Cotti Coffee expanding into Australia heralds a new era of China influencing consumer preferences

  • Cotti Coffee opened a new outlet in Sydney, Australia as part of its international expansion model
  • The Chinese chain has leveraged big data and localisation to achieve 58% total outlet growth in under two years
  • Targeting millennials and Gen Z could be part of China’s wider strategy to internationalise its coffee shop chains and ultimately shift global consumer preferences

THE DECISION to venture into the Australian market is a strategic move for Cotti Coffee, aimed at tapping into the country’s thriving coffee culture and gauging its appeal to other international markets.

The operator – which prioritises convenience – has launched a compact takeaway-only establishment in Sydney, offering a menu of both modern Chinese coffee recipes and more “international” choices. 

Cotti Coffee, founded in October 2022 by former Luckin Coffee executives, currently has over 6,000 outlets in China and has expanded into 11 international countries. Luckin Coffee still largely dominates the Chinese market, but with 58% total outlet growth in under two years, Cotti is hot on the heels of the next competitor in line, Starbucks China, who took over 20 years to achieve a similar number of outlets.

Like Luckin and other fast-growing coffee start-ups, Cotti has leveraged big data as a key differentiating factor. This attracts investors by offering numbers and market intelligence to create forecasts, and the capacity to quickly adapt to diverse markets and consumer groups. But while Luckin focused on expanding throughout China, Cotti always had the goal of international expansion.

Why Australia?

Thanks to its strong specialty scene, Australia presents an opportunity for Cotti Coffee to carve its niche and establish a foothold in the competitive coffee market. But Australia is a notoriously difficult market to enter – one where even Starbucks initially missed the mark

“They’ll need a solid value proposition in a market that has such good coffee already,” says Omar Ali, Managing Director at Ocean Grounds Coffee Roasters in China. “Cotti is very inexpensive, average coffee. Perhaps it’s an opportunity to engage Australian youth with more fun options that could topple Australia’s popular, narrower coffee selection of flat whites and lattes that has ruled for so long.”  

For Felipe Cabrera, founder and General Manager of Ad Astra Coffee Consulting, the new location is no accident and a good example of their international expansion strategy. Sydney’s Cabramatta suburb, dubbed “Little Saigon”, has a thriving Asian community that is likely to respond well to flavours which are already popular in China, such as the Rice Milk and Blue Pampas series. 

Localisation as expansion strategy

A cornerstone of Cotti’s expansion strategy is leveraging big data to adapt its menu offerings and ambience to suit the preferences and cultural nuances of international markets. 

“Cotti seems to be a fast learner on how to adapt into different coffee cultures and react to their customers’ local tastes and trends, while maintaining its flagship products like raw coconut lattes, rice milk lattes, fruity Americanos, and plant-based milk lattes,” says Felipe. 

According to him, this first store opening in Australia is the latest in Cotti’s out-of-China expansion strategy, which has been underway since mid-2023. Largely focused on nearby East and Southeast Asian countries, Cotti has also opened outlets in Korea, Japan, Indonesia, Thailand, Vietnam, Singapore and others.

Now, Cotti is moving beyond Asian markets by offering a competitive mix of premium coffee quality, low price point, customisable drinks, food and tech that can appeal in most markets. 

“Cotti could never compete with Luckin,” says Isabelle Mani, coffee journalist. “So they invested in food too as a more profitable product segment, with a line of baked goods. This makes for a more ‘Western’ model that is exportable, which was always the point as Luckin is already leading in China.”

Coffee chains bank on millennials and Gen Z to scale up and out of China

Cotti Coffee isn’t the only Chinese coffee shop chain looking to internationalise. Luckin Coffee, HeyTea, Pacific Coffee and Mellower Coffee, for example, have all expanded into Singapore, with Mellower building a presence in South Korea as well.

These brands channel China’s signature app-based transactions, automation, and convenience in a bid to appeal to younger consumer groups on the international stage, foster loyalty, and drive repeat business. Drink customisation with coffee as an ingredient rather than something standalone is another another factor which has clear appeal to younger demographics.

Altogether, this strategy – which is already effective in China – will help reach consumer groups which are shaping the future of specialty coffee.

“Cotti and other Chinese brands will most likely continue to target Gen Z and millennial coffee consumers who are open to new ways to drink their coffees and caffeinated drinks like non-dairy milk lattes, fruity flavours or milk bubble tea-like coffees,” says Felipe. 

Against a background of global inflation and less disposable income,the lower price point many of these chains offer could also catalyse growth abroad.  

“Young people with a lower income but looking for a fun, premium product will get on board,” says Isabelle. “And by targeting Gen Z, China can shape the taste preferences of the markets they enter. This is basically what Starbucks did, making American consumption the global standard.”

China is clearly looking to internationalise its coffee shop chains. So far, it has achieved successful growth in neighbouring countries across Asia. If Cotti Coffee takes off in Australia, China could be poised to leave an indelible mark on the global coffee landscape – heralding a new era of Chinese influence for coffee drinkers.

Coffee Intelligence

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