Starbucks Korea’s new subscription service, Buddy Pass (Image courtesy of Starbucks Korea)
SEOUL, Nov. 28 (Korea Bizwire) –Starbucks Korea announced on Wednesday that it will officially launch its new subscription service, Buddy Pass, on December 2 to mark its 25th anniversary.
This move comes as the coffee chain faces growing challenges to maintain its once-dominant appeal in South Korea, despite expanding its retail channels, including a scenic store at Kimpo’s Aegibong Observatory near the North Korean border and a large outdoor café in Jeju.
Declining Sentiment Amid Price Hikes
While Starbucks has achieved impressive financial growth—its revenue surged by 56% over four years to 2.92 trillion won in 2023, with forecasts of exceeding 3 trillion won in 2024—consumer sentiment appears to be waning.
A big data analysis by Data & Research revealed a dip in the brand’s favorability. From November 2022 to November 2023, Starbucks recorded a positive sentiment rate of 67%, a 6.9% decline from the prior year. This downturn coincides with two rounds of price hikes in 2023, most recently in November, when iced drinks saw increases of up to 600 won, sparking consumer dissatisfaction.
This photo taken on March 3, 2024, shows a Starbucks outlet in Seoul. (Image courtesy of Yonhap)
Eroding Premium Image
Frequent price increases and controversies have diluted Starbucks’ premium brand image. A major scandal in 2022, when formaldehyde was found in promotional bags, damaged its reputation, while comments from Shinsegae Vice Chairman Chung Yong-jin, Starbucks Korea’s parent company executive, also drew public criticism.
Moreover, a growing number of consumers are shifting to lower-cost alternatives, such as convenience store coffee and other affordable brands, intensifying polarization within the coffee market.
Buddy Pass Subscription: A Mixed Proposition
The Buddy Pass subscription offers customers a daily 30% discount on one handcrafted beverage after 2 p.m. for a monthly fee of 7,900 won. Subscribers also receive discounts on food, free delivery for Starbucks’ Delivers service, and free shipping for online orders. While the service was piloted last month and met with customer enthusiasm, concerns linger over its long-term profitability.
Analysts point out that aggressive discounts could erode Starbucks’ high-end image and create financial losses if customers heavily utilize the benefits. “Frequent promotions may transform Starbucks into a discount-oriented brand, further diminishing its exclusivity,” warned market observers.
Challenges Ahead
Although Starbucks Korea has demonstrated resilience with a rebound in operating margins, reaching 8.4% in the third quarter of 2024, its reliance on short-term revenue growth without addressing core consumer trust issues raises sustainability questions.
As competition intensifies and the brand’s premium allure diminishes, Starbucks faces mounting pressure to realign its strategy to secure its leadership in South Korea’s evolving coffee market.
Ashley Song (ashley@koreabizwire.com)
