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On November 18, a major Chinese coffee chain announced that its third-quarter profits declined by 2.7%, primarily due to reduced profit margins caused by increased delivery costs, driven by rising competition among food delivery platforms in China.
The company reported a net profit of approximately USD 183 million (CNY 1.3 billion) for the three months ending September 30. Revenue soared by 50%, reaching about USD 2.2 billion (CNY 15.3 billion), supported by the addition of 3,008 new stores and a record average of 112.3 million monthly customers.
Earnings from company-operated stores grew 48% to CNY 11.1 billion, while partnerships contributed CNY 3.8 billion, representing a 62% increase. As of the end of September, the company operated a total of 29,214 stores worldwide, including 18,882 self-managed outlets and 10,332 partnership locations.
The CEO noted during a quarterly earnings call that the intensity of delivery subsidies has “started declining rapidly” in the current quarter. However, ongoing higher costs for coffee beans could slow growth into early next year.
The profit margins were squeezed due to a fierce delivery subsidy war that significantly increased logistics and commission expenses. Delivery costs surged by 211%, reaching CNY 2.9 billion, which reduced the company’s operating margin under generally accepted accounting principles from 15.5% to 11.6%.
The CEO emphasized that deliveries will remain supplementary since most coffee consumption in China is primarily pickup-based, owing to considerations of cost and product quality.
Margins at individual stores for company-operated outlets decreased from 23.5% to 17.5%. Net income for the quarter dipped slightly from CNY 1.31 billion to CNY 1.28 billion, with the net profit margin narrowing to 8.4%.
Regarding plans to relist, the company disclosed that there is no confirmed timeline for a return to the main stock exchange in the United States.
As of September 30, cash and short-term investments totaled CNY 9.4 billion, up from CNY 5.9 billion at the end of the previous year, supported by an operating cash flow of CNY 2.1 billion.
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