Korea's budget coffee franchises are accelerating their push into overseas markets. While they had expanded abroad mainly into emerging markets such as Mongolia and Southeast Asia, recently they have widened their reach to advanced markets where coffee consumption is part of daily life, like Japan and the United States. With the domestic budget coffee market entering a mature phase, they are seeking new growth drivers overseas.
On the 30th, the franchise industry said The Venti on the 21st signed a master franchise (MF) agreement with local Philippine food and beverage (F&B) corporations JJR BROTHERS FOOD CORP. MF is a method of overseas expansion in which a franchise headquarters grants a local partner in a specific country or region full brand licensing and operating systems in exchange for fees and royalties. The Venti plans to open its first store in the Philippines in the third quarter of this year.
The Philippines is the fifth country The Venti has entered, after Canada, Vietnam, Jordan and the United States. With a sizable young consumer base and an active dining-out and cafe culture, the Philippines is seen as a suitable market for budget coffee brands that offer diverse beverage menus and price competitiveness.
Recently, budget coffee franchise companies have been laying the groundwork for overseas operations in emerging markets such as Mongolia and Southeast Asia while speeding up entries into Japan and the United States. A The Venti official said, "We are also preparing to open our first store in Las Vegas in the United States in the second half of this year."
PAIK'S COFFEE, run by The Born Korea, is also aiming to open its first store in Japan in the second half of this year and is establishing detailed operating strategies by studying the local coffee market, major competing brands and consumption patterns by commercial district. It is also exploring ways to enter the U.S. market.
MEGA MGC COFFEE is also reviewing an overseas expansion. MEGA MGC COFFEE established its Japanese subsidiary, MEGA MGC JAPAN, last year and is reviewing the timing of its Japan entry and operating methods. It is also reported to be considering entry into the U.S. market. MAMMOTH COFFEE is already operating stores in Japan. It is pursuing a value-for-money strategy in key Tokyo commercial districts by highlighting large-size Americanos.
Budget coffee brands are turning to the Japanese and U.S. markets because these markets have coffee consumption cultures similar to Korea's while offering both scale and growth potential. Japan is a market where a culture of buying coffee at convenience stores and cafes on the way to work or at lunchtime is well established. The United States is a leading coffee consumption market, home to Starbucks' headquarters, and is seen as a place with high interest in Korean brands thanks to the spread of K-food and content.
An industry official said, "The Japanese market includes a consumer segment highly sensitive to price, so it is viewed as a market with a niche for domestic brands that lead with large sizes and mid- to low-priced coffee," adding, "In the United States, if brands build recognition among Korean residents and consumers familiar with K-content and then broaden to local consumers, there is ample potential for success."
A slowdown in domestic market growth is also driving their faster push overseas. As major budget coffee brands such as MEGA MGC COFFEE, PAIK'S COFFEE, The Venti and COMPOSE COFFEE have aggressively opened stores, the domestic budget coffee market is seen as having entered a mature phase.
A coffee industry official said, "As budget coffee shops have opened throughout urban and residential commercial areas, competition to open budget coffee outlets in the domestic market has been getting fiercer," adding, "On top of that, rising prices of beans, milk and other materials and supplies have become a burden, prompting budget coffee brands to throw their weight behind overseas expansion."
In the industry's view, if emerging markets such as Southeast Asia and Mongolia served as stages to test overseas business models, Japan and the United States are markets where brands must prove their competitiveness. In both markets, coffee consumption is frequent and there are many competing brands, making it difficult to gain a foothold on price competitiveness alone.
A cafe industry official said, "The overseas expansion of domestic budget coffee brands is closer to a stratagem to find long-term growth drivers than to outward expansion simply to increase the number of stores," adding, "If they gain a foothold in mature markets such as Japan and the United States, it will also positively affect expansion into other countries."
Seo Yong-gu, a professor in the business administration department at Sookmyung Women's University, said, "As the domestic budget coffee market has entered a mature phase, their overseas expansion is an essential choice to seek new growth drivers," adding, "If they have laid the foundation for overseas business in Southeast Asia and Mongolia, Japan and the United States will be markets where brand competitiveness and revenue can be verified." He added, "With interest in Korean brands rising thanks to the spread of K-food and content, it is also a timely moment for K-coffee brands to make a decisive move."