Homegrown coffee chains emerge as strongest players in Korea

Competition in South Korea’s coffee market is intensifying with the rise of fast-growing local brands such as Mega Coffee and Compose Coffee, which feature more affordable options than global big names like Starbucks and The Coffee Bean & Tea Leaf.  

Mega and Compose, respectively the country’s second- and third-largest coffee chains by the number of outlets, have aggressively increased their outlets over the past several years amid the pandemic and high inflation.

The two players are threatening the top position of Ediya Coffee, a local franchise characterized by mid-priced specialty coffee.

As of the end of 2023, Ediya topped coffee chains in Korea with around 3,000 outlets across the country, followed by Mega and Compose running 2,709 and 2,350 houses, respectively. Starbucks and Carlyle-backed A Twosome Place operated 1,893 and 1,641 outlets, respectively.

RAPID EXPANSION

Mega and Compose have gained popularity with their affordable beverages. Their hot Americano is priced at 1,500 won ($1.12), less than half Ediya’s and around 33% Starbucks’.

As more consumers seek cheaper coffee amid inflation, Mega, which opened its first outlet in Seoul in December 2015, increased the number of houses to 1,000 in 2020 and 2,000 in 2022.

Compose, launched in 2014, exceeded 2,000 outlets last year.  

Mega and Compose are strengthening their marketing with ads featuring Tottenham football star Son Heung-min and K-pop sensation BTS member V, respectively.

RED OCEAN

South Korea has one of the world's highest per capita coffee consumption. 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. 

The Korean coffee market has been saturated for years with a surging number of cafes. As of the end of 2022, around 99,000 cafes and beverage shops were in operation; a total of 11,450 cafes across the country closed in the first 11 months of last year, exceeding the figure for all of 2022.

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

Ediya opened its first overseas outlet in Guam last December and is planning to launch the second one on the island this year. The homegrown Korean brand exports coffee products to 19 countries such as the US, Taiwan, New Zealand and Australia. Mega and A Twosome Place are considering their advancement into global markets.   

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

Jihyun Kim edited this article.