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The Growing Coffee Market In South Korea

With coffee now officially the UK’s favourite drink we decided to take a look at how the coffee industry is catching on in other parts of the world. Areas that for one reason or another, haven’t always been associated with a cup of the black stuff.

One country that’s in the midst of a coffee revolution is South Korea. With 50% of its population surrounding the metropolitan area of Seoul (the third largest metropolitan area in the world, behind Tokyo and Delhi), investors and entrepreneurs have identified the potential market for new coffee shops and the rate of expansion in the coffee industry has been staggering over the last couple of years.

Imported coffee has risen by 97% since 2011. The catalyst for the surge is largely due to the US-Korea trade agreement (March 2012) that reduced tariffs on coffee beans from the US from 8% to 3.2%. Where it was once reserved for high-income earners and seen very much as a luxury, the reduction in imports has opened up the market to a wider selection of the population.

The rise has been so sudden that South Korea is now the 11th largest coffee market in the world and has seen a boom in new coffee shops opening throughout the country. At present it boasts 12,300 coffee shops and the capital, Seoul, has more outlets of Starbucks than any other city in the world, even New York.

* Starbuck stores throughout Asia.

Starbucks opened its first store in 1999 and since 2011 has been opening 80 new premises a year. The strong association with the South Korean public and the US has helped make coffee desirable and with many Koreans associating coffee and Starbucks as a lifestyle choice, it has become a status symbol throughout the city. Landlords are eager to have the brand open up a store in their buildings to enhance their value, reputation and image.

The sudden influx of coffee shops have replaced the once traditional “dabang” which were common meetings places serving a selection of customary teas. 

It’s not just large US chains that have profited from the surge in demand for coffee. Local businesses and entrepreneurs have also seized the growing opportunities.

CEO of the South Korean Caffé Bene, Sun-Kwon Kim, has stated that he wants to open 10,000 new shops in 14 different countries (including South Korea) by 2020. Starting only 6 years ago and with currently 1,860 coffee shops, the plans are bold and faced with stiff competition.

Initially Caffe Bene stuggled to gain any traction in an already oversaturated American market. Failing to gain brand recognition Sun-Kwon Kim agreed a deal with a number of entertainment shows to use his coffee locations in a selection of TV shows for a 3% share in the companies profit. The gamble appears to have worked and Caffe Bean now has a large fan base and is planned to feature in the new Batman Vs Superman movie.

While it’s unlikely that Superman will be seen flying through Metropolis while slurping on a Frappuccino, the all too common product placement in such a large budget Hollywood production is a sign of just how far the South Korean coffee industry has developed over recent years. The value of the market overall has climbed a staggering 17 times to 2.48 trillion Korean won between 2008 and 2012. 

The countries continued economic growth, a burgeoning coffee shop culture and its populations fascination with the US lifestyle, has quickly established South Korea as one of the fastest growing coffee industries in the world.