In South Korea, strong economic performance and an appropriate cultural landscape is providing the ideal environment for growth in the coffee industry.','none',' Story by Andrew Ford, MTC Group The South Korean coffee market is shaping up as the new frontier for specialty coffee in the Asia Pacific, and possibly the world. The broader South Korean economy has seen significant growth over the past decade. The economy has had above average GDP growth, low unemployment and both a steady political landscape and stable economy. Many South Korean companies have emerged as powerhouses ready to take on the world. The same stage is set for the newly emerging coffee franchises that are looking beyond national success and are setting themselves up for global expansion over the coming years. It could be said that the South Korean coffee market is embracing specialty coffee at a speed like no other coffee market in the world. It is not only the rapid take up of the concepts that envelope specialty coffee, but the youth and enthusiasm of those involved, which suggest a long and bright future for this relatively small and lesser known coffee nation. The nation of South Korea is a small country geographically with a big population of some 50 million, representing one of the highest population densities in the world. Greater Seoul is the second largest city in the world with approximately 25 million residents. As a result of the high urban density and small homes, everyone eats, meets and entertains out of the home. Combined with long cold winters, this provides the perfect cultural mix for a vibrant café environment. The high density of café chains and coffee shops in Seoul is likely one of the highest in any developed or developing country. On every street, in every suburb visitors can find a myriad of global franchise chains, local Korean brands and small independent micro-roasters. A contrast to the American-led advent of cookie-cutter chain stores, the creativity and concepts of cafés in South Korea are particularly remarkable. Almost every brand is pushing new store layouts, designs and themes. The physical size of these cafés is equally impressive. For such a high-density city where space is at a premium, these cafés almost always take up over 100 square meters in prime retail locations, often on three levels and occasionally on five-levels. These cafés certainly don’t struggle to fill this space, as they are almost always at capacity. One example is a micro-roaster and café in Jongno-gu, central Seoul. The owners have five levels of café seating area in a central tourist and shopping district. As of 11am, every level is at capacity right through into the evening. This café was the only one in the district in its prime central Seoul location for almost 10 years. Around three years ago, other cafés started to open nearby, and at time of writing there were more than seven independent and chain stores within 200 metres of the shop. The history of the coffee sector in South Korean is very young. Coffee was under government rations until the late 1960s after the Korean civil war. Instant coffee took hold after the first instant coffee factory opened in 1968. Fresh roasted coffee only appeared on the scene in the late 1970s. At that time, importing coffee was highly regulated, and it wasn’t until 1987 that deregulation began. The market has continued to be dominated by major players. As recently as 2010, some 40 per cent of coffee revenue was earned by just 10 companies. It wasn’t until the early 1990s that espresso coffee was introduced into the market and today roast and ground coffee represents just 1 per cent of non-café retail sales. Per capita consumption in South Korea is relatively high for the region. Last year consumption was just under 2 kilograms per person. Most Asian nations typically sit at under 1 kilogram a person, with Japan being the exception with consumption sitting above 3 kilograms. It can be noted that Japan and South Korea’s economies are among the best performing and most strongly developed of the Asian nations, therefor a link could be drawn here between coffee consumption and development. More recently, the coffee education sector has emerged with multiple coffee schools offering independent and endorsed training and accreditation from certifying bodies, such as the Specialty Coffee Association of America, Specialty Coffee Association of Europe, World Coffee Events, Cup Of Excellence and other independent endorsements. Any given month in South Korea, an expert will likely be travelling to the country to share their knowledge and experience to gatherings of young industry professionals. On the international chain store front, major players including Starbucks, Coffee Bean & Tea Leaf and Gloria Jeans have all seen rapid growth in South Korea. However, domestic brands including Paris Baguette, Café Pascucci, Cafeind Guurnaru and Holly’s Coffee, to name but a few, are growing at extraordinary speed.
The rapid expansion of South Korean franchise, Caffebene, likely best tells the story of the Korean coffee franchise sector. The company has opened more than 650 stores in less than three years. This includes international expansion, with their New York Times Square store opening scheduled for late 2011. The company has aggressive plans for more than 2000 shops within the next three years, evidence of their ambitious faith in the growth of the coffee chain market. Coffee chains haven’t limited the country’s interest in specialty coffee, and South Korea represents a significant portion of the global specialty coffee market. Last year, South Korea had more registered bidders at Cup of Excellence than any other country. A small super-premium special shop in Busan (Momos) purchased the most expensive lot of coffee at an internet auction, paying more than US$230/pound. Somewhat fortunate by the late start, South Korean coffee is not overly burdened with either an espresso or filter heritage and has successfully adopted both coffee preparation methods equally. As a result, almost every independent café will offer a complete selection of brewing methods in well-displayed, easy to read menus, generally offering a huge selection of beans to choose from. Staff are quite knowledgeable and well trained and the equipment is new and high quality. The future of the South Korean coffee market offers a bright outlook, with a culture of quality coffee preparation, backed by ambitious plans. The industry is still young at all levels, from independent cafés to franchise. With a relatively low per capita consumption, companies are placing their bets on high opportunities for growth. The country is being targeting by the new Executive Director of the International Coffee Organisation Robério Oliveira Silva to join the organisation, a sign of South Korea’s vast potential. Coffee businesses world-wide are smart to keep their eyes on this prosperous Asian nation. Andrew Ford is the CEO, President and Managing Director of MTC Group International based in Australia, and their newest operations MTC Korea. He would like to make special mention to the Specialty Coffee Association of Korea for their support in providing background and research material for this review and also to MTC Korea for hosting him several times and providing insight into this dynamic and fascinating coffee market. For more information visit www.scak.net and www.mtcgroup.co.kr