Over 14,000 coffee shops open every year in Korea as the business poses as an easy post retirement income source, but they do not last long as one out of 10 fails to make a profit, a study showed.
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According to a report released by KB Research Institute on the latest coffee market trend and environment, about 71,000 coffee shops are in business across the country as of July. The number of stores has grown 10 percent or more every year from 2011 to 2016. The growth in the number of coffee stores in Korea slowed down in 2017 but still maintains 8 percent.
A majority of 15,000 coffee stores were located in Gyeonggi Province and 14,000 in Seoul, the report showed, with four out of 10 stores concentrated around the capital.
New entries still outnumber exits. In 2018, 14,000 stores opened and 9,000 closed, compared with 27,000 openings and 4,000 shutdowns in 2009.
The start-up rate of coffee stores reached their peak in 2014 at 26.9 percent before falling to 22 percent, data showed. This indicates that 22 percent of coffee shops in business in 2017 were newly opened ones last year. The shut-down rate, meanwhile, went up from 11 percent to 14.1 percent during the same period.
The report, in particular, showed a rise in the number of coffee stores closing down after a short period of business – 52.6 percent of the stores that closed down last year operated for less than 3 years.
Coffee still sells well in the society famous for their coffee craze, but makes less money, the report said.
It cited data from Statistics Korea showing coffee stores raised 7.9 trillion won in sales in 2017, up 10.1 percent from 7.1 trillion won in 2016. Operating income per store, however, fell 11 percent from 11.8 million won to 10.5 million won over the cited period.
An average 11 percent of coffee stores in Korea incur losses, which is higher than 4.8 percent of restaurants. The profit rate of stores generating profit – excluding loss-making ones – reached 19.3 percent, higher than that of restaurants with 17.5 percent.
There were 15,000 coffee franchise stores in Korea as of last year, excluding franchisees under foreign names like Starbucks and Coffee Bean, compared to 18,000 franchise Korean restaurants and 17,000 chicken joints.
The report showed that there are 2,700 to 3,000 new coffee franchise stores opening every year after reaching its peak of 3,227 stores in 2015. The number of franchises closing down was up from 1,082 to 1,705.
By brand, Ediya operated 2,399 franchises last year, followed by Twosome Place (1,100 stores), Yogerpresso (705 stores), Coffee Banhada (589 stores), and Paik Dabang (571 stores). The average sales per franchise store were 158 million in 2018, down from 174 million in 2015.
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Korea’s coffee industry, meanwhile, is expected to continue to grow in the years to come. The market is estimated to be worth 8.6 trillion won in 2023, up from 5.9 trillion won in 2016 and 6.8 trillion won in 2018.