Starbucks Posts Record Operating Profit in Korea in 2017: Sources | Be Korea-savvy

Starbucks Posts Record Operating Profit in Korea in 2017: Sources

(image credit: Korea Bizwire)

(image credit: Korea Bizwire)

SEOUL, Mar. 15 (Korea Bizwire)Starbucks Coffee Korea posted a record operating profit last year amid growing popularity of the U.S. coffeehouse chain here, industry sources said Thursday.

The 50-50 joint venture between retail conglomerate Shinsegae and the U.S. coffee giant posted 114.4 billion won (US$107 million) in operating profit on 1.2 trillion won in sales last year, Shinsegae said.

It is the first time Starbucks recorded over 100 billion won in operating profits since it opened its first local branch near Ewha Womans University in Seoul in 1999.

The operating profit is up 25.9 percent last year from 85.4 billion won a year earlier, and the sales rose 33.9 percent on-year from 1 trillion won.

The strong figures compare with those of Twosome Place, Angel-in-us Coffee and other local competitors, whose average operating profits and sales are much smaller, and hover between 10 billion won and 20 billion won for operating profits, and 100 billion won and 200 billion won for sales.

Starbucks Korea said it transmitted 63.1 billion won in royalty payments to its U.S. headquarters last year.

Starbucks had 1,140 stores in the country as of the end of last year, the world’s fourth-largest number of Starbucks stores in relation to population coming only after Canada, the United States and Singapore, according to industry data.

The number has risen sharply over the years, hitting 1,000 in 2016 from 500 in 2013 and 327 in 2010.

Industry sources attributed the popularity of Starbucks in South Korea to the growing loyalty of women in their 20s and 30s, saying the company has succeeded in promoting its image as an upmarket brand in South Korea, where the luxury coffee market is still growing.

The dramatic rise has also been helped by regulations that ban franchises from opening new stores within a 500-meter radius from same brand shops.

Unlike local franchise coffee shops, which are subjected to the regulations, Starbucks is free as its outlets are run not by franchise contractors but directly by the company’s headquarters.

Critics say the regulations aimed to protect food franchise contractors from intense competition have actually served as a boon to foreign businesses operating in South Korea.


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