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Starbucks’ dominance deepens in Korea

Starbucks Coffee Korea

Starbucks has solidified its dominance over Korea’s coffee industry, widening its gap with A Twosome Place, The Coffee Bean & Tea Leaf, Ediya Coffee and other smaller rivals, according to industry analysts.

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According to audit reports released by the Financial Supervisory Service, Starbucks Coffee Korea, which opened its first shop near Ewha Womans University in Seoul in 1999, saw its sales increase 20.5 percent to 1.52 trillion won (US$1.3 billion) in 2018 from the previous year. Its operating profit also jumped 24.9 percent to 142 billion won.

Starbucks continues to focus on its cold beverages, which include cold brew and cold foam, as customers have been craving iced drinks more than hot ones.

The coffee chain has also introduced new concepts such as its luxury Reserve store, Teavana and morning box to accelerate growth in Korea.

“Growing partnerships with local farmers and small businesses here has bolstered sales and improved the image of the Starbucks brand,” a Starbucks Korea official said.

“We have also rolled out innovative IT services and expanded community service programs to attract customers.”

The company opened 121 new stores last year, and now operates more than 1,280 stores across the nation.

Other major coffee brands in Korea leaped in annual sales, but fell short behind Starbucks.

A Twosome Place, which was spun off from CJ Foodville last year, posted 274.3 billion won in sales and 29.2 billion won in operating profit.

Due to its separation from the CJ subsidiary, the coffee chain’s financial statements were released for the first time. Its actual sales, however, are expected to be higher as the sales revealed only showed results from February to December.

“Unlike Starbucks, which is operated directly by its Korea headquarters, we operate under a franchise system. So the annual sales are estimated to be about 900 billion won,” an official from A Twosome Place said.

“We are unable to provide the annual sales of 2017 for confidentiality reasons, but the numbers have definitely increased.”

Starbucks’ Korea headquarters collects all sales, while A Twosome Place franchise owners receive money from sales and send a certain amount to the head office.

Ediya, which operates 2,500 stores in Korea, also showed an 8.9 percent increase in sales to 200.5 billion won while its operating profit fell 12.4 percent due to the costs of building Ediya Coffee Dream factory.

To revive its profits, the coffee chain offers a coffee bean customizing service at its lab.

Meanwhile, The Coffee Bean & Tea Leaf saw its sales rise 5.6 percent to 166.6 billion won while Hollys Coffee sales also rose to 154.9 billion won.

Coffee brands posted higher sales amid weak consumer sentiment because customers tend to spend more time at coffee shops for many more reasons than simply craving food and beverages, according to company officials.

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To meet the demand, Hollys Coffee increased the number of electrical outlets at locations near college campuses and busy streets to encourage laptop users. It also offers meeting rooms and spacious seating to welcome office workers.

(Source: The Korea Times)

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