Korean coffeehouse chains are eyeing markets overseas as Seoul becomes oversaturated with coffee shops.
The number of coffee shops in Korea increased from about 6,000 in 2008 to 9,400 in 2011 according to research conducted by Samsung Economic Research Institute. The research also showed that some 40 percent of stores run by the top five Korean brands ― Caffe Bene, Hollys Coffee, Ediya Coffee, Angel-in-us and Tom n Toms ― are situated in Seoul.
Of 810 Caffe Bene stores in Korea, 261 are in Seoul; 172 of 391 Hollys Coffee branches are in Seoul; and the figure is 354 out of 600 for Ediya Coffee.
|Caffe Bene’s New York store (Caffe Bene)|
While adjusting some of the other items to appeal to local tastes, the overseas branches maintain the same book-caf-like interior. In the Beijing stores, the menu descriptions are more detailed to help Chinese consumers who are not as familiar with such beverages.
The coffeehouse chain aims to open more shops in the U.S. and China in the latter half of this year as well as advance into other Asian countries including Japan, Cambodia and the Philippines, and also the Middle East. It recently signed a partnership with Saudi Arabia-based KEDEN Group to launch shops in Kuwait, Qatar, Oman, United Arab Emirates and Bahrain. Together they will open 100 shops in the region within five years, according to Caffe Bene.
“Overseas expansion is this year’s main goal of Caffe Bene, which we have been preparing since the brand launch. In case of the local market, we plan to open more shops in special locations like in hospitals, schools or rest areas (in highways),” said Hong Ju-hye, a PR official at Caffe Bene.
Hollys Coffee plans to open 22 shops overseas within the year in the Middle East and Asia.
It signed an agreement with Saudi Arabia-based retail company Sure Business in May and opened shops in Qatar, Bahrain and Kuwait. It also opened a shop in Shenzen, China last month and will open one in Beijing this month.
In South America, Hollys successfully opened two stores in Peru and is planning to open more in Mexico and Chile. The company is also eyeing markets in Russia and Europe.
Angel-in-us is also steadily expanding its market share in Asia after it first opened a shop in China in 2008. It currently runs nine shops in China, four in Vietnam and three in Indonesia.
Ediya Coffee and Tom n Toms are still focusing on Korean expansion, eyeing growth in regions other than Seoul.
Ediya opened its first company-operated store outside of Seoul in Gwangju in May, and plans to open more in the city as well as in South Jeolla Province. Based on the success here, the company hopes to start overseas launches as early as the end of this year or early next year.
Tom n Toms formed a special task force to open stores in the provinces. Focusing on the major cities excluding Seoul, the coffee chain plans to expand throughout the nation. In the latter half of the year, the focus will be on Daejeon, Daegu and Gangwon Province.
Insiders say that the Fair Trade Commission’s move to limit the distance between coffeehouse chains to at least 300 meters to 500 meters in Seoul seems to be another factor for the companies’ recent rush out of Seoul.
The antitrust watchdog hinted in June that it would soon put a minimum limit on the distance between coffee chains as it already does for bakeries (500 meters), chicken stores (800 meters), pizza stores (1,500 meters) to protect franchise holders.
“Only 17 percent of the applicants who wished open a franchise store passed through the screening process of our market-opening-team since January. We have been running the team since 2010, and have very high standards. If the FTC makes a certain regulation, we would be able to meet the standards quickly,” said Hong.
The FTC’s regulation, however, only applies to franchise stores and not company-operated stores. Market leader Starbucks therefore will not be affected as all of its shops are directly operated by the company.
Meanwhile, insiders noted that the expansion of coffeehouse chains outside of Seoul could bring new sources of profitability and growth.
By Park Min-young (firstname.lastname@example.org)