasing cost pressure, while several retail brands began adjusting prices in the end market. Against this backdrop, the light-asset model that relies solely on external procurement has become increasingly unsustainable. For leading Chinese coffee brands, early investments in vertically integrated supply chains have proven essential—“building factories and securing the source” has become the core defense against market fluctuations.

01. Leading Brands Double Down on Deep Supply Chain Integration

Luckin Coffee began its “new coffee infrastructure” initiative in 2021 and has since completed a comprehensive network: a coffee cherry processing plant in Baoshan, Yunnan, and two major roasting bases in Fujian and Jiangsu. Its Qingdao roasting base is now under construction. Together, these facilities form a scalable production network supporting 26,206 stores worldwide as of Q2 2025.

Cotti Coffee launched its East China supply chain base in Anhui in 2023, with its second roasting phase in Dangtu scheduled to begin operations in May 2025. Once operational, total annual processing capacity will reach 75,000 tons. On May 14, 2025, Cotti signed an agreement with Lincang, Yunnan, to build an integrated “coffee core base” covering the entire industry chain—with an investment of 500 million yuan and an annual processing capacity of 50,000 tons of fresh cherries. The project, now in the site preparation stage, will support Cotti’s global expansion strategy.

Starbucks also made a major move in September 2023, investing 1.5 billion yuan to build an Innovation Park in Kunshan, Jiangsu—its first localized roasting facility in China. The park integrates green bean processing, roasting, and logistics, forming a complete vertical supply chain. This not only shortens transportation time and reduces costs but also allows the company to tailor products to local tastes, respond more rapidly to market demand, and mitigate global supply chain risks—strengthening its position in the premium segment.


02. Supply Chain Competition Reshapes Industry Landscape

The intensifying competition in supply chains is fundamentally reshaping China’s coffee industry. On one hand, major brands are building strong competitive barriers through economies of scale, while smaller brands—lacking cost control and quality assurance—face growing survival pressure. On the other hand, the supply chain has become the backbone of large-scale expansion. By the end of Q2 2025, Luckin had reached 26,206 stores globally, while Cotti, Tim Hortons China, and Nowwa Coffee have all set ambitious store expansion targets. A stable supply chain ensures steady raw material access, reduces per-unit costs, and fuels sustainable growth.

As competition shifts from front-end retail to back-end infrastructure, leading brands now view supply chain construction as a prerequisite for expansion. For Luckin, Cotti, and Tims, large-scale procurement and production not only secure raw materials but also lower operational costs—creating an advantage in both pricing flexibility and profitability.


03. Supply Chain Independence Opens Global Opportunities

By Q2 2025, China’s coffee market had reached a size of 365 billion yuan, with projections exceeding 380 billion yuan in Q3. The sector now holds genuine potential to nurture world-class coffee brands. However, industrial autonomy is key. Today, top players are building factories and developing production regions to gradually gain full control from raw materials to finished goods.

As China’s largest coffee-growing province, Yunnan plays a pivotal role in this transformation. In Baoshan and other key regions, the deep-processing rate reached 85% in 2024 and has remained high in 2025. The collaboration between Yunnan producers and leading brands marks a “two-way partnership,” driving China’s shift from a coffee consumption giant to a coffee production powerhouse.

China’s coffee industry has entered the “supply chain supremacy” era. For leading brands, mastering the supply chain marks the transition from “wild growth” to high-quality development. In the years ahead, the industry’s core competition will center on integration efficiency—who can best connect production with demand, balance expansion with cost, and optimize end-to-end operations. Those who succeed will lead the next chapter of global coffee.

For consumers, this means more stable prices and consistent quality. For China, it signals a historic opportunity—to break free from dependence on OEM production and rise as a central hub in the global coffee value chain.


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