Changes brewing: Global coffee chains struggle to adapt to Korea's cafe culture

Korea Herald

13 hours ago

Blue Bottle rethinks its slow-coffee roots; Tim Hortons slashes prices
Global coffee chain such as US franchise Blue Bottle and Canada's Tim Hortons, are changing tack in Korea's cutthroat coffee market, where both appear to have muffed their attemps to localize their offerings.
Blue Bottle, which entered Korea in 2019 touting its artisanal brewing rituals, has recently traded some of its signature slowness for speed.
Its once-prized focus on customer interaction has lost some of its gravitas, now that it's available on local delivery apps like Baemin and Coupang Eats. Perks like size upgrades and app discounts only further blur the lines between craft and convenience.
As of October last year, only five of its 17 locations offered delivery. That number has since doubled to 10.
According to industry insiders, the shift risks diluting the brand's identity, though it seems a necessary concession to Korean cconsumer culture.
'Yet, in a market awash with cheap caffeine and fast service, its core values may be hard to maintain,' one insider said.
While Blue Bottle's annual sales in Korea rose 17 percent on-year to 31.2 billion won ($22.6 million) last year, operating profit plunged to 200 million won, from 1.9 billion won the previous year and 2.7 billion won in 2021. The company also posted a net loss of 1.1 billion won, its first since entering the Korean market.
Another notable entrant, Tim Hortons, which made its Korean debut in 2023, appears to be at a crossroads.
In June, the chain shuttered its flagship store in Cheongna, Incheon, its first directly operated location to close.
While speculation swirls around its financial struggles in Korea, the company cited a search for a more fitting location to better reflect its Canadian roots.
The backlash also stems from Tim Hortons' premium pricing strategy in Korea, where prices are 1.5 to 2 times higher than in Canada despite its reputation there for affordability and everyday value.
For these newcomers, the hurdles are steeper in the face of fast-growing, budget-minded Korean chains like Mega Coffee, whose 2,000-won Americano delivers enough of a caffeine kick to stand up against Tim Hortons' 4,000-won and Blue Bottle's 5,900-won Americanos.
This month, Tim Hortons launched a promotional campaign slashing prices on its signature Iced Capp by 60 percent and offering free Americano coupons to customers who purchased donuts, in a bid to reconnect with Korean consumers.
When it comes to strategy, Starbucks, a dominant force in Korea's cafe scene, is an early mover in delivery, having launched the service in April last year. It continues to anchor customer loyalty by doubling down with expanded app rewards and discounts of up to 60 percent.
'Korean coffee consumers move fast and expect brands to keep pace,' said one industry official, urging global chains to stay agile and responsive to local demands. 'Striking the right balance between brand roots and local flavor is critical to success.'
Korea's saturated and stratified coffee market indeed breeds stiff competition, in which cafe businesses at every tier are feeling the squeeze.
According to Korea's National Tax Service, the number of coffee shops nationwide dipped to 95,337 in the first quarter, down 743 from a year earlier. It's the first recorded decline since the agency began tracking the figure in 2018.