Chains take a shot at low-priced coffee market

As low-priced coffee grows in popularity, more coffee retailers are vying to expand their market share. The photo shows cups of iced Americano from four major low-priced coffee drink retailers from left: Paik's Coffee, McDonald's McCafe, Ediya Coffee and CU's Delaffe. / Korea Times photo by Lee Min-hyung

By Lee Min-hyung

A price war is brewing among four major low-priced coffee drink retailers vying to get a greater share of the market.

Among the four retailers, which include Ediya Coffee, convenience store chain CU and McDonald's McCafe, Paik's Coffee is the fastest-growing. To date, the coffee drink retailer has achieved unparalleled success, opening 69 stores across the nation since it began franchising in February 2014.

Paik's Coffee

"We sell about 1,000 cups every day, mostly Americanos," said a Paik's Coffee store manager in Seoul.Paik's Coffee, headed by CEO Paik Jong-won of parent company The Born Korea, attributes its success in part to its lower prices and generous servings. A medium cup of iced Americano, for instance, costs only 2,000 won ($1.70) there, less than half the price of a similar cup of coffee at Starbucks, which costs 4,100 won. Paik's Coffee also serves the Americano in a massive 15-centimeter-tall cup.

The popularity of CEO Paik has also played a central role to the chain's success. The chef-entrepreneur became a public figure himself after marrying famous actress So Yoo-jin in 2013. He has since appeared in many TV shows, such as "Korean Food War" and "My Little Television," where he has captured audiences with his wit.

"We don't worry about competition," said an official from The Born Korea, declining to be named. "Our motto is simple: make cheap, big and tasty coffee drinks and bread. We are just doing our best to meet customers' needs."

Graphic by Cho Sang-won

McCafe

Global fast-food chain McDonald's entered the low-priced coffee drink industry in Korea with the launch of McCafe in July 2012.

Sales of McCafe's main menu items, such as cafe Americano, cafe latte and cappuccino, have tripled in the first half of this year, compared to the same period a year ago, according to McDonald's Korea.

"As of January 2015, we have lowered our coffee drink prices by up to 600 won. Most coffee menu items are now priced between 1,000 won and 2,000 won," said Karen Kim, McDonald's Korea's communications director. "We are also trying to meet customers' needs by introducing small coffee drinks and changing the color of the cup to bright orange."

However, some McCafe items sell at slightly higher prices. A medium cup of iced Americano, for instance, sells for 2,500 won, while a medium cup of iced mocha sells for 3,300 won.

CU

The nation's biggest convenience store chain, CU, sells the cheapest cup of iced Americano among the four competitors. A medium Delaffe iced Americano costs 1,000 won, while a big one costs 1,500 won.

"We saw an 18.2-percent increase in Americano sales in June compared to the same period last year," said an official from BGF Retail, which operates the chain. The Americano accounts for 40 to 50 percent of the chain's total iced coffee sales.

Since 2009, more than 50 million cups of Delaffe iced coffee and tea drinks are sold each year.

"It is easy for customers to buy Delaffe because it is sold at all CU convenience stores across the country," he said. "On top of that, it has a competitive edge in price. Delaffe is sold between 1,000 and 1,500 won, which is cheaper than the drinks at most of our competitors."

He also mentioned that convenience store coffees are becoming more popular around the world.

"In Japan, a convenience store coffee drink, or the so-called ‘100 yen ($0.8) coffee,' is significantly gaining popularity," he said.

Ediya Coffee

Seoul-based Ediya Coffee, founded in 2001, has been called the pioneer of low-priced coffee drinks in Korea.

The 1,600-store coffeehouse chain has been reaping huge profits from its cheap coffee drinks; its operating profit doubled to 13 billion won in 2014 from the year before.

Ediya sells a medium cup of iced Americano at 2,800 won, a little more expensive than the other three competitors, but still cheaper than most of other coffee chains.

Ediya's strategy for success is to maximize the satisfaction not just of customers, but also of store owners.

"Aside from the relatively cheap prices, we use a win-win approach for both the company and each store owner," an Ediya official said. "Our business priority is to increase the profit of each store owner. Because of our partnership philosophy, more than 35 percent of the stores that opened after 2012 were those by existing store owners or their acquaintances."

Ediya has also received positive consumer feedback for its efforts to produce high-quality coffee drinks at low prices.

"Ediya Coffee is not just about being a low-priced coffeehouse chain," the official said. "We are always conducting research to find the best combination of coffee beans."

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