By Park Jae-hyuk
As of the end of March, 90,809 coffee shops were in operation nationwide compared to 54,000 convenience stores. Considering bakeries and dessert cafes, which also sell coffee, the number of coffee shops is estimated to be even higher.
In particular, Seoul accommodates about 18,000 coffee shops ― outnumbering convenience stores and chicken restaurants in the capital city, both of which are very popular types of businesses among the self-employed.
More data also supports the claim that Korea is the “republic of coffee.”
Given the import volume of coffee beans, Koreans drank more than 25 billion cups of coffee in 2016, which means an average Korean consumed 500 cups of coffee in one year.
Despite the slight falloff in market share, coffee mix has maintained the largest portion with 13.21 billion cups, followed by canned coffee with 3.79 billion cups and brewed coffee with 3.64 billion cups.
Although the amount has risen 25 percent from 10 years ago, sales revenue has nearly tripled during the same period ― from 3 trillion won ($2.64 billion) to 8.8 trillion won ― due to the rapid growth of the brewed coffee market here.
Winners and losers
Despite the saturation, coffee shops are still the most popular type of business among the self-employed.
“There is a famous saying that if your severance payment is small, you will have to open a chicken restaurant. If the amount is big, you will be able to have a coffee shop,” said Daumsoft Vice President Song Gil-young, an expert in big data analysis.
“For those who retire early against their will, coffee shops are like the most favored choice thanks to their profitability although they need sufficient funds. Chicken restaurants need relatively lower investments but the thin-margin business seems to be less favored.”
His remarks are backed by surveys. According to a COEX survey in February, 65 percent of 4,625 respondents wanted to open coffee shops or bakeries.
However, not all coffee shop owners appear to enjoy good bottom lines, as amply demonstrated by the struggle of some mid-sized local coffee shop franchises which are suffering long-lasting losses.
For instance, Caffe Bene has posted an operating loss for four consecutive years due to excessive domestic and global expansion. It earned 81.7 billion won in sales last year, down 32 percent from a year earlier, and its operating loss rose 18 percent to 13.4 billion won.
Tom N Toms, another mid-sized local coffee shop franchise operation, is also experiencing eroding profitability. Its operating profit in 2015 was 4.3 billion won, down from 6.5 billion won the previous year.
Starbucks Coffee Korea, on the other hand, posted 1.03 trillion won in sales last year to top the 1 trillion won mark for the first time in the industry. A Twosome Place, which is operated by CJ Foodville, is also expected to have reaped double-digit growth in sales last year.
Ediya Coffee, Paul Bassett and Holly’s Coffee have also posted good results through each of their business strategies, such as offering low-priced coffee, selling beer and providing tables for single customers.