Executive Summary
Key takeaways from 85°C’s recent operational shifts in mainland China:
– 85°C is closing more than 40 stores in mainland China in 2024, representing over 10% of its total locations, as part of a strategic downsizing effort.
– Sales in the Chinese market have dropped by over 20%, with reported losses exceeding NT$2 billion in the first half of 2025, highlighting severe financial pressures.
– The company’s ‘selective elimination and optimization’ strategy aims to shutter underperforming stores while expanding franchise networks by year-end.
– Industry experts attribute the challenges to brand aging, innovation gaps, and intense competition from newer bakery chains.
– Future growth hinges on successful franchise adoption and product innovation to recapture consumer interest.
The Rapid Contraction of a Once-Dominant Brand
85度C (85°C), the Taiwanese bakery and coffee chain that once captivated Chinese consumers with its affordable luxury positioning, is now undergoing one of its most significant operational contractions in mainland China. The closure of its Beijing知春二店 (Zhi Chun Er Dian) on October 19 leaves just one remaining location in the capital city—the白广路店 (Bai Guang Lu Dian)—marking a dramatic retreat for a brand that previously expanded aggressively across the country. This strategic downsizing represents a pivotal moment for 85°C’s parent company美食-KY (Gourmet Master Co.) as it implements what it terms ‘selective elimination and optimization’ across its Chinese operations. The phrase ‘selective elimination and optimization’ encapsulates the company’s approach to pruning unprofitable stores while strengthening its remaining footprint.
The current situation reflects broader challenges facing international F&B brands in China’s rapidly evolving consumer market. Once celebrated for bringing ‘five-star quality at平民化价格 (common people prices),’ 85°C now finds itself struggling against both domestic competitors and shifting consumer preferences. The company’s response—closing dozens of stores while planning franchise expansion—demonstrates the complex balancing act required to navigate China’s competitive retail landscape. This selective elimination and optimization strategy will determine whether the brand can recover its former prominence or continue to cede ground to nimbler competitors.
The Beijing Store Closures: A Microcosm of Broader Challenges
The shutdown of 85°C’s Beijing知春二店 (Zhi Chun Er Dian) provides a telling case study of the brand’s current struggles. Located conveniently near知春路地铁站 (Zhi Chun Lu Subway Station), the store previously benefited from high foot traffic but could no longer sustain operations amid declining sales. When记者 (journalists) from每日经济新闻 (Daily Economic News) visited the location on October 20, they found empty shelves and a closure notice informing customers that the白广店 (Bai Guang Lu Dian) would serve as Beijing’s sole remaining outlet. The notice struck a nostalgic tone—’时光荏苒，匆匆2年 (Time flies, two years have passed in a blink)’—while directing loyal customers to the surviving location.
Customer Response and Operational Details
Store staff confirmed that the知春二店 (Zhi Chun Er Dian) had ceased operations and advised customers to visit the白广店 (Bai Guang Lu Dian) for service or contact customer service for membership card refunds. Interestingly, the白广店 (Bai Guang Lu Dian)—also situated at a subway exit—continued to see steady customer traffic despite external renovations, suggesting that well-located stores can still generate business. However, the客服 (customer service) representatives acknowledged that Beijing now has just one operational 85°C location, underscoring the severity of the market pullback. This selective elimination and optimization of underperforming locations follows a pattern seen in other major Chinese cities, including杭州 (Hangzhou),上海 (Shanghai), and南京 (Nanjing), where multiple 85°C stores have recently closed or显示暂停营业 (displayed ‘temporarily closed’ status) on platforms like大众点评 (Dianping).
Corporate Explanation for the Closures
85°C总部公共事务部苏女士 (Ms. Su from 85°C’s Public Affairs Department) explained to每日经济新闻 (Daily Economic News) that the closures represent normal business strategy for a chain organization. She characterized the moves as ‘汰换择优 (selective elimination and optimization),’ emphasizing that the company continues to开放加盟 (open franchise opportunities) nationwide and hopes to ‘活跃市场 (activate the market)’ through partnership models. When asked about potential new franchise stores in Beijing, she indicated that the company welcomes local entrepreneurs to join their network, though specific plans remain unclear. This selective elimination and optimization approach aims to create a leaner, more profitable store portfolio while maintaining brand presence in key markets.
Financial Performance and Market Contraction
85°C’s operational retrenchment comes amid alarming financial results from its mainland China operations. According to母公司 (parent company)美食-KY (Gourmet Master Co.) financial disclosures, 85°C’s中国大陆市场 (mainland China market) sales plummeted to NT$80.53 billion (approximately RMB 18.8 billion) in 2024—a decline of over 20% from the previous year. More troublingly, the market’s contribution to overall revenue dropped from 51% to 42%, indicating both absolute and relative deterioration in performance. The company has reportedly been experiencing losses since the second half of 2023, with亏损 (losses) expanding to approximately NT$2 billion (roughly RMB 46 million) in the first half of 2025 alone.
Scale of the Store Reduction Strategy
美食-KY (Gourmet Master Co.) confirmed in October that 85°C will close more than 40 stores in mainland China during 2024—representing over 10% of its total store count in the market. This constitutes the most significant operational adjustment in nearly five years and reflects the urgency of the financial situation.北京安高管理咨询有限公司创始人曹盼盼 (Cao Panpan, founder of Beijing Angao Management Consulting Co., Ltd. and Secretary-General of the World Association of Chinese Catering Community Catering) described the closures as a necessary decision based on market loss projections, noting that ‘止损是最好的选择 (stopping losses is the best choice)’ when existing stores cannot reverse their unprofitable status. This selective elimination and optimization represents a pragmatic response to sustained financial underperformance.
Broader Market Context and Consumer Shifts
The challenges facing 85°C extend beyond its own operations to encompass broader trends in China’s bakery and café sector. Consumer preferences have evolved significantly since 85°C’s peak popularity, with younger demographics increasingly favoring specialized artisanal bakeries and premium coffee chains. The rise of digital platforms like美团 (Meituan) and饿了么 (Ele.me) has also transformed distribution channels, putting pressure on traditional brick-and-mortar models. As 85°C implements its selective elimination and optimization strategy, it must contend with these structural market changes that have diminished the competitive advantage of its established business model.
Expert Analysis on Brand Challenges
Industry specialists point to fundamental issues in 85°C’s brand positioning and innovation capabilities as primary drivers of its current difficulties.餐宝典创始人汪洪栋 (Wang Hongdong, founder of Canbaodian) identified ‘品牌老化 (brand aging)’ and ‘创新不足 (insufficient innovation)’ as core problems, noting that 85°C has failed to establish clear brand differentiation or develop standout products in recent years. He observed that the bakery market has seen an influx of new competitors like鲍师傅 (Bao Shifu) and泸溪河 (Lu Xi He), which have captured consumer attention with focused product offerings and contemporary marketing approaches.
The Innovation Gap and Competitive Pressures
According to汪洪栋 (Wang Hongdong), 85°C’s products and marketing have developed ‘距离感 (a sense of distance)’ from the current market, particularly among younger consumers who drive trends in the food and beverage sector. Unlike specialized competitors that excel in specific categories, 85°C’s broad ‘咖啡+烘焙 (coffee + bakery)’ model has struggled to maintain relevance amid increasing market segmentation. The company’s selective elimination and optimization strategy must address this innovation deficit if it hopes to recover market share. Wang further noted that the entire烘焙行业 (bakery industry) faces systemic challenges, including complex supply chains, high product standardization difficulties, and low barriers to entry that encourage price wars rather than quality competition.
Structural Industry Challenges
The bakery sector’s inherent complexities create additional headwinds for 85°C’s recovery efforts.汪洪栋 (Wang Hongdong) highlighted two critical industry-wide issues: First, the供应链 (supply chain) for bakery products is notoriously complex, with perishable ingredients and short shelf lives complicating logistics and quality control. This complexity has historically limited national expansion, leading to a market dominated by regional players rather than truly national brands. Second, the低门槛 (low barriers to entry) enable rapid market saturation and product homogenization, forcing brands to compete primarily on price and marketing rather than substantive differentiation. This environment has proven challenging for established players like 85°C attempting to implement selective elimination and optimization while maintaining brand integrity.
The Path Forward: Franchise Expansion and Innovation
Despite the widespread store closures, 85°C maintains an optimistic outlook regarding its future in mainland China. The company has explicitly stated that it will continue to开放加盟 (open franchise opportunities) across the country and plans to add new franchise locations before the year-end. This franchise-focused growth strategy represents a shift from the company’s previous emphasis on company-owned stores and aligns with broader trends in China’s food service industry, where franchise models can reduce capital expenditure while accelerating expansion. The selective elimination and optimization of underperforming corporate stores may create space for more entrepreneurial franchise partners to drive localized growth.
Franchise Model Implementation
85°C’s transition toward franchise operations follows patterns seen with other international chains in China, such as肯德基 (KFC) and星巴克 (Starbucks), which have successfully leveraged franchise partnerships to penetrate deeper into regional markets. Franchising can potentially address some of 85°C’s current challenges by transferring operational risks to partners while maintaining brand standards through centralized supply chain and marketing support. However, the success of this selective elimination and optimization strategy depends on attracting qualified franchisees—particularly in markets like Beijing where the brand’s presence has dramatically shrunk. 苏女士 (Ms. Su) from 85°C’s public affairs department has openly invited potential partners, stating that the company ‘希望北京的朋友能多捧场 (hopes friends in Beijing will support)’ the franchise initiative.
Product Development and Market Adaptation
Alongside its operational restructuring, 85°C has emphasized ongoing product innovation to regain consumer interest. The company claims to be持续推陈出新 (continuously introducing new products), though industry observers note that recent offerings have failed to generate the buzz of earlier successes like the招牌海岩咖啡 (signature sea salt coffee) that initially distinguished the brand. Effective selective elimination and optimization must extend beyond store portfolio management to encompass menu revitalization and marketing innovation. Potential areas for development include localized flavors tailored to regional preferences, healthier options responding to growing wellness trends, and digital integration to enhance customer engagement and loyalty program effectiveness.
Strategic Implications for Investors and the Market
85°C’s dramatic contraction in mainland China carries significant implications for investors monitoring the Chinese consumer sector. The company’s experience illustrates the perils of brand complacency in China’s rapidly evolving retail environment and highlights the importance of continuous innovation to maintain relevance. The selective elimination and optimization strategy represents a necessary corrective action, but its ultimate success remains uncertain given the depth of the company’s challenges. Investors should monitor several key indicators in the coming months, including franchise adoption rates, same-store sales performance at remaining locations, and new product reception.
For the broader market, 85°C’s struggles signal consolidation within China’s crowded bakery and café segment. Well-funded competitors may see opportunity in the brand’s retrenchment, potentially accelerating expansion into vacated locations. At the same time, 85°C’s selective elimination and optimization approach could establish a template for other struggling chains facing similar challenges of brand aging and financial underperformance. The coming year will prove decisive for 85°C’s future in mainland China—either validating its strategic downsizing as a successful turnaround or confirming the limitations of retrenchment without fundamental brand reinvention. Market participants should watch for the company’s year-end franchise announcements and first-quarter 2025 financial results for clearer signals about the strategy’s effectiveness.