Changes brewing: Global coffee chains struggle to adapt to South Korea's cafe culture
- Global coffee chains such as US franchise Blue Bottle and Canada's Tim Hortons are changing tack in South Korea's cut-throat coffee market, where both appear to have muffed their attempts to localise their offerings.
Blue Bottle, which entered South 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 is 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 at October 2024, 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 consumer 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 South Korea rose 17 percent year on year to 31.2 billion won (S$29.3 million) in 2024, 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.
Earlier 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 South 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 South Korea, where prices are 1.5 to two times higher than in Canada despite its reputation there for affordability and every day 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.
In June, Tim Hortons launched a promotional campaign slashing prices on its signature Iced Capp by 60 per cent 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 South Korea's cafe scene, is an early mover in delivery, having launched the service in April 2024.
It continues to anchor customer loyalty by doubling down with expanded app rewards and discounts of up to 60 per cent.
'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 flavour is critical to success.'
South Korea's saturated and stratified coffee market indeed breeds stiff competition, in which cafe businesses at every tier are feeling the squeeze.
According to the country'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 is the first recorded decline since the agency began tracking the figure in 2018. THE KOREA HERALD/ ASIA NEWS NETWORK
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