SEOUL, South Korea – A coffee war is brewing in South Korea, according to the Korea Business Strategy Institute, as the franchised coffee shop market has reached saturation point.
According to a report in the Korea Herald, one in 10 South Korea coffee shops closed their doors last year – the equivalent of more than 1000 stores.
“While restaurants and even convenience stores are adding coffee on the menu to sell, the coffee war is intensifying as now even offices own espresso machines,” Lee Kyung-hee from the Korea Business Strategy Institute said.
According to data from business tracker CEO Score on Wednesday, total 118 franchise headquarters registered at Korea Franchise Association had 87,540 member shops across the nation as of the end of last year.
About 6 percent of the stores went out of business and 6,784 changed ownership in 2017, while 10,227 stores newly opened.
Of those, 11,198 were coffee and beverage stores, representing the third largest sector of the South Korean franchise market behind convenience stores and fried chicken restaurants.
Average sales of the franchised stores reached 351.5 million won last year, down 5.8 percent from two years ago.
Nine out of 10 sectors except for retail shops saw their combined revenue decline, and car stores showed the biggest drop of 19.9 percent from 279.9 million won in 2015 to 224.1 million own in 2017.
South Korea coffee franchises are being hit by convenience stores developing takeaway coffee services at prices as low as 1000 won (US90 cents) in the case of 7-Eleven, or about a quarter of the price of a Starbucks coffee.
The country’s 1000+ Starbucks stores are not included in the data because they are company owned.
The Korea Herald says local chains have been cutting store networks and staff numbers to remain competitive.
