COSTA COFFEE IN CHINA: WHAT A DECADE OF EXPANSION ACTUALLY TAUGHT US
I wrote the first version of this case study in 2015. Back then Costa Coffee looked like a British success story in China: fresh capital, a local partner, a growth plan built on the country’s expanding middle class. Ten years later, the honest update is a different one. Costa has spent the last five years closing stores, not opening them, while Luckin Coffee built a network of over 30,000 locations around it. That is not a footnote. That is the case study now.
Olivier Verot is the founder and CEO of GMA, based in Shanghai since 2012. He has advised food and beverage brands, including several coffee and tea chains, on market entry and localization strategy in China.
A joint venture that made sense on paper
Some of the original story still holds up. Costa entered China through a joint venture with the Yueda Group, a Jiangsu-based conglomerate, rather than going it alone. That was the right call. A foreign coffee brand with no local retail experience, no supplier relationships, and no read on Chinese consumer behavior needs a partner who already has those things. Costa also benefited early on from Starbucks’ tax controversy in Europe, which briefly made the American giant look less untouchable. None of that was wrong. The problem is what came after.
Coca-Cola bought Costa outright in 2018, in a deal completed in January 2019 worth roughly 3.9 billion pounds ($5.1 billion). The plan at the time was ambitious: reach 1,000 stores in China by 2025. That target has quietly been dropped. It was never close.
The numbers in 2026 tell the real story
Here is what verified reporting shows about Costa’s China footprint going into 2026:
- Costa’s store count in China dropped from 453 in 2023 to 389 by November 2024, a loss of 64 stores in a single year.
- By February 2025 the count had fallen further, to roughly 380 stores, and Costa closed another 28 stores in the first half of 2025.
- Store numbers have essentially stalled near the 400 mark since 2017. Shenzhen, a city of 17 million people, was down to a single Costa location as of late 2024.
- In November 2024, Coca-Cola brought in a new China retail general manager, Lu Longhai, previously credited with turning around Haagen-Dazs China. His mandate: fewer, better stores in tier-1 cities like Beijing and Shanghai, not blind expansion.
- In February 2026, Coca-Cola’s own CFO confirmed the group is keeping Costa but is actively reviewing its “challenged” China business.
Meanwhile, Luckin Coffee opened its 30,000th store in February 2026 and had crossed 35,000 locations globally by June 2026, according to Nikkei Asia. That is not a typo. One Chinese coffee chain, founded in 2017, now runs roughly a hundred times more locations in China than Costa managed to build in nearly two decades. We covered how that happened in detail in How Luckin Beat Starbucks in China: 5 Lessons for F&B Brands.
There is one place Costa is holding ground: ready-to-drink coffee. Through Coca-Cola’s distribution network, Costa-branded bottles and cans now reach more than 100,000 retail points across China. The physical café business is shrinking. The packaged goods business is not. That split tells you something about where the brand’s real strength lies today, and it is not table service.
Why “experience” wasn’t enough
The original version of this article argued that Chinese coffee drinkers cared more about the environment of a café than the coffee itself, and that Costa’s bigger, calmer stores were built to answer that demand. That observation was accurate. It still is, for a segment of the market. Chinese consumers do value a café as a destination, a place to sit for two hours with a laptop or a business contact, not just a counter to grab a cup and leave.
What that older analysis missed is that “experience” stopped being a differentiator the moment everyone offered it. Starbucks built bigger, better stores. Local chains like Manner and Luckin skipped the sit-down experience entirely for a large share of their business and won anyway, because they solved a different problem: convenience, price, and speed, ordered from a mini program, paid for in three taps, ready before you arrive. We wrote about how Starbucks itself had to adapt its China playbook in How Starbucks Is Different in China: Localization Lessons for 2026, and about the broader shakeout of the category in China’s Tea and Coffee Shakeout.
Costa kept its pricing premium, generally above 35 yuan a cup, while Luckin trained an entire generation of Chinese coffee drinkers to expect deep app coupons and subscription pricing. A beautiful store means less when the app next door is cheaper, faster, and already has your order history, your loyalty points, and your preferred sugar level saved.
A choice we see in almost every F&B pitch
A few years ago we spoke with the China expansion lead of a mid-sized European bakery-café chain, a brand with strong reviews at home and no presence in Asia. Their first plan looked a lot like Costa’s original playbook: open flagship stores in premium malls in Shanghai and Beijing, lean on European heritage as the main selling point, add delivery later once the brand was “established.”
We pushed back on the sequencing, not the ambition. Delivery and mini-program ordering in China are not an add-on you bolt on once the brand is known. They are how most urban consumers discover a café brand in the first place, through a recommendation on Xiaohongshu, a coupon on Meituan, an order placed without ever walking past the storefront. The brand rebuilt its launch plan around a smaller number of stores designed as delivery kitchens with a modest seating area, WeChat mini-program ordering from day one, and a KOC seeding campaign on Xiaohongshu before the first store even opened. It is a small operation today, profitable in its two cities, growing slowly. That is a better outcome than a fast rollout built on the wrong assumptions.
What foreign F&B brands should actually do differently
If you are weighing a China entry for a café, restaurant, or packaged food brand, Costa’s trajectory is worth studying precisely because the company did some things right and still lost ground. A few conclusions we keep coming back to with clients:
- Pick a local partner, but keep decision speed. The Yueda joint venture gave Costa distribution and local knowledge. It did not give the brand the speed to react when Luckin changed the rules of the category within two or three years.
- Build for delivery and mini-programs from the first store, not the fiftieth. A store format designed only for dine-in customers is fighting with one hand tied, because a large share of demand never sets foot inside.
- Price against the market you’re actually in, not the one you came from. A premium position can work in China, but it has to be earned with a genuinely different product or status signal, not assumed because it worked in London.
- Be visible where Chinese consumers actually search and decide. That still includes Baidu for intent-driven search, but in 2026 it also means Xiaohongshu for discovery, Douyin for short-video demand generation, and WeChat for retention through mini programs and loyalty. For more on building visibility the right way, see our guide on Social Media Marketing in China for Global Brands.
- Track your online reputation actively, not passively. A brand with a clean search result page still needs a plan for reviews, comparisons, and the inevitable local competitor comparisons that show up the moment a foreign name enters the market.
- Watch what the fast movers are doing, and ask why it works, not just that it works. KFC and McDonald’s have both had to rebuild parts of their China playbook more than once. We break down their approach in KFC vs McDonald’s in China: Localization Lessons for 2026.
None of this means Costa is finished in China. Ready-to-drink coffee sold through Coca-Cola’s network is a real business, and a leaner store footprint focused on Beijing and Shanghai may well be a more sustainable shape for the brand than the 900-store ambition it once talked about. But the story is no longer “a British success in an emerging market.” It is a lesson in what happens when a strong original strategy, local partner, premium positioning, experience-led stores, does not evolve as fast as the market around it does. As Jiemian Global reported, Costa’s own leadership now frames the priority as store quality over store count. That is the right call ten years too late for the expansion plan Costa announced in 2022, but it is not too late for the brand overall.
FAQ: Entering the China F&B market
Is it still worth entering the China coffee or F&B market as a foreign brand in 2026?
Yes, but not with a strategy copied from home. The market is bigger than it was in 2015, and consumer spending on food and beverage out-of-home keeps growing. The brands that struggle are the ones that assume premium positioning and store experience alone will carry them, the way Costa did. Local competitors move faster on price, delivery, and app-based loyalty, so your entry plan has to compete on those terms from day one, not add them later.
Do we need a Chinese joint venture partner like Costa did with Yueda?
Not always, but you do need local execution speed somewhere in the structure, whether that is a partner, a strong local hire, or an agency that runs your digital and delivery operations day to day. What sank Costa wasn’t the partnership itself. It was a decision-making pace that could not keep up with a market where a competitor can reshape category expectations in two years.
Should we open flagship stores first or start smaller?
Smaller, mostly. A handful of well-placed stores built for delivery and mini-program ordering, backed by content on Xiaohongshu and Douyin before launch, teaches you more about local demand than one expensive flagship. You can scale the format that works instead of defending a big investment that assumed the wrong customer behavior.
How long before a foreign F&B brand sees real traction in China?
Plan for 18 to 36 months of adjustment before the format, pricing, and channel mix are right. Brands that treat the first year as a live test, not a finished launch, adjust faster and spend less getting there. Brands that lock in a fixed plan for three years, as Costa effectively did with its 1,000-store target, tend to find out too late that the market moved.
How GMA helps F&B and coffee brands get China entry right
We work with food, beverage, and hospitality brands on the part of China entry that Costa’s story shows matters most: building the digital and delivery layer, Baidu visibility, Xiaohongshu seeding, WeChat mini-program ordering, before the store count becomes the whole strategy. If you are weighing a China launch or trying to fix one that has stalled, get in touch with our team and we will look at your specific market and format with you.
