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Korean coffee market expanding.

Korean coffee market expanding

The Korean coffee market has entered a full-fledged growth period, with an estimated size of 35,000 tons valued at 50,000 million won (about 33,000 million yen). Although the leader, Dong Suh Foods Co. (belonging to General Foods Group) is maintaining firm market footing, Nestle and Miwon have made full-scale entries, throwing the share competition into confusion. An expected participation of Lotte in the next year will make competition more intense. In the commercial coffee market, Japanese enterprises are advancing one after another. In these circumstances, Park Ichoo visited Japan, and we interviewed him about he latest trade situation. He is managing "Bohemian Coffee House" in Seoul City, and is familiar with the trade.

Karasawa: Could you explain about the trends of commercial coffee market which center around cafes?

Park: The largest change for the past year was that operating cafes and restaurants after 12:00 PM has been prohibited under the administrative guidance. Legal control was implemented in January of this year, resulting into 24-hour operating shops disappearing from the the streets. Apart from shops in hotels which are specially permitted to operate after midnight, all other shops must close the doors by 12:00. The control has been an administrative step against the increasing traffic in flesh and kidnappings which have become social problems. Although our trade union was fiercely opposed to it, as it may seriously affect the future of trade people, it was enforced nevertheless.

As for the legal aspect, the lease contract term on stores and residences has been revised from conventional one year to two years. After the revision, since the house owners are basing their payment demand on the two-year term, the house rent and security money are showing a 50-60% rise on the average.

During the past year, the environment in which cafes are managed has also changed significantly. Along with the soaring land prices, commodity prices are also rising. Last year, 10,000 won was enough for a housewife to go shopping. The situation has recently changed for the worse. Since salaries have not increased correspondingly, the commodity price increases are making the household economy even more stringent.

Karasawa: Are coffee prices, such as cup coffee and ground beans, increasing similarly?

Park: Reflecting the general commodity price increases, coffee prices are also rising. For example, Doutor Coffee Shop (DCS) chain has doubled ground bean prices in November, although they carried out about 10 to 20% decreases in spring this year. In July, DCS also increased the menu prices. There are other shops such as Jarden (belonging to Crown Confencionery Group) which has kept prices unchanged.

Jarden chain has opened over 12 shops in the past year, making the chain development steady headway. Among the 12 shops, 3 seem to be under direct management. Since they have a sound management foundation, the chain development is smooth.

DCS chain, on the other hand, has six shops, while Herzen chain also opened its second shop at the end of July.

Stimulated by DCS, Jarden said Herzen chain developments, Miwon, a leading foodstuff manufacturer, has also set about the chain development, opening three shops to date under the shop name "Nice Day Coffee Shop."

Meanwhile, Caravan Coffee, a Japanese roaster, entered into a business venture with a Korean enterprise, and opened a Caravan Coffee Shop chain. Two shops named Waltz were also opened by an entrepreneur who has business relations with Waltz Shokai (trading house).

Karasawa: What kind of influence, do you think, has been exerted upon the Korean coffee trade by advances of Japanese enterprises for the last two or three years?

Park: It is true that advances of Japanese enterprises are drawing attention of the local trade people, Since the domestic beans supply is unfavorable, there are even such trade people who purchase roasted beans from DCS, Jarden, etc. and use them in blending. Generally speaking, local people think that, as various types of shops open in different parts, customers become more and more free to choose, and thereby accelerate coffee diffusion.

Karasawa: Could you comment on the home coffee market?

Park: The hottest news is on Lotte's expected entry in the coffee market as of the next year. According to newspaper reports, under technical contracts with Jacobs Suchard, Lotte will manufacture and sell freeze dry type instant coffee.

Although the domestic coffee business has been exclusively occupied by Dong Suh Foods Co., there is severe competition with Nestle which has tied up with the local Tosan Foods, and Miwon which has purchased MJB. Lotte's entry will, therefore, throw them into hot competition. Nestle which made a full-scale entry last autumn, among others, will increase their share from 30 to 40% by the end of this year.

In the canned coffee drink market, four companies, including Dong Suh and Miwon, are fighting for a larger share. Here again, Lotte has advanced. "Kankoku Inryo," a beverage manufacture belonging to Tosan Foods, also enters after tieing up with Coca-Cola Bottlers, U.S.A.

In the vending machine industry, which is supporting the canned coffee market, the number of vending machines shipped so far, this year, is 80% larger than that for the corresponding period of last year. A lot of newspaper space is given to reports on technical ventures between foreign enterprises such as Sanden (Japan), Bond (U.S.A.) and Hasne, with Korean manufacturers.

For nearly 20 years, the Korean coffee market has been occupied by Don Suh Co. However, due to positive advances of Korean enterprises and full-scale entries of overseas brand coffee manufacturers, the Korean coffee market is heating up.
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Karasawa, Kazuo
Publication:Tea & Coffee Trade Journal
Date:Jan 1, 1991
Words:934
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