‘Core Commercial Areas’ Global Starbucks vs ‘Bangbanggokgok’ Native Ediya
by Lee Seonae
Published 22 Feb.2020 09:37(KST)
Updated 22 Feb.2020 09:40(KST)
The Premiumization of 'Starbucks' Creating a New Culture in the Domestic Coffee Market
'Ediya,' the Pride of Native Coffee... Surpasses 3,000 Stores, the Only One in Korea
[Asia Economy Reporter Lee Seon-ae] “Korea is like a social network service (SNS) influencer in the global coffee market. Just as K-pop shakes the global music market, K-coffee is stylishly blending with its original culture and showcasing an advanced style.” - Jose Sette, Chairman of the International Coffee Organization (ICO)
In our coffee republic, office workers almost never miss stopping by coffee shops on their way to work and after meals. According to KB Financial Group Management Research Institute on the 22nd, as of 2019, the number of coffee shop stores in Korea is approaching 15,000, and the market size has exceeded 3 trillion won. Although there are claims that growth is slowing, new stores are still opening almost daily.
Among the numerous coffee shops, the share held by top brands is significant. Leading brands such as Starbucks, Ediya, Twosome Place, Angel-in-us, Hollys, and Tom N Toms operate anywhere from 500 to nearly 3,000 stores each. The combined number of stores of these top brands reaches about 8,000, representing a very large portion of all coffee shops.
◆ Starbucks, the Creator of Coffee Shop Culture = The brand that cannot be left out in Korea’s journey to becoming a ‘coffee republic’ is undoubtedly Starbucks. Upon entering the domestic market, Starbucks immediately caused a so-called ‘syndrome’ and emerged as a pioneer of coffee culture. When Starbucks opened its first store in Korea at Ewha Womans University in 1999, it marked the beginning of a new business type called ‘coffee shops,’ replacing the traditional ‘dabang’ (tea rooms) culture.
With Starbucks’ arrival, new types of ‘coffee shops’ began to replace dabangs, creating a new coffee culture. Other foreign brands like Coffee Bean (2001) appeared, and domestic brands such as Hollys (1998), Ediya (2001), Angel-in-us (2000), and Tom N Toms (2001) gradually started gaining recognition.
Unlike Starbucks, which operates only directly managed stores, subsequent coffee shops expanded their presence through franchises, gradually growing in size. Especially noted as a startup item for retirees, from the late 2000s when the ‘baby boomer’ generation began starting businesses after retirement, coffee franchises surged ahead of ‘chicken’ franchises as the top startup choice. The brand that grew during this period was none other than ‘Ediya.’
◆ The Native Coffee Franchise Legend ‘Ediya’ = Ediya quietly increased its market share by emphasizing keywords such as ‘practicality, rationality, coexistence, and takeout’ in an industry dominated by premium strategies. Its sub-street strategy of opening stores one block behind the main expensive rental streets eased the burden on franchisees while attracting customers with reasonable prices.
In the past five years, Ediya has opened more than 300 new stores annually, surpassing 3,000 stores last November?the first coffee shop brand in Korea to do so. Among domestic food service franchises, only the bakery chain Paris Baguette has over 3,000 franchise stores, and globally, coffee brands with over 3,000 stores in a single country are rare.
Rather than reckless expansion, Ediya’s principle of ‘opening stores only where business is viable’ has led to great success. From its founding, Ediya has prioritized coexistence among customers, franchisees, partners, and headquarters. Chairman Moon Chang-gi’s management philosophy, “If franchisees survive, the headquarters survives,” is deeply rooted and applied as the fundamental operating principle.
Last year, Ediya implemented a 10 billion won scale franchisee coexistence policy. To reduce franchisees’ fixed cost burdens such as rent, it lowered the prices of supplies worth about 4 billion won. When the disposable cup reduction policy began, it invested 500 million won to supply reusable cups to franchise stores nationwide. The headquarters also bears about 3 billion won annually in marketing costs, including members app promotions, SNS marketing, product placement (PPL), and franchise store promotional materials.
◆ Fierce Battle Between Global and Native Brands = Meanwhile, Starbucks has maintained its position as the top domestic coffee shop in sales by adhering to an even more thorough premium strategy. It operates only in prime locations, increasing its stores from 1,262 at the end of 2018 to 1,378 after adding 116 stores in one year. Last year, sales reached 1.8696 trillion won, up 22.8% from the previous year, and operating profit was 175.1 billion won, up 22.6% during the same period. This year, sales are expected to approach 2 trillion won.
Starbucks’ greatest strength lies in branding. Operating all stores directly to enhance service quality under the concept of ‘expensive but different.’ It introduced ‘Reserve’ coffee brewed with limited edition beans and high-end coffee machines, and its limited edition events sell out within hours, demonstrating tremendous brand power.
Industry insiders agree that the domestic coffee industry has now entered a mature phase. While rapid growth has ceased, the market is not shrinking either. Young consumers mostly prefer brewed coffee, and consumption of brewed coffee increases with age. The decline in the mixed coffee market since 2011 further supports this trend.
Ediya is currently preparing for a new leap forward. It is investing a total of 40 billion won to build a state-of-the-art production facility called the ‘Dream Factory’ in Pyeongtaek, Gyeonggi Province, covering approximately 12,892 m² (about 4,000 pyeong), scheduled for completion in April. Ediya Coffee plans to equip this facility with world-class roasters and equipment to produce coffee beans, stick coffee, and beverage powders in-house, enhancing quality and product competitiveness.
An industry official said, “Starbucks is showing a new breakthrough beyond the limitation of being a directly managed store, and Ediya is making a leap forward by breaking the frame of low-priced coffee,” adding, “In the Korean market, where global franchises uniquely struggle, this year is expected to see an even fiercer competition for coffee market leadership between Starbucks and Ediya.”
Another industry insider emphasized, “With an annual per capita coffee consumption of 353 cups, 2.7 times the global average of 132 cups, Korea is a coffee republic where everyone drinks about one cup a day. Yet, more than 9,000 coffee shops close each year, showing the harsh reality,” and added, “In this market, the competition between the leading global brand Starbucks and the closely following native brand Ediya will unfold in an interesting way.”
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