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Franchise coffee shops hit by cheap coffee amid economic slowdown

All Headlines 10:55 April 12, 2016

SEOUL, April 12 (Yonhap) -- Major franchise coffee shops in South Korea saw their revenue fall in 2015 in the face of tougher competition with cheap take-out coffee amid economic slowdown, heading to another tough year, data showed Tuesday.

Homegrown coffee brands have sprung up in Asia's fourth-largest economy over the past decade to capitalize on the growing population of coffee drinkers, but their growth has slowed recently in the saturated domestic market.

Adding to their woes, low-cost coffees at convenience stores and mini take-out stalls have enjoyed growing popularity among price-conscious consumers, posing a threat to franchise coffee shops standing on every corner of major streets.

Coffee Bean & Tea Leaf, an American franchise chain owned by Seoul-based Mirae Asset Private Equity Fund, posted 138.9 billion won in sales last year, down 5.1 percent from a year ago, its regulatory filing showed.

Its operating profit tumbled 68.5 percent to 3.9 billion won, although the number of its shops increased by just nine to 234 during the period.

Paul Basset, a specialty coffee house operated by Maeil Dairies Co., said it logged 48.4 billion won in sales, but its net swung to a loss of 180 million won due to rising marketing costs and aggressive store expansion.

Sales at Caffe Bene sank 14.9 percent on-year to 121 billion won, expanding operating loss nearly four times to 11.4 billion won due to slumping businesses of other food franchise subsidiaries.

While mid-end franchise stores had a sluggish year, brands at both ends of the price spectrum were largely unscathed by the latest consumption trend.

Ediya, a low-end coffee shop with the largest number of outlets over 1,500 nationwide, raised 135.5 billion won in sales, up 16.5 percent from a year ago. It plans to expand its stores to 2,000 this year.

Sales at U.S. coffee giant Starbucks also rose 25.4 percent on-year to 773.9 billion won in 2015 on the back of high-end specialty coffee service and bakery items.

Another tough year is waiting for the major coffee brands as convenience stores have been aggressively expanding in-store coffee services nationwide. Their coffee is considered drinkable at a price as cheap as 1,000 won, about a quarter of Starbucks' tall Americano sold at 4,100 won in South Korea.

ejkim@yna.co.kr
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