Cheap 7-Eleven Coffee Threatens Big Franchises

      January 09, 2017 08:43

      Cheap brewed coffee from convenience stores is giving Starbucks a run for its money as the recession continues to bite.

      CU, GS25 and 7-Eleven sold a combined 9.58 million cups of brewed coffee last month, or 320,000 cups a day, which is similar to Starbucks' average daily sales in Korea. 7-Eleven was the first to launch brewed coffee early in 2015, and less than two years later convenience stores have surpassed 10 percent of the overall market of 3 million cups a day.

      The coffee is hardly top-of-the-range and the cups are small, but the cheap Arabica beans pack a powerful punch and cost little more than a cup of instant coffee.

      "We started off by selling brewed coffee in 20 stores," says Ham Tae-young at 7-Eleven. "Now we sell it in 4,200 or half of our stores, and it's overtaken soju as our best-selling product."

      GS25 and CU jumped on the bandwagon in December 2015 and sales have grown two- to threefold already.

      People wait in line to buy coffee at a convenience store in Seoul.

      Office worker Lee Joon-il (38) does the math. "A cup of coffee after lunch would cost as much as the meal itself," he says. "So now I enjoy convenience-store coffee, which isn't bad."

      The idea, like so many, started in Japan in 2012, when 7-Eleven rolled out its 100-yen coffee. It was a hit among salarymen who were no longer flush with cash, and rivals Family Mart and Lawson followed suit.

      In convenience stores in Korea a cup of Americano coffee costs W1,000-W1,200 and a latte W1,500 (US$1=W1,204) .

      A Starbucks or other conventional coffee shop has to factor in the cost of furnishings and overheads, but a convenience store just needs to set aside a few square centimeters of counter and train staff for half a day. That means convenience stores can afford to sell coffee three to four times cheaper.

      The development is particularly challenging not only for big franchises like Starbucks but also medium chains that thrive on takeaway coffee. At Ediya and Paik's Coffee, a cup of Americano costs around W3,000, cheaper than at Starbucks but still a lot more expensive than in a convenience store.

      An Ediya staffer said, "Convenience stores just sell Americano or latte, so we'll have to differentiate ourselves by selling a wider range of coffee that's better quality."

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