As the domestic coffee market reaches saturation, major budget coffee brands such as MEGA MGC COFFEE, COMPOSE COFFEE, and PAIK'S COFFEE are turning their attention overseas. In particular, they are zeroing in on Japan, a neighboring country with high coffee consumption, to secure new growth engines.
However, given Japan's distinctive conservative coffee culture and its extremely polarized consumption structure, there are concerns about whether the Korean-style "cost-effectiveness strategy" can take root in the long term.
According to the industry on the 7th, the brand pushing into the Japanese market the fastest right now is MAMMOTH COFFEE. After opening its first store in Jan. last year in Toranomon, the central business district of Tokyo, MAMMOTH COFFEE expanded to its fourth store in about a year. Its strategy of selling a 940 ml large-size Americano for 400 yen (about 3,800 won) is drawing attention among Tokyo office workers who value practicality. The Born Korea's PAIK'S COFFEE is also preparing to enter Japan within the year. It is expected to actively leverage CEO Paik Jong-won's strong brand recognition in local marketing.
Beyond Japan, expansion into other parts of Asia is also active. COMPOSE COFFEE gauged the Asian market's response with a pre-opening of its first Taiwan store on the nth of last month. MEGA MGC COFFEE has already verified its potential by operating eight outlets in Mongolia and is targeting entry into Asian and North American markets. EDIYA COFFEE is focusing on Guam, and The Venti is building a global network with bases in Southeast Asia and Canada.
Budget coffee brands are rushing overseas because the domestic market has grown so tight that there is virtually no room left to retreat. The number of domestic budget coffee franchise stores has more than tripled in the past five years, surpassing 10,000. By brand, MEGA MGC COFFEE has a little over 4,000, COMPOSE COFFEE about 3,000, and PAIK'S COFFEE about 1,800.
Indicators also confirm that the domestic coffee market is saturated. According to the Seoul Commercial District Analysis Service, as of the fourth quarter of last year, there were 6,766 coffee franchise outlets in Seoul, down 368 from the same period a year earlier.
With new openings virtually impossible, companies are defending profitability at home by significantly strengthening food menus such as cup chicken and tteokbokki, while pursuing a "two-track strategy" to find new growth engines in overseas markets.
The industry views the initial response in Japan as positive, but believes the market's unique characteristics will be a major variable. First, Japan's coffee market is split at the extremes between "ultra-low price" and "premium." Local consumers either enjoy cheap convenience store and vending machine coffee for around 100 yen a cup or prefer specialty shops that use high-quality beans. Korean budget coffee sits in a middle price range between these options, which could make it difficult to secure a firmly loyal customer base.
Cultural differences are also a hurdle to overcome. While takeout culture is highly developed in Korea, Japan still centers on the "kissaten (teahouse)" culture of sitting down to enjoy coffee in-store. For example, MAMMOTH COFFEE eliminated seating to create a takeout-only layout and introduced mobile ordering and self-checkout systems to cut both rent and labor costs, but this may not mesh well with Japanese culture.
In addition, Japanese consumers are highly sensitive to food quality under the influence of the "monozukuri (craftsmanship)" culture. An industry source said, "Simply being large in quantity and cheap may spark curiosity at first, but if the perception takes hold that the beans are of poor quality, there is a risk that revisit rates will plunge."
Another factor that cannot be ignored is Japanese consumers' particularly strong preference for domestic brands. Japan's "Doutor" is already a national coffee brand with a dense network across the country. It maintains prices similar to Korean budget coffee while already possessing a local supply chain and customer loyalty. That makes it difficult to gain an edge against homegrown Japanese brands.
A retail industry source said, "Low prices alone will not sustain popularity in the Japanese market," adding, "Success will require building a stable local supply chain to optimize the cost structure and devising a localization strategy that precisely reflects Japanese consumers' tastes and their habits of using space."