South Korean consumers are particularly sensitive to coffee prices due to their high consumption levels. The average adult in South Korea drinks nearly 370 cups of coffee per year—more than twice the global average of 161 cups. (Image courtesy of Pixabay/CCL)
SEOUL, Feb. 18 (Korea Bizwire) — Once a popular and low-barrier entry point for entrepreneurs, South Korea’s café industry is now facing an intense survival challenge due to market oversaturation, rising costs, and regulatory pressures.
Despite the industry’s rapid expansion, data shows an alarming rate of closures. According to Statistics Korea, as of 2022, the number of employees in the coffee shop sector reached 271,794, growing at an annual rate of 8.37% over five years. Revenues also climbed at an average rate of 12.47%, reaching KRW 15.5 trillion ($10.7 billion) in 2022.
However, the recent surge in café closures is raising concerns about broader economic repercussions, including employment instability and local business downturns.
A primary reason for the wave of closures is an oversupply of cafés. South Korea’s coffee shop industry doubled in size within six years, surpassing 100,000 establishments in 2022.
Unlike in the United States, where it typically takes over a year to open a café, in South Korea, new coffee shops can be launched in as little as three to four months, exacerbating market saturation. The lack of regulatory restrictions has led to fierce competition, with multiple café franchises often operating within the same building.
In Seoul alone, 4,617 coffee shops shut down in 2024, equating to an average of 385 closures per month. Most did not survive beyond three years, with an average lifespan of just 2.9 years.
The rise of low-cost coffee chains, such as MegaMGC Coffee, Compose Coffee, and Paik’s Coffee, has further intensified the strain on independent cafés. Over the past four years, the number of stores operated by these budget coffee brands doubled from 3,869 in 2021 to 7,928 in 2024.
Industry experts warn that the presence of a single discount coffee chain can force three to four nearby independent cafés out of business.
Café owners also cite unfavorable labor laws as a growing challenge. Due to staffing demands, most cafés require at least one or two part-time employees. However, recent labor law changes have made hiring more difficult.
Under the current system, employees working for over a year are entitled to 15 days of paid leave, which can be used consecutively, leading to staffing shortages and additional financial burdens for small business owners.
Adding to the crisis, surging coffee bean prices are further squeezing margins. According to the Korea Agro-Fisheries & Food Trade Corporation, the price of Arabica beans exceeded $9,000 per ton in 2025, a 117% increase from $4,152 the previous year.
Robusta bean prices also surged by 80%, reaching $5,651 per ton. Supply disruptions caused by extreme weather conditions in Brazil and Vietnam, the world’s top two coffee-producing countries, have contributed to this inflation.
Experts predict that coffee prices will continue to rise for at least the next two to three years, further straining café operators who are already struggling with fluctuating exchange rates and increasing operational costs.
As South Korea’s once-booming café industry faces mounting pressures, small business owners and industry leaders are calling for policy reforms and financial support to ensure the sector’s sustainability.
As consumer sentiment weakens, more people are cutting back on expenses for coffee and alcohol, leading to a sharp 10% decline in café sales. (Yonhap)
Lina Jang (linajang@koreabizwire.com)
