Hollys Coffee goes to Japan as Korean franchises turn gaze abroad

Hollys Coffee, a unit of South Korea’s KG Group, is opening its first overseas outlet in Osaka, Japan, riding on the popularity of Korean culture, known as Hallyu or the K-wave, in the neighboring country.

Hollys said on Monday it will open a coffee house at the Marui Department Store in Namba, Osaka in the first half.

The company said it picked Japan as its first overseas destination given the growing popularity of Korean-style cafés and dessert shops among young Japanese people.

“To promote the Korean café culture and coffee tastes, we’ve decided to directly enter the Japanese market instead of a master franchise system,” said Hollys Chief Executive Lee Jong-hyun. “Gradually, we’ll open more outlets across Japan and enter other countries as well.”

Japan is Asia’s top coffee-consuming country and the world’s fourth largest.

Holly, which began its operations in 1998, currently operates about 550 outlets in Korea.

SATURATED KOREAN COFFEE MARKET

Korean coffee shop operators are increasingly launching overseas outlets to avoid fierce competition in the saturated domestic market and take advantage of the Hallyu trend overseas.

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, including homegrown coffee shops and foreign brands, particularly Starbucks.

According to the National Tax Service, there were some 96,300 coffee and dessert outlets across the country as of the end of 2023.

KOREAN COFFEE FRANCHISES LOOK OVERSEAS

Korea is among the world's highest per capita coffee consumption countries.  According to market research firm Euromonitor International Ltd., more than 400 cups of coffee were consumed per capita in the country last year, compared with the 152.7 global average.

As competition in the domestic market heats up, homegrown coffee franchises seek global expansion.

Ediya Coffee, Korea’s No. 1 coffee franchise, opened its first overseas outlet in Guam last December and plans to launch the second one on the island this year.

Ediya entered China in 2005 but pulled out of the market three years later due to worsening profitability.

The coffee franchise currently exports its coffee products to 19 countries, including the US, Taiwan, Australia and New Zealand.

Tom N Toms is one of the most active domestic players seeking overseas expansions. The company operates branches in over 70 countries, including the US, China, the Philippines, Mongolia and Myanmar.

Mega Coffee, Korea’s No. 2 coffee franchise known for its low- and mid-priced specialty coffee products, and The Carlyle Group-owned franchise A Twosome Place, are also considering their advancement into global markets.

Write to Sul-Li Jun at sljun@hankyung.com

In-Soo Nam edited this article.