Chung reaffirms bond between Shinsegae and Starbucks Korea

By Kim Jae-heun

Vice Chairman of Shinsegae Group Chung Yong-jin reaffirmed the close relationship between his company and Starbucks Korea in a recent appearance on their YouTube channel.

Chung, who has recently been active on social media with his popular Instagram account, agreed to appear on the channel to talk about his memories of bringing the American coffeehouse chain to Korea in 1999.

“When Starbucks was first introduced, people were shocked by how you have to go order a coffee yourself and pay for it first,” Chung said. “As a first fan of Starbucks Korea, I feel great pride in the company that is much appreciated for always offering new paradigms in the coffee industry, and celebrating its 21st anniversary.”

He also talked about his four favorite beverages at Starbucks while revealing his nickname “YJ” that he uses to order drinks on his mobile phone.

Starbucks Korea is a joint venture launched by Shinsegae Group and Starbucks's headquarters in Seattle with each owning a 50 percent share. Starbucks Korea is currently affiliated by proxy with E-mart, a retail subsidiary of Shinsegae Group.

It is rare for the owner of a major firm to appear on YouTube.

Starbucks Korea said Chung decided to be a guest to celebrate the coffeehouse chain's 21st anniversary here while encouraging his workers. However, industry pundits think there is more to it.

“Chung's appearance says much about how Shinsegae will continue to operate Starbucks licensing in Korea. If Starbucks decided to sign a new contract with another firm here or to advance directly into the local market on its own, the rumor should have already been discredited as the contract expiration date is just around the corner,” an industry source said.

A Shinsegae official said negotiations were still ongoing and had no further comment on the matter. However, he said confidently that Shinsegae will continue its partnership with Starbucks next year.

Last year, local media reported that Starbucks was planning to sign a store management license contract with another company here.

Also, when Starbucks Korea moved its offices from the Westin Chosun Hotel, which is owned by Shinsegae, to another building in nearby central Seoul, rumors spread that it was preparing to split with Shinsegae.

But arguments that the American coffeehouse chain will keep its partnership with Shinsegae have gained more force.

It is a risk for Starbucks to try finding another retailer and food manufacturer like Shinsegae since Shinsegae Food is currently supplying food such as sandwiches and cakes to Starbucks store across the nation.

Also, a number of stores have opened in Shinsegae's building including E-mart and Shinsegae Department Store. A contract expiration would mean the closing down of all the stores there.

“Plus, the coffee franchise industry is going through hardship amid the COVID-19 pandemic. Starbucks is not an exception to this, although it is putting up a good defense,” the source said.

After the daily cases of coronavirus infection here resurged in the third quarter, the government ordered all coffee shops nationwide to close down and only take delivery orders or take-out after 9 p.m.

This led its operating profit to decline by 3.5 percent compared to last year. The third wave of COVID-19 that began in late November will also affect Starbucks Korea's earnings in the fourth quarter.

“There have been rumors that Starbucks' headquarters in the United States wanted to terminate the contract but these seem unlikely. It is expected that the joint venture between E-mart and Starbucks Korea will be maintained for the time being,” the source said.