Low-priced coffee franchises in Korea are speeding up efforts to enter overseas markets. As price hikes continue due to a saturated domestic market, rising coffee bean prices, and exchange rate burdens, they are moving to make overseas markets a new growth engine. However, some note that in the global market, it is hard to guarantee success with the same "low-price strategy" that worked at home.
◇ Limits to the domestic growth formula… Low-priced coffee turns overseas
According to the restaurant industry on the 8th, major low-priced coffee brands such as MEGA MGC COFFEE, PAIK'S COFFEE, COMPOSE COFFEE, and The Venti have recently been expanding their overseas businesses. MEGA MGC COFFEE operates eight stores in Mongolia and has established a Japan unit. It is also leaving open the possibility of entering the U.S. market. The Venti is expanding to the Philippines and the United States following Canada, Vietnam, and Jordan, while COMPOSE COFFEE is pushing into the Philippines after Singapore and Taiwan. PAIK'S COFFEE is also operating 17 stores in the Philippines and is preparing to open its first store in Japan this year.
The industry cites domestic market saturation as the backdrop for going abroad. As the low-priced coffee market grew rapidly, it became difficult to expand scale through new openings alone, and as burdens from coffee beans and exchange rates increased, the low-margin, high-volume strategy also began to show limits.
In fact, MAMMOTH COFFEE will raise the prices of iced Americanos and iced decaf Americanos by 200 won starting on the 11th of this month. The Venti raised prices of major menu items other than Americanos by 100 to 500 won in May, and both Coffee Bean and EDIYA COFFEE are responding to cost pressures by increasing prices of stick coffee products. PAIK'S COFFEE also adjusted the cafe mocha price from 3,700 won to 3,900 won, and Banapresso raised the cold brew price from 3,300 won to 3,600 won.
A representative of a low-priced coffee brand said, "Korea's coffee market is already at a saturation stage, so aggressive store openings are not easy," and added, "With interest high in K-content and K-food, there is a continuing move to preempt overseas markets."
However, companies said it is hard to view overseas expansion as simply a result of a domestic market slump. A PAIK'S COFFEE representative said, "Marking our 20th anniversary, we are pursuing country-by-country market research, menu development, and a BI overhaul based on the judgment that we can also do well in the global market," and added, "Domestic market saturation had some impact, but that alone is not the reason for going overseas."
◇ "Different from typical K-food… offering tailored menus"
Analysts also say the competitive landscape in overseas markets differs from that at home. Japan and the United States are mature markets where a variety of mid- to low-priced brands such as convenience store coffee, McDonald's, Dunkin', Doutor, and Komeda are already established.
Accordingly, domestic brands are emphasizing "value for money" rather than absolute low prices overseas. A representative of a low-priced coffee franchise said, "Locally, we sell at prices somewhat higher than convenience store coffee but cheaper than premium brands," and added, "Beyond price, a wide range of menus, quality, and large sizes are being evaluated as strengths."
A MEGA MGC COFFEE representative also said, "While maintaining reasonable prices locally, menus that blend a variety of beverages with the sensibility of K-content are receiving a good response."
The local price of an Americano from MEGA MGC COFFEE in Mongolia is 7,000 tugriks. In Korean won, that is about 2,800 won. A MEGA MGC COFFEE representative said, "It is very difficult to make a simple comparison between local overseas prices and domestic prices because the business environments are very different. In the process of exporting materials and supplies and products from Korea, various expense items such as transportation and customs fees are additionally incurred," and added, "Taking those expenses into account, we closely reviewed the price levels of major competing brands and market conditions to set an appropriate selling price that local consumers can accept."
Beyond price, the Korean-style cafe culture is also cited as a competitive edge. A PAIK'S COFFEE representative said, "Reasonable prices, large sizes, and fast service, along with more than 100 different menu items, are strengths of Korean cafes," and added, "We plan to introduce menus tailored to consumption tendencies in each country."
The industry ultimately expects that success or failure in overseas markets will depend more on differentiation than on price. Because coffee is not a product that embodies Korea's unique food culture like instant noodles or kimchi, there are limits to attracting consumers solely because a brand is a K-brand.
An industry representative said, "At home, low prices were the biggest competitive edge, but overseas, price alone is not enough. It is also hard to claim differentiation with just the coffee itself," and added, "Brand and menu competitiveness that can persuade local consumers why they should choose a Korean brand will be key to success."