As K-food gains popularity, exports of Korean mix coffee are also increasing. However, Dongsuh Foods' "Maxim," synonymous with mix coffee, is not among the export items. Dongsuh Foods is a joint venture in which Dongsuh and global food company Mondelez each hold half the equity. Under the contract, Maxim must be sold only in the domestic market.
According to the Korea Customs Service on the 5th, Korea's food exports totaled $8.481 billion (about 12 trillion won) in the cumulative period from January to September this year. That is up 8.9% from the same period last year ($7.787 billion), the highest on record. Among them, exports of coffee preparations such as mix coffee reached $283 million (about 400 billion won), up 15.8% from a year earlier.
It was not the "domestic champion" Maxim that drove the increase in exports. Maxim, a steady seller from Dongsuh Foods, is regarded as the byword for Korean mix coffee. According to market research firm Nielsen, as of the end of last year, Dongsuh Foods' share of the domestic mix coffee market was 90.8%, firmly in first place. However, official overseas sales of Maxim are not possible.
Since its establishment in 1968, Dongsuh Foods has been a joint venture set up by Dongsuh and Mondelez with equity split 50–50. Mondelez holds the overseas rights to Dongsuh Foods' key brands, including Maxim, Maxwell House, Kanu, and T.O.P. Accordingly, Dongsuh Foods cannot officially sell mix coffee products overseas. Currently, the only product that can be exported is "Prima."
A Dongsuh Foods official said, "Most mix coffee products such as Maxim and Kanu sold overseas are volumes moved by individual suitcase dealers or through parallel distribution, so they are not counted as official export volumes." The official added, "We do supply some Korean marts, but the volume is small, so it is hard to see it as official exports," and "Even though K-food and K-coffee are said to be booming, we have no plans to develop our own brand to target the global market. We will focus more on products tailored to domestic consumer tastes."
For now, this appears to be Dongsuh Foods' only option. On a consolidation basis last year, Dongsuh Foods posted record sales of 1.7909 trillion won, thanks to price hikes on key products. However, operating cash flow during the same period was 185.9 billion won, down 26% from a year earlier. Cash flow from core operations deteriorated. With the domestic market expected to slump in an era of high inflation, the coffee industry views the plan to find new growth engines only at home as a structural limitation Dongsuh Foods faces.
The export market for K mix coffee is growing as latecomers make inroads. Namyang Dairy Products Co., the No. 2 player in the domestic mix coffee market (5.6% share), is exporting its mix coffee brands "French Café" and "Lukas Nine" to the United States, China, Indonesia, and elsewhere. In particular, buoyed by the popularity of K-food, local U.S. demand for mix coffee is rising, and products are also being produced and exported through original design manufacturing (ODM).
Franchise cafe Ediya Coffee is currently selling 36 products, including mix coffee, stick coffee, and drip coffee, in 27 countries worldwide. Major export destinations include the United States, Canada, Japan, Singapore, and Mongolia. As a result, Ediya Coffee's exports in the third quarter of this year increased 81% from a year earlier. In addition, Korea Mcnulty and Coffee Docent are also exporting coffee preparations such as instant mix coffee stick products and drip bags.
An industry official said, "The overseas K mix coffee market is currently in a transitional stage where various brands are expanding their presence in different ways rather than any particular corporations leading the market," adding, "If Dongsuh Foods does not establish a strategy to enter the global market, it will have no choice but to remain a 'frog in a well.'" Another official said, "Fundamental solutions are needed, such as renegotiations with Mondelez or the introduction of a model for joint overseas brand operations."