SEOUL, April 4 (Yonhap) – Low-cost coffees at South Korean convenience stores are increasingly popular among price-conscious consumers, posing a threat to coffee shop franchises, industry data showed Monday.
Local convenience stores have served canned coffee and instant coffee with hot water for years, but they are expanding sales of higher-quality drinks through self-serve coffee bars to get a bigger chunk of the rapidly growing market.
The nation’s top three convenience store chains, which each have over 7,000 outlets nationwide, offer coffee at around 1,000 won (87 cents), a price one-third or one-fourth that of major franchise coffee shops.’
Helped by affordable prices, coffee sales at major convenience store chains have soared in the first quarter compared to a year ago.
7-Eleven, operated by Lotte’s affiliate Korea Seven, said sales at “Seven Cafe” jumped nearly four times in the first three months of this year, without elaborating on the specific sales figures.
GS 25, a chain under GS Retail, also saw coffee sales at “Cafe 25″ rise nearly three-fold during the period, and CU, a chain by BGF Retail, said its sales at “Cafe GET” rose 62 percent.
Convenience stores plan to expand their on-the-go coffee services this year as well as bakery items and ice beverage menus this summer to expand coffee-related sales. The 7-Eleven and GS 25 chains plan to triple the machine to 3,000 this year, according to company officials.
As major chains are set to expand coffee services to edge out their rivals, industry officials expect the competition to accelerate polarization in the market between mini take-out stores and trendy cafes. Their fast rise poses a threat to franchise coffee shops, which have posted lackluster performances amid a supply glut and rising rental fees in major retail strips.
Ediya, a homegrown coffee brand that has the largest number of shops nationwide, said the average sales per store slipped 2 percent in 2015 from a year ago.
“We have been paying keen attention to convenience store coffees. After in-depth discussions with employees late year, we concluded that creating Ediya’s own taste is the most important,” Ediya CEO Moon Chang-ki said during last week’s press conference. “Despite the influx of cheap coffee, we will strengthen R&D to improve the quality of our coffee products.”
The coffee market was valued at 6 trillion won last year and was expected to grow about 10 percent in the next five years.
Amid the coffee craze, convenience store coffee grew at the fastest pace to snip away the market share of other caffeine beverages. Coffee sales at convenience stores amounted to 40 billion won (US$34.7 million) in 2015 and are expected to expand to 100 billion won this year, according to industry data.