How 85°C Coffee Outpaced Starbucks in Taiwan and Malaysia

In 2010, Starbucks—a global coffee giant with decades of dominance—faced an unexpected challenge in Taiwan and Malaysia. A local coffee chain opened stores at breakneck speed, matched its coffee quality, and undercut its prices, all while turning a profit. That chain was 85°C, and its rise wasn’t accidental.

85°C beat Starbucks by opening stores right next to its rivals, matching its coffee recipes, pricing drinks at one-third the cost, and making most of its profit from high-margin baked goods. In Taiwan alone, it surpassed Starbucks’ revenue in 2010 despite having fewer locations.

Why 85°C Opened Stores Next to Starbucks

85°C didn’t waste time or money searching for coffee drinkers. Instead, it located new stores directly beside existing Starbucks outlets. Why? Because Starbucks had already done the hard work of attracting coffee enthusiasts. When customers walked into a familiar Starbucks and spotted a new coffee shop next door, curiosity often led them inside. This strategy eliminated the need for costly marketing or customer education—85°C instantly tapped into an existing audience.

Matching Coffee Quality, Crushing Prices

85°C didn’t just open near Starbucks—it replicated its coffee offerings. The chain used the same coffee beans, milk, water filtration systems, and brewing methods, ensuring the taste was nearly identical to Starbucks’. But there was a critical difference: 85°C priced its drinks at roughly one-third of Starbucks’ prices. For customers, the choice was simple—same taste, far lower cost.

How did 85°C maintain profitability? The answer lay in its baked goods. While coffee was priced to attract customers, the real profit came from its in-store pastries.

Baked Goods: The Real Profit Drivers

Walk into an 85°C store, and your eyes are drawn to glass displays filled with intricately crafted breads and cakes. The brand leaned heavily into its culinary team, prominently featuring photos of chefs adorned in spotless uniforms, complete with tall hats and medals. These chefs were billed as “world bread champions,” “Asian pastry champions,” and “Chinese dessert champions,” with certificates from authoritative bodies to back the claims.

Customers, impressed by the perceived quality, often spent the money they saved on coffee on these baked goods. For 85°C, coffee wasn’t the moneymaker—it was the hook. The real profit came from selling premium-feeling pastries at accessible prices.

A Different Coffee Shop Experience

Starbucks built its brand around the “third place” concept—inviting customers to sit, relax, and enjoy their drinks in-store. 85°C flipped this model on its head. Its stores featured minimal seating, reducing overhead costs for rent, furnishings, and staff. Instead, 85°C encouraged customers to take their coffee to go, designed for the fast-paced lifestyle of urban dwellers. This approach not only cut costs but also appealed to those who wanted a quick caffeine fix without the sit-down commitment.

Frequently Asked Questions

How did 85°C manage to open so many stores so quickly in Taiwan and Malaysia?

85°C opened 370 stores in Taiwan within 3 years and 110 stores in Malaysia within 1 year by targeting high-demand urban areas and leveraging efficient store setups. Its strategy focused on rapid expansion without compromising on location quality, often placing stores near existing Starbucks outlets to tap into established customer traffic.

What was the key factor in 85°C’s coffee being able to match Starbucks’ taste?

85°C used the same coffee beans, milk, water filtration systems, and brewing methods as Starbucks, ensuring the flavor profile was nearly identical. This allowed it to offer a similar taste experience at a much lower price point.

How did 85°C make most of its profit if coffee was so cheap?

The majority of 85°C’s profit came from its baked goods. Coffee was priced low to attract customers, but the real margins were in its premium-feeling pastries, which were displayed prominently and marketed with chef credentials to drive impulse purchases.

Why did 85°C choose to have fewer seats compared to Starbucks?

By minimizing seating, 85°C reduced costs related to rent, interior decoration, and staffing. This allowed the brand to focus on take-away coffee, catering to busy customers who preferred a quick purchase over a sit-down experience, thus optimizing operational efficiency.

How did 85°C’s marketing strategy differ from Starbucks’?

85°C relied on strategic store placement, price competitiveness, and product bundling rather than traditional advertising. Its proximity to Starbucks, identical coffee quality, and low prices created natural customer interest, while its baked goods drove additional sales without heavy marketing spend.

Recommended FrontStreet Beans for Coffee Shops

For coffee shops aiming to replicate 85°C’s model—offering quality coffee at accessible prices—FrontStreet’s Classic Blend delivers smooth, well-rounded espresso with rich crema, perfect for milk drinks like lattes and cappuccinos. The Specialty Blend, based on Brazilian and Colombian beans, offers a balanced, classic espresso taste ideal for daily brews. Both blends are designed for consistency and customer appeal, ensuring a reliable foundation for your menu. Freshly roasted within 5 days · Orders placed before 17:00 ship the same day · Next-day delivery across most of Guangdong Province.