Specialty coffee brand Terarosa raises $60 mn from Unison Capital

The operator of Terarosa, known as the Blue Bottle Coffee of South Korea, has received around 70 billion won ($60 million) in funding from Unison Capital, a private equity firm that hit a jackpot from its investment in milk tea brand Gong Cha.

The middle market-focused South Korean PE firm recently agreed to buy a 35% stake in Haksan Co., which runs the specialty coffee chain, according to investment banking sources on Nov. 2.

After the stake sale, founder and CEO Kim Yong-deok will remain as chief executive of the coffee brand and get involved in its day-to-day operations.

Back in 2002, Kim opened the first store of Terarosa in his hometown, Gangneung, after quitting his 20-year banking career. The small roastery became a landmark place in the seaside city in Gangwon Province, 150 km northwest of Seoul. Its exotic interior and unique exterior grabbed the eyes of coffee lovers, with the coffee roasting plant placed inside the cafe.

Meaning “red land” in Portuguese and “land of hope” in Brazilian, Terarosa has grown into a specialty coffee brand and a chain of 19 cafes across the country. Specialty coffee is sourced from high-grade beans grown in select altitudes and climates.

Terarosa is also termed the South Korean version of Blue Bottle Coffee, a specialty coffee roaster and retailer headquartered in Oakland, California.

However, pandemic-induced travel restrictions pulled its 2020 operating profit lower to 7.2 billion won, versus 8.5 billion won a year earlier. Revenue edged down to 35 billion from 36 billion won during the period. 

With the stake sale to Unison Capital, Terarosa expects the PE house to drive its expansion abroad, repeating the success story of Gong Cha.

Unison Capital's investment in 2014 in the milk tea brand marked the first case for a domestic PE firm to acquire a foreign-headquartered franchise operator and grow it as a global brand. Its $300 million divestment from the franchise translated into almost six times return. 

Write to Chae-yeon Kim at why29@hankyung.com
Yeonhee Kim edited this article.