Starbucks Korea is expected to exceed a record 100 billion won (US$88.4 million) profit this year as the US coffee chain’s popularity booms.
Industry sources told Yonhap news agency that the 50-50 joint venture between retail conglomerate Shinsegae and the US company achieved a 52.8 billion won operating profit on 593.5 billion won in sales during the first six months this year. That marks the first time Starbucks recorded more than 50 billion won in profit since it opened its first local branch near Ewha Womans University in Seoul in 1999.
Full-year profit is likely to easily surpass the 100 billion-won mark as coffee shops usually earn more during the latter half of the year, which includes Christmas and the year-end holiday season.
The strong figure compares with those of its local competitors Twosome Place and Angel-in-Us Coffee, which averaged between 10 and 20 billion won during the same period.
Sources told Yonhap the popularity of Starbucks in South Korea is due to the growing loyalty of women in their 20s and 30s, pointing out that the company has succeeded in promoting its image as a luxury brand in South Korea where the luxury coffee market has yet to mature.
Starbucks Korea’s annual sales topped the 1 trillion-won mark for the first time last year.
Starbucks has 1050 stores in the country as of the end of June, the world’s fourth-largest number of Starbucks Coffee stores on a pro-rata population basis, behind only Canada, the US and Singapore, according to industry data.
The number of the stores has risen sharply from 327 in 2010 and 500 in 2013 to 1000 as at the end of last year.
The dramatic rise has apparently been helped by the regulations that ban franchises from opening new stores within a 500-metre radius from the shop of the same brand: Running its own stores, rather than franchising, exempts Starbucks from such regulations.
However, critics say while the regulations aimed to protect food franchise contractors from intense competition, they have instead aided foreign businesses operating in South Korea.
“We are not subjected to the franchise law as all of our shops are run by the company directly,” a Starbucks Korea official said.