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Starbucks Korea secures No.1 spot in crowded market

Its 2021 sales on course to top 2 trillion won, the highest-ever annual sales for a coffeehouse chain in Korea

By Dec 15, 2021 (Gmt+09:00)

3 Min read

Starbucks Korea secures No.1 spot in crowded market

Starbucks Korea's sales are on course to exceed 2 trillion won ($1.7 billion) this year, the largest-ever annual revenue for a coffee franchise operating in the country.

The impressive number will demonstrate that Starbucks Korea has cemented its dominant position in the crowded market, where The Carlyle Group recently announced its entrance with the acquisition of second-ranked A Twosome Place worth about 1 trillion won. 

Starbucks Korea, 67.5% owned by E-Mart Inc. of Shinsegae Group, is forecast to log 2.3 trillion won in sales this year, according to the industry sources on Dec. 14. In the first nine months to September, its sales reached 1.7 trillion won, close to its full-year revenue of 2020. 

Considering its quarterly sales stood at 500 billion-600 billion won this year, it is likely to comfortably exceed the 2 trillion won milestone for the entire year.

NO STEP BACKWARD OVER THE PAST 22 YEARS

Since it opened its first store in South Korea in 1999, Starbucks Korea has continued its year-on-year growth. In 2016, its sales topped 1 trillion won for the first time in the history of its South Korean operations, compared with 8.6 billion won in 2000.

Since then, it has taken only five years to nearly double annual sales this year. Its annual sales are more than three times the combined revenue of second- and third-ranked A Twosome Place and EDIYA Coffee. 

Behind its ongoing sales growth were Starbucks' marketing efforts to position itself as a third locale, or a social space separate from home and the workplace.

"We defined ourselves as a space seller. In our store, people won't feel awkward staying almost all day with only a cup of drink," said a Starbucks Korea official. 

(Courtesy of Starbucks Korea)
(Courtesy of Starbucks Korea)


Aside from sales and profitability, Starbucks has cultivated the country's coffee culture. Thanks to the Seattle-based coffeehouse, takeaway coffee became popular in Korea and consumers show little resistance to buying a cup of coffee that can cost as much as a single meal.

Starbucks was also the first coffeehouse chain in South Korea to introduce a program of eliminating single-use cups, alongside the mobile order option which allows its customers to order drinks and snacks directly from the app on their mobile phone.

Moreover, its merchandising marketing helped improve its brand value. The limited-edition diaries and tumblers and mugs with the instantly recognizable green logo have helped create a Starbucks fandom.

NEW OWNERSHIP STRUCTURE

Starbucks Korea, established as a 50:50 joint venture between E-Mart and Starbucks Corp., had expanded to 1,503 branches as of December last year.

Earlier this year, E-Mart, a Korean supermarket chain, bought an additional 17.5% stake in the coffee franchise from Starbucks' headquarters. Singapore's GIC Private Ltd. acquired the remaining 32.5% stake in Starbucks Korea for 800 billion won ($700 million).

Under the new ownership structure, Starbucks Korea will make various marketing efforts in collaboration with its affiliated companies, including the e-commerce brand SSG.COM, said the Starbucks Korea official.

As coffee has become an integral part of everyday life in Korea, a total of 16,000 new coffee shops have opened nationwide so far this year, meaning an average of 44 new coffeehouses opened every day, according to the Ministry of Public Administration and Security.

Slightly more than a quarter of cafes opened between 2018 and 2020 have shut down.

Write to Sul-ri Jun at sljun@hankyung.com
Yeonhee Kim edited this article.
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