What happened: Coffee Box, a local rival to “new retail” coffee brand Luckin, has shuttered 30% to 40% of its more than 400 stores nationwide in a pullback that began around the Spring Festival holiday. There are now 70 outlets in Shanghai compared with 120, and around 40 in Beijing vs. more than 60. Coffee Box stated that it targeted unprofitable storefronts and those that failed to meet certain brand requirements as it seeks to regain profitability amidst a cooling capital market. The company expects to return to profitability in the second quarter and a new financing round will be announced in April.
Why it’s important: One of the early players in the sector, Coffee Box was founded in 2014 as a WeChat-based third-party delivery platform for Starbucks and Costa before it launched its own brand. The company began profiting from its more than 100 stores at the end of 2017, but the arrival of well-funded Luckin Coffee in 2018 ramped up the competition. Luckin, while still loss-making, announced in early January its goal to open more than 2,500 new shops, pushing the total number of storefronts to 4,500 by the end of this year.