Strategic Analysis Report on Li Ning's Cross-Border Coffee Business

Li Ning’s strategic decision to expand into the coffee business is rooted in the practical pressure of slowing core business growth. According to the company’s 2025 Interim Results Report, the Group recorded revenue of RMB 14.817 billion in the first half of the year, representing a year-on-year increase of only 3.3%; profit attributable to equity holders was RMB 1.737 billion, down 11% year-on-year, with net profit margin slipping from 13.6% in the same period of 2024 to 11.7%[1][2]. Looking back at its performance in recent years, Li Ning’s revenue growth rate has remained in single digits for three consecutive years: +2.3% YoY in 2023, +3.9% YoY in 2024, and +3.3% YoY in H1 2025[1][3]. Against the dual backdrop of fading China Chic dividends and pressured macro consumption environment, the traditional sports apparel retail business faces significant growth bottlenecks.

Against this background, Li Ning has chosen the coffee track as a key direction for cross-border exploration, with its core logic being the widely discussed “high-frequency consumption empowering low-frequency consumption” model in the business sector in recent years. Sports apparel and footwear are typical low-frequency consumption categories, with consumers generating purchase demand only once every 3 to 6 months; while coffee, as a mass high-frequency consumer good, has a high proportion of users who consume it daily or weekly. The combination of the two has a natural complementary logic — by introducing the high-frequency repurchase coffee format, it drives traffic to the low-frequency core sports apparel business, improving the utilization efficiency of offline space and user stickiness[1].

From the perspective of consumer portrait analysis, there is a significant overlap between Li Ning’s core customer groups and the main coffee consumers. Li Ning’s core customers are mainly young people aged 20 to 40 and fitness enthusiasts, most of whom have coffee-drinking habits and have a high acceptance of the integrated “sports + coffee” scenario[1]. This high matching of consumer portraits reduces the education cost for NING COFFEE’s market promotion and provides a solid foundation for brand synergy.

NING COFFEE has experienced a clear phased evolution. Starting in 2022, Li Ning leveraged its existing store network and customer flow to implant coffee services at a low cost, piloting the “store-in-store” model to improve store efficiency and consumer experience[4]. At this stage, its positioning was more as an in-store supporting service, with the coffee business subordinate to the core sports apparel business.

In 2025, NING COFFEE entered a new stage of independent operation. The first independent store officially opened at Beijing Wangfujing Super Outlet, which is fundamentally different from the previous coffee service hidden inside brand stores as an auxiliary experience — it has an independent storefront and complete seating area for the first time, and has entered a highly market-oriented business district like the outlet for the first time[1][4]. As of now, NING COFFEE has opened 9 stores nationwide. During the trial operation period, relying on brand popularity and a professional coffee team, NING COFFEE’s single-day turnover once approached RMB 20,000, delivering an impressive first performance report[1].

Based on its judgment of the track prospects, Li Ning has formulated an ambitious expansion plan for NING COFFEE: targeting to open 300 to 500 coffee stores nationwide by the end of 2026. If this target is successfully achieved, NING COFFEE will rank among the second echelon of domestic coffee brands[1].

Supporting this expansion plan is Li Ning’s massive offline channel resources. As of June 30, 2025, the number of sales points for Li Ning brand (including Li Ning core brand and Li Ning YOUNG) regular stores, flagship stores, Li Ning China fashion stores, factory outlets, etc. reached 7,534[2][3]. These stores are widely distributed in high-traffic areas such as shopping malls, commercial streets, and core communities, which can not only reduce the site selection and rental costs of NING COFFEE through the “store-in-store” model, but also quickly introduce existing customer flow to the coffee business, forming a synergistic effect.

NING COFFEE shows distinct differentiation characteristics in product design and pricing strategy. In terms of product naming system, coffee categories borrow names from classic running shoe series such as “Chitu” and “Liejun”, launching featured items like “Chitu Latte” and “Liejun Mocha”; tea drinks and milkshakes closely follow sports scenarios, launching functional drinks containing protein powder to meet the demand for energy supplementation after fitness[1]. This practice of deeply integrating sports genes into the product system effectively strengthens brand association.

In terms of pricing strategy, NING COFFEE neither follows the “RMB 9.9 low-price war” of Cotti and Luckin, nor benchmarks the pricing of high-end brands like Starbucks which is often above RMB 30, but instead chooses a mid-price range of RMB 20 to 50, with main products priced around RMB 20[1]. This positioning not only conforms to the consumption capacity of its core users, but also avoids vicious competition in the low-price track, while supporting a reasonable price space through functional and scenario-based product design.

From the height of brand strategy, NING COFFEE is by no means an isolated business segment, but an important part of Li Ning’s grand narrative of brand reshaping. In December 2025, Li Ning held the opening ceremony of the world’s first “Dragon Store” and the launch event of the new Honor Gold Label product series in Taikoo Li Sanlitun, Beijing[4][5]. The “Dragon Store” revolves around three themes: “Award Moment”, “Competition Moment”, and “Life Moment”, creating exclusive products and experience spaces for consumers, aiming to get rid of the traditional image of simply selling goods and shift to selling “lifestyle” and “emotional value” to enhance brand premium[4].

NING COFFEE and the “Dragon Store” form a complement — the former reaches young consumers through high-frequency consumption scenarios, while the latter conveys brand cultural connotations through immersive experience spaces. Both together point to one goal: strengthening brand building from different dimensions to add growth momentum for the future[4].

In 2025, Li Ning successfully won the qualification as the sports apparel partner of the Chinese Olympic Committee (COC) for 2025-2028, taking over from Anta which had a 16-year consecutive partnership, and will provide professional sports equipment support for the Chinese sports delegation in the next four years[4][5]. The acquisition of this top-tier sports resource marks a historic transition in the apparel partnership of the Chinese Olympic delegation, providing strong support for Li Ning to revitalize its brand momentum.

The management clearly stated that it will fully support the Chinese sports delegation in competing in international competitions through high-quality products and efficient services, and simultaneously launch online and offline marketing activities in an orderly manner around this top-tier cooperation to continuously deepen Li Ning’s professional sports image[3]. NING COFFEE can further enhance its recognition and favorability among young consumer groups by leveraging the brand exposure dividend during the Olympic cycle.

In addition to NING COFFEE, Li Ning has adopted a multi-pronged strategy in brand youthfulness. Co-branding collaborations with cultural IPs such as the Dunhuang Museum, by integrating Dunhuang cultural elements into product design, have successfully attracted young consumers who pursue cultural identity and China Chic styles[6]. Academic research shows that such co-branded products can effectively enhance the brand’s cultural height and product practical value[6]. Meanwhile, Li Ning accurately reaches Gen Z consumer groups through digital communication methods such as social media topic marketing, KOL and KOC seeding campaigns.

At the product level, Li Ning continues to increase investment in scientific and technological research and development, with R&D expense growth rate reaching 8.7%, higher than the revenue growth rate. Over the past decade, the company’s cumulative R&D investment has exceeded RMB 3.8 billion[7]. Innovative initiatives such as the application of “Super BENG” technology and the transformation of aerospace technology into sports products have strengthened the brand’s professional sports attributes, and also provided young consumers with product choices that combine functionality and technological sense[7].

The competitive pressure faced by NING COFFEE cannot be underestimated. As of October 2025, the number of coffee stores nationwide has reached 254,000, while more than 50,000 coffee stores have closed in the past year, accelerating industry reshuffling[1]. Traditional coffee brands continue to expand: Starbucks steadily advances the layout of high-end stores, Luckin and Cotti seize the sinking market through low-price strategies, and the three together account for nearly 40% of the domestic coffee market share[1].

Fiercer competition comes from the siege of cross-border players. In recent years, giants from different fields such as China Post, Sinopec, Tongrentang, and NIO have all expanded into the coffee track. China Post’s “Post Coffee” has achieved rapid large-scale development by leveraging tens of thousands of post offices nationwide; Sinopec’s “Easy Joy Coffee” accurately targets travel crowds relying on gas station scenarios; Tongrentang’s “Zhima Health Coffee” focuses on health preservation concepts[1]. Scenarios such as supermarkets, internet cafes, hotels, and gyms have also introduced coffee formats one after another. The scenario dividend of coffee consumption has been fully tapped, and market homogenization competition is becoming increasingly severe.

From the perspective of organizational operation, the expansion of NING COFFEE business will significantly increase management levels and operational complexity. The coffee business involves multiple dimensions such as supply chain management, store operation, talent training, and product R&D, which are fundamentally different from the business logic of sports apparel retail. Although NING COFFEE can leverage Li Ning’s existing store resources to achieve low-cost expansion, links such as site selection, decoration, recruitment, and training for independent stores still require a lot of resources and energy.

Against the current background of slowing core business growth and pressured net profit, Li Ning needs to seek a balance between core business consolidation and new business expansion. The company’s management once emphasized that it will prioritize long-term brand value over short-term profit maximization[4]. This strategic orientation means that the company is willing to bear short-term pains for brand building, but it also needs to be alert to the risk of declining core business competitiveness due to excessive resource dispersion.

From the perspective of financial data, although Li Ning’s 2025 interim results maintained growth, its profitability has declined. Net profit fell 11% year-on-year, and net profit margin dropped 1.9 percentage points to 11.7%[2][3]. Net cash inflow from operations was RMB 2.411 billion, down 11.7% year-on-year[2]. Against the backdrop of intensified industry competition, deeper discounts, and declining customer traffic, the management frankly stated, “We can currently feel the pressure brought by the decrease in offline customer traffic, and the competition among sports brands will become increasingly fierce”[7].

Against this background, continuous investment in the coffee business may further pressure short-term financial performance. If NING COFFEE’s expansion plan progresses smoothly, it will be difficult to achieve profitability in the short term and will need to be nurtured by the cash flow of the core business. How to advance the brand reshaping strategy while maintaining financial health is a practical challenge facing Li Ning.

Based on comprehensive evaluation, Li Ning’s cross-border coffee business is more of an effective path for brand youthfulness rather than a pure diversion of strategic resources. This judgment is based on the following logic:

There is obvious customer group overlap and scenario complementarity between NING COFFEE and Li Ning’s core business. The high-frequency coffee business can effectively increase consumer store visit frequency and stay time, creating more touch opportunities for sports apparel sales. Product naming and functional positioning also strengthen brand association rather than diluting the brand’s professional sports attributes.

The evolution of sports brands into lifestyle brands is a global trend. International giants such as Nike and Adidas have long transcended the positioning of simple sports equipment and extended to the fields of fitness, health, and lifestyle. Li Ning’s mega-store model and coffee business layout are essentially strategic initiatives to benchmark international brands and seize the high ground of lifestyle consumption.

Li Ning’s management clearly stated that it will prioritize long-term brand value and lay a foundation for stronger competitive position in the future through resource investment[4]. Although this strategic orientation may affect profit margins in the short term, it lays a foundation for the brand’s long-term development.

The following risks need to be focused on during the strategic advancement of NING COFFEE:

Risk Type	Specific Performance	Recommendations
Market Competition Risk	The coffee track is highly competitive, and NING COFFEE’s differentiated advantages may be quickly imitated	Strengthen the “sports + coffee” scenario barrier, and continuously launch innovative products with sports attributes
Resource Diversion Risk	Investment in coffee business may affect R&D and marketing resources of the core business	Establish clear resource allocation priorities to ensure that the competitiveness of the core business does not decline
Operation Execution Risk	The coffee business has high management complexity, which may lead to operational errors	Introduce a professional coffee operation team and adopt a steady expansion pace
Financial Pressure Risk	Short-term losses may affect investor confidence	Do a good job in investor communication and emphasize the long-term value of brand reshaping

From an investment perspective, Li Ning is currently at a critical juncture of strategic transformation. The company’s core brand fundamentals remain stable — healthy inventory structure (82% new products, inventory turnover period of only 4 months), improved channel operating efficiency, and rising direct-operated store profit margin[2][4][7]. If the brand reshaping strategy is successful, it will open up new growth space for the company.

Currently, the valuation of China’s sports apparel sector is at a relatively low level, with Li Ning’s PE ratio at approximately 13.7 times, which is about 72% of its five-year historical average[4]. Considering the company’s strategic initiatives such as advancing brand reshaping, acquiring Olympic resources, and laying out the high-end market, under the assumption of stabilized macro consumption environment, Li Ning has certain valuation repair space.

---

[1] Sohu - “Li Ning Enters Coffee Business: Will the Sports Giant Step into the Coffee Track?” (https://m.sohu.com/a/975675345_250147)

[2] Li Ning Investor Relations - “2025 Interim Results Report” (https://ir.lining.com/tc/ir/presentations/pre250821.pdf)

[3] Li Ning Investor Relations - “2025 Interim Results Announcement” (https://doc.irasia.com/listco/hk/lining/announcement/a322344-cw_02331ann_21082025(a).pdf)

[4] Yahoo Finance Hong Kong - “Committed to Brand Reshaping, Li Ning’s Future Looks Promising” (https://hk.finance.yahoo.com/news/決心投入品牌重塑-李寧未來向好-085917633.html)

[5] eBrun - “Li Ning’s Weekly Updates: NING COFFEE Independent Store Hits RMB 20,000 Daily Sales; Outdoor Brand Haglöf Enters China” (https://www.ebrun.com/20260107/635953.shtml)

[6] SHS Conferences - “Branding Products—Taking Li Ning as an Example” (https://www.shs-conferences.org/articles/shsconf/pdf/2025/11/shsconf_iclrc2025_03003.pdf)

[7] National Business Daily - “Li Ning’s 2025 Interim Report: Steady Operation Shows Resilience, Technology and Sports Resource Layout Drive Long-Term Value” (https://www.nbd.com.cn/articles/2025-08-22/4024343.html)