China's Delivery Subsidy War Heats Up as Tea and Coffee Lead the Charge

Credit: CFP

AsianFin -- As summer temperatures soar, so does consumer demand for cold beverages—and in China, it's triggering a fierce new battleground in the food delivery subsidy war.

E-commerce giants like JD.com and Alibaba's Taobao are slashing prices on milk tea and coffee to levels not seen before, turning familiar drinks into loss-leader products as they battle for dominance in the fast-growing instant retail sector.

A quick scroll through these platforms reveals shockingly low prices: an iced Americano for just 5.9 yuan on JD.com, or a twin-cup blueberry tea combo from Mixue for only 3.9 yuan. On Taobao, once-premium offerings from brands like Nayuki are now available for 7 yuan a cup, with chains like Auntea Jenny starting at just 6 yuan. These steep discounts have proven irresistible, even to those who jokingly complain about gaining weight from overindulging.

According to data from Alibaba, Taobao's Flash Sale and Ele.me platforms processed over 40 million orders in a single day on May 26, with tea and coffee accounting for a quarter of that volume—about 10 million orders.

The price plunge raises two key questions: what does a 5-yuan drink mean in the broader context of the delivery economy, and why have platforms chosen tea and coffee as their initial weapons of choice?

First, the beverage sector itself has undergone a major shift. In just over a year, six leading tea brands have gone public, including TeaBaidao, Gu Ming, Mixue, and Auntea Jenny. These listed companies now have both the scale and financial muscle to weather price wars and expand aggressively. Mixue, for instance, boasts over 46,000 stores worldwide, while Auntea Jenny is nearing 10,000 locations.

Such scale allows these brands to absorb the impact of subsidies more effectively than smaller, regional players. It also boosts consumer trust in an era where ultra-low prices can raise concerns about food safety. In the minds of many, a well-known brand is simply safer.

In contrast, the coffee segment—though also dominated by a few big names like Luckin, Cotti, and Starbucks—lacks the same breadth. Beyond the top three, players like Luckin Coffee have around 4,000 stores, while others such as Manner and Tims hover around 1,000. Costa Coffee, a global brand, has fewer than 500 outlets in mainland China.

The result? Coffee chains can't match tea brands on scale, making them more vulnerable in a subsidy-driven price war. Yet from a consumer standpoint, a 5-yuan coffee or milk tea is now priced comparably to bottled water—shifting customer expectations permanently.

But there's a deeper strategy at play. For e-commerce platforms, tea and coffee aren't just about cheap drinks—they're the gateway to a broader campaign to win China's burgeoning instant retail market.

Unlike traditional food delivery, which is anchored in lunch and dinner windows, instant retail thrives on evening and late-night consumption, from cold beverages to alcoholic drinks and even adult products. That means platforms need to create new habits and new use-cases for consumers. And there's no better entry point than an affordable cup of tea or coffee—ideal for any time of day, especially during hot summer afternoons.

Both JD.com and Taobao are now repositioning themselves not merely as food delivery players, but as comprehensive 24-hour retail platforms. Tea and coffee, with their broad appeal and high consumption frequency, are ideal for bridging the gap between mealtime deliveries and lifestyle consumption.

The transformation is also psychological: consumers no longer have to open different apps for different needs. Whether they're ordering lunch or grabbing a cold drink at 3 p.m., the same platform can serve both—fostering stickiness and reinforcing the brand's presence throughout the day.

Of course, not everyone benefits. Viral videos have shown overwhelmed coffee shop staff struggling to fulfill a flood of subsidized orders, sometimes breaking down in tears under the pressure. For some brands, the cutthroat pricing has already gone beyond sustainable levels, prompting fears of long-term damage to the industry's pricing structure.

As this delivery subsidy war unfolds—with tea and coffee leading the charge—it's clear that the implications will be far-reaching. Whether it's a lasting gain for platforms, a burden for frontline workers, or simply a temporary win for consumers remains to be seen.

One thing is certain: the Pandora's box has been opened, and the beverage-led delivery revolution is only just beginning.

(Note: 1 USD equals about 7.25 yuan)