Amid high inflation and a recession, domestic low-cost coffee franchises saw increases in sales and store counts. With a prolonged weak won due to a high exchange rate, rising green coffee prices, and tighter environmental regulations, there are projections of a broader industry hit.
According to the preliminary 2024 franchise (franchisee) statistics from the Ministry of Data and Statistics (MODS) on the 14th, the number of franchisees in the coffee and nonalcoholic beverage sector reached 34,735 in 2024, up 7.7% (2,494) from a year earlier. Average annual sales per franchisee also came in at 219 million won, up 4.7% year over year.
Sales and store counts also rose for leading low-cost coffee brands. According to the Korea Fair Trade Commission's franchise information disclosure system, MEGA MGC COFFEE posted 496 billion won in sales in 2024, up 34.6% from 368.4 billion won a year earlier. After opening its 4,000th outlet in December last year, the number of stores surpassed 4,000. The industry estimates MEGA MGC COFFEE's sales last year approached 600 billion won.
PAIK'S COFFEE, run by The Born Korea Inc., recorded 441.9 billion won in sales in 2024, up 13.9% from the year before. During the same period, The Venti posted sales of 94.7 billion won, up 3%. MAMMOTH COFFEE also recorded 75.7 billion won in sales in 2024, up 13.3% from a year earlier. COMPOSE COFFEE posted 89.7 billion won in sales in 2024, up 0.9% year over year. COMPOSE COFFEE expanded its stores to 3,000 last year and is eyeing entry into the 200 billion won sales range.
A coffee industry official said, "As consumption slumped due to high inflation, consumers flocked to low-priced, large-sized coffee," adding, "Franchises are gaining share as low-cost coffee shops open where independent cafes have closed."
However, concerns are rising that the combination of recent increases in green coffee prices and a high exchange rate will hit the low-cost coffee industry. According to food industry statistics from the Korea Agro-Fisheries & Food Trade Corporation (aT), as of the 9th of this month, the international price of Arabica green coffee was $7,935.34 per ton, up 7% from $7,414.73 a year earlier.
The exchange rate is also climbing. On the 13th, the won-dollar exchange rate in the Seoul foreign exchange market finished the transaction at 1,473.7 won, up 5.3 won from the previous day. The rate has been rising steadily since late last year. When the exchange rate rises, companies' purchase prices for imported raw materials also increase.
The government's proposed "cup price labeling system" is also cited as an additional burden for the industry. The idea is to encourage tumbler use by listing disposable cup prices separately, but there are concerns that, as cup costs previously included in coffee prices become visible, consumers may perceive it as a de facto price increase. Coffee prices are already on an upward trend. According to the Korean Statistical Information Service (KOSIS), last month's consumer price index for coffee was 143.98 (2020=100), up 7.8% from 133.62 a year earlier.
Industry watchers say that if high inflation and weak consumption persist alongside a prolonged rise in green coffee prices, already low average checks could fall further, increasing pressure on the industry to raise prices. A coffee industry official said, "Franchise cafes purchase beans in bulk and are less exposed to cost pressure, so the impact has been limited so far," adding, "But if the upward trend in green coffee prices continues, price increases may be considered. They will wrestle with how far to carry the 'low-price' appeal."