Starbucks reigns in coffee republic of South Korea; Drink, play and work

In South Korea, coffee is not just something to drink. It’s a culture, in which people drink, play and work.

Koreans’ love affair with coffee has been going strong for years, with many café-goers showing little resistance to spending more on a tasty cup of coffee than on a single meal.

Even the three-year COVID-19 pandemic, which imposed strict social distancing rules, failed to stop Koreans from venturing out to coffee houses in their neighborhoods. As a result, the country has seen a whopping increase in coffee outlets, particularly Starbucks.

According to Starbucks Corp., Korea ranks fourth globally in the number of its outlets, trailing only the US, China and Japan.

As of the end of 2023, Korea had 1,893 Starbucks outlets, an increase of 116 stores from the year prior.

With that figure, Korea is only eight stores shy of catching up to Japan, which has a population twice that of its neighbor.

Of 38,587 Starbucks outlets globally, the US ranked top with 16,466 stores, followed by China with 6,975 outlets. The top two countries account for 61% of the total.

Canada ranked fifth with 1,465 Starbucks outlets, followed by the UK with 1,297 houses.

KOREA SET TO SOON OVERTAKE JAPAN

Italy's and Australia's outlets reached only double-digits as of the end of last year with 36 and 71 Starbucks houses, respectively.

In 2013, Japan was ahead of Korea in the number of Starbucks outlets with a gap of 400 stores.

The difference has steadily narrowed to 154 in 2019, 121 in 2020, 67 in 2021, 17 in 2022 and eight in 2023.

Japan was the first country for Seattle-based Starbucks to venture outside North America.

The first Starbucks house in Japan opened in Ginza, an upmarket district in Tokyo, in 1996.

Starbucks opened its first outlet in Korea in front of Ewha Womans University three years later. Starbucks Korea celebrates its 25th anniversary this year.

Starbucks has been an attractive destination for Korean coffee lovers looking to get away from it all.

A THIRD LOCALE

Behind its strong growth was Starbucks' marketing strategy to position itself as a third locale, or a social space separate from the home and the office. 

The pandemic even has changed the perception of workspace among millennials and Gen Z, or those born between the 1980s and the early 2000s.

They no longer want to work at fancy office spaces in high-rise buildings and instead prefer to work at spacious coffee houses.

“Koreans love to go to a Starbucks not just to enjoy coffee but also to study, play games or even hold a business meeting,” said an industry official.

With the rapid expansion of outlets in Korea, Starbucks’ employee numbers have also spiked.

When Starbucks opened its first coffee house in front of Ewha Womans University, it had 40 workers, or partners. Starbucks Korea now hires 23,000 partners.

According to SCK Co., the operator of Starbucks Korea under Korean retail giant Shinsegae Group, Starbucks Korea posted 49.8 billion won ($37.4 million) in operating profit with a profit margin of 6.5% in the third quarter of 2023. Sales were 758.6 billion won.

Even so, Starbucks Korea runs fewer outlets than some homegrown Korean coffee chain operators.

Ediya Coffee operates over 3,000 outlets while Mega Coffee runs 2,785 coffee houses.

But unlike Starbucks, which runs spacious outlets, Ediya and Mega Coffee operate smaller stores with a focus on takeaway customers.

Started as a 50-50 joint venture between Shinegae and the US coffee chain operator, Starbucks Korea is currently 67.5% owned by E-Mart Inc., a Shinsegae affiliate.

Singapore’s GIC Private Ltd. owns the remaining 32.5% stake in Starbucks Korea.

Write to Hyeong-Ju Oh at ohj@hankyung.com

In-Soo Nam edited this article.