Even today, when people think of “new consumption” in China, they often recall the funding stories from the last boom cycle. Among them, the specialty coffee wave stood out. Several boutique coffee brands that combined quality and aesthetics gained attention during that period, and Algebraist Coffee was one of the few that rose with relative ease.
Founded in 2015, Algebraist became known for its distinctive coffee and minimalist store design. Between 2019–2022, it completed four funding rounds: angel investment from Wuyuan Capital in 2019, a Series A round from Genesis Capital in 2020, followed by investments from Tencent and a new round from Oriza Holdings in 2021.
Those peak years were dazzling. “At that moment, everyone ignored the cost structure and mistook brief glory for a sustainable business model,” Algebraist founder Dai Yi said. As market conditions shifted, the experience brought hard lessons. “I no longer envy others who rapidly roll out stores. Keeping our company alive and in the black each month—that’s what really matters.”
Today, as the industry is shaped by rapid expansion and price competition, and major players like Luckin Coffee and Cotti Coffee capture attention, what’s happening to those outside the spotlight?
According to 36Kr, Algebraist Coffee secured a new funding round earlier this year worth an eight-figure RMB sum, led solely by SND Financial Holdings. Its total funding now exceeds RMB 200 million (USD 28 million). Notably, the company turned a monthly profit and achieved positive cash flow starting in the third quarter of 2024, with performance improving each month. The latest funding, the company emphasized, is primarily intended to support brand and product development, rather than sustain day-to-day operations.
Looking back, timely adjustments and steady growth helped Algebraist navigate the downturn.
At the height of its expansion before the pandemic, Algebraist had signed leases and begun renovations for more than 170 directly operated stores. However, 80 of those—still unopened—were canceled due to the pandemic. “If we had gone all-in on expansion back then, we might not be here today,” Dai said. Algebraist was also among the first of the leading coffee brands to publicly announce a contraction plan.
Today, Algebraist sees itself as a “consumption upgrade for the mass market.” While maintaining its identity as a serious coffee brand, it has worked to streamline pricing, control costs, and improve supply chain efficiency. According to 36Kr, customers have praised its regularly updated product lineup. Kiri, its French cheese latte series, sold 117,000 cups in its launch month. The rose breve latte, first introduced in 2019, continues to be one of the brand’s most frequently repurchased drinks, with over 650,000 cups sold in 2024.
Beyond product development, Dai has focused more on operational details such as store format, staffing, and supply chain costs. “Everyone’s managing in finer detail now,” he said. “But at the core, we have to return to product quality and consumer needs. Even store location choices should start from what’s most convenient for the customer.”
In March 2024, Algebraist launched its partner entrepreneur program, shifting from a purely self-operated model to one that includes franchising. Today, the brand opens around eight to ten stores per month. Its total store count has surpassed 150, with franchise stores now forming the core of its business model. Compared to industry expansion rates, Algebraist’s approach is measured.
“We have internal thresholds and guiding principles,” Dai told 36Kr. “At this stage, we haven’t seen a clear psychological or behavioral shift in consumer sentiment that would justify a major pivot. So we’re focused on operating the brand more steadily.”
For now, the brand remains strongest in Jiangsu, Zhejiang, and Shanghai. It is exploring expansion into other regions but is doing so cautiously.
Not every specialty coffee brand from the previous wave has endured. Some have disappeared, while others are still trying to adapt amid stiff competition. In his conversation with 36Kr, Dai repeatedly returned to basic principles:
“Make great products. Build a solid team. Be the kind of brand more people like and trust.”
One thing is clear: China’s coffee market continues to expand, as demand for quality brews remains strong. For brands like Algebraist, the priority is staying in the game, waiting for the right moment to play their next hand.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Ren Cairu for 36Kr.