Summary of Key Points
As the pioneer of high-quality local coffee, Seesaw was once a favorite of investors (valued at 1 billion yuan with 135 stores at its peak), but now it has only around 30 stores left due to bankruptcy proceedings. On the surface, it seems that the 9.9 yuan price war was the catalyst, but the real issue lies in its internal strategic confusion: it tried to maintain the premium image of high-quality coffee (large stores with unique designs for each store) while also aiming for rapid expansion, which led to a failure on both fronts. Additionally, the heavy financial burdens associated with its large-store model and aggressive expansion strategies under performance-based agreements caused a cash flow crisis. This situation reflects the polarization of the coffee market—either focus on extreme cost-effectiveness (like Luckin and Kudi) or on differentiated premium quality (like Starbucks and Manner). Brands that fail to clearly position themselves are more likely to be eliminated. However, high-quality coffee doesn't necessarily have to be "small and beautiful"; the key is to have a viable business model.
Detailed Analysis
1. The Price War Was the “Last Straw,” but Not the Fatal Blow
The price war initiated by Luckin and Kudi in 2023 has indeed set a benchmark for coffee prices, making consumers perceive anything above that range as overpriced and causing some of Seesaw's customer base to switch. But why are brands like Manner and M Stand, which also offer high-quality coffee, doing well? The problem with Seesaw was internal: it failed to address its high costs and unclear positioning. The price war merely accelerated its downfall.
2. The Paradox of High Quality and Scale
Seesaw initially pursued a premium approach with large stores (100-200 square meters) and unique designs, targeting the middle-class market. However, after securing funding, performance-based agreements required rapid expansion (the founder once stated the goal of opening 500-1000 stores within five years). This created a dilemma: high-quality products require higher costs to maintain their premium image, while scale requires lower costs for replication. As a result, Seesaw failed to innovate its products (old customers lost the sense of luxury), and by lowering prices to attract budget-conscious consumers, it alienated both its existing and new customer bases.
3. The Large-Store Model Is a Cash-Draining Trap
Large stores come with significant costs: high rents in prime locations (for example, in Beijing and Nanjing, where a 200-square-meter store might cost tens of thousands to hundreds of thousands of yuan per month) and expensive custom designs (each store requires different decoration, increasing costs several times over those of standardized smaller stores). These high fixed expenses, combined with low sales per square meter, led to a long payback period. Seesaw expanded too quickly, spending all its funds on opening new stores without generating enough profit, resulting in debts to suppliers and unpaid employee salaries, ultimately causing a cash flow crisis.
4. Market Polarization
The coffee market has divided into two camps:
- Cost-Effectiveness Focus: Luckin and Kudi (around 15 yuan per cup), competing on efficiency and scale (with tens of thousands of stores).
- Premium Quality Focus: Starbucks and Manner (around 30 yuan per cup), focusing on customer experience or efficiency (Starbucks through its “third space” concept, Manner through small, efficient stores).
Brands like Seesaw, with prices higher than Luckin but without the same level of customer experience as Starbucks, were naturally marginalized. In 2024, nearly 40,000 coffee shops in China closed, mostly mid-range brands and independent stores.
5. High-Quality Coffee Doesn't Have to Be “Small and Beautiful”
High-quality coffee can still be successful; the key is to have a cost structure that aligns with its value proposition:
- Efficiency-Focused Premium Brands (Manner): Open small stores (5-10 square meters, costing only 10%-20% of traditional large-store rents), streamline the product lineup to around 47 items (high standardization and fast delivery), and use premium beans for higher margins (62.5% gross profit margin); they have now opened over 2,400 stores.
- Experience-Focused Premium Brands (Starbucks): Return to the “third space” concept, creating personalized offerings tailored to specific communities (e.g., high-protein lattes for fitness enthusiasts or oatmeal lattes for those with lactose intolerance); Starbucks saw a 11% increase in revenue in the first quarter of 2026.
In conclusion, the future of high-quality coffee lies not in scale but in the viability of its business model. As long as a brand finds a path that suits it, achieving thousands of stores is not an impossible goal.
Final Conclusion
Seesaw's bankruptcy is not a failure of high-quality coffee itself, but rather a failure due to unclear positioning and unbalanced costs. High-quality coffee can thrive, but it cannot simultaneously pursue both a premium image and rapid expansion. Choosing the right path is essential for survival in this industry.