Domestic mid-priced coffee franchise companies are focusing on their overseas market expansion. Not only 'Ediya' and 'MegaMGC Coffee', but also 'The Venti' has begun to target the local market in Vietnam.
According to industry sources on the 30th, the domestic low-cost coffee franchise The Venti opened a local store in Ho Chi Minh City, Vietnam, on the 28th. This marks The Venti's second international store opening. The Venti first opened its overseas store in Richmond, British Columbia, Canada, last March.
Ediya has also been targeting the overseas market since last year, starting with the opening of its first location in Malaysia. The first store is set in 'Elmina', a representative satellite city of Kuala Lumpur, the capital of Malaysia. Given that it has signed a master franchise agreement with a local partner, the company expects a rapid pace of market expansion.
MegaMGC Coffee also launched its overseas market entry last year with its first directly-operated store in Mongolia. Compose Coffee, recently acquired by the Philippines' largest food service company Jollibee, is looking to expand into overseas markets while operating two stores in Singapore.
This is based on the judgment that there is a limit to further growth in the domestic coffee market. The five major low-cost coffee brands represented by MegaMGC, Compose, Baekdabang, The Venti, and Mammoth have surpassed 10,000 stores as of this year. Compared to the number of stores in 2020, it has more than tripled. Considering personal cafes, the number of stores could increase to about 100,000.
As a result, competition in the domestic coffee market is intensifying day by day. It's so intense that even 'Starbucks', regarded as a strong player in the coffee market, is attracting consumers by lowering coffee prices through various promotions. Recently, Starbucks Korea offered a service where the next coffee is sold at a 60% discount when purchasing coffee.
Canada's 'Tim Hortons' and America's 'Blue Bottle', which entered the market believing they could succeed, are also struggling. Tim Hortons, which recently launched a franchise operation, ended the business of its Incheon Cheongna store, which opened last April, after just one year. This marks the first closure of a directly-operated store since its entry into Korea. Blue Bottle has reported losses in its domestic business since last year, with a net loss of about 1.1 billion won last year.
An industry official noted, "The intensity of competition in the domestic coffee market is stronger than expected, and consumers are also quite discerning. Given that even prominent overseas brands struggle to establish themselves in the domestic market, the growth achieved locally may also translate into potential success overseas."
Korean brands are benefiting from the Korean Wave. With idols and actors at the forefront, dramas and K-pop have increased the favorability of Korean brands and their acceptance. The food and beverage industry sees this positive image of Korea as a way to overcome the disadvantage of low recognition. To this end, they are introducing desserts that evoke Korean food. A representative example is Ediya Coffee, which showcased beverages using Sikhye and roasted sweet potatoes in Malaysia.
However, there may be trial and error. It is analyzed that it may take time to win the hearts of local consumers. When Starbucks first entered Korea, it faced significant resistance, earning the nickname 'coffee prices more expensive than meals', and a similar situation may occur overseas.
In striving to expand based on expectations for Korean brands, political issues should not be overlooked. It is essential to consider the case from about a decade ago in 2013 when the popular drama 'My Love from the Star' aired overseas, leading to the popularity of 'Chimaek (chicken and beer)'. At that time, many domestic chicken franchise companies expanded into overseas markets but ultimately experienced mass withdrawals. The chicken franchise BBQ withdrew most of its stores due to deteriorating Korea-China relations following the deployment of the Terminal High Altitude Area Defense (THAAD) system in 2017.
Suh Yong-gu, a professor at Sookmyung Women's University, stated, "Localization is particularly important, and it is necessary to select appropriate partners and also to have an exit strategy prepared in case the business does not go well."