The Myeongdong shopping district in Seoul, South Korea | Photo credit: KrimKate/Shutterstock

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Few nations on Earth can claim to have embraced coffee and café culture as enthusiastically as Korea. Government data shows there were more than 100,000 coffee shops across the East Asian nation at the end of 2023 collectively generating a whopping ₩15.5trn ($11.2bn) in sales and employing some 270,000 workers.

With a population of 52 million people, there is roughly one coffee shop for every 520 citizens in Korea. Just under a third of those outlets are branded coffee chains, with World Coffee Portal data showing the segment grew 6.9% to exceed 31,130 outlets in the 12 months to November 2023 – averaging nearly 10% annual growth over the last five years.

Branded coffee chain market leader Ediya Coffee has opened hundreds of outlets over the last 12 months and now operates more than 4,000 sites, followed by Mega Coffee’s 3,000-plus stores and Compose Coffee’s 2,600.

With 1,900 stores, Korea is Starbucks’ third-largest market globally behind the US and China. Such is the popularity of exchanging Starbucks gift cards, particularly at Christmas, the Korean government estimates that the coffee chain holds around ₩318bn ($230m) in pre-paid balances. “It will be fine to call Starbucks an unregulated bank”, said former Hana Financial Group CEO, Kim Jung-tai in 2020.

Korea’s prowess as one of the world’s largest coffee-consuming countries is even more remarkable given its relatively recent mass adoption. The launch of ‘mixed coffee’ – sachets of instant coffee and freeze-dried milk – by food and beverage giant Dongsuh Foods in 1976 is widely credited with kickstarting Korea’s caffeine obsession.

“Mixed coffee has had a long-lasting impact on the industry, contributing to a culture where people of various ages enjoy coffee. This trend influenced the perception that coffee should be quick and sweet, driving a successful coffee culture during South Korea’s rapid industrialisation,” says Wonjin Cho, a coffee columnist and co-author of the acclaimed Korea Specialty Coffee Guide.

That lasting impact is evident in the viral Dalgona trend that swept the world in 2020. Widely believed to have originated in Busan in the 1960s, the whipped mix of instant coffee, sugar, milk and hot water captivated millions during Covid lockdowns and remains an indulgent favourite at cafés and home kitchens.

Today, Korea is also home to a booming and highly influential specialty coffee market, with home-grown pioneers such as Coffee Libre, Terarosa, Namusairo and Bean Brothers jostling with renowned international brands, including US-based Blue Bottle Coffee and Intelligentsia Coffee, Japan’s % Arabica and Germany’s The Barn.

South Korea’s love of coffee is keeping a huge number of branded cafés and independent operators in business – but what is behind the country’s caffeinated obsession and how can coffee shops continue to thrive in such a crowded market? Clues can be found in the nation’s complex history and rich cultural traditions.

An Ediya Coffee shop in Myeongdong, Seoul, South Korea | Photo credit: Icot Igol Production/Shutterstock

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Anything you can do...

For Wonjin Cho, competition and striving for excellence fundamentally characterises the Korean mindset. “This competitive spirit has driven constructive competition across various industries, propelling South Korea to the forefront in many fields,” he says.

Hemmed in by Japan to the east, China to the west, and separated from North Korea by the most heavily militarised border in the world since the end of the Korean War in 1953, it is easy to see why South Korean society fiercely values independence and a cast iron work ethic.

With many in Korea working long hours, coffee and café culture have become embedded into daily life as a cost-effective and pleasurable way to refuel. It was only in 2011 that Korea officially adopted a five-day working week following the long-held tradition of Saturday being at least a half business day. Times continue to change, and in 2018 the maximum working hours per week was reduced from 68 hours to 52.

Nevertheless, Koreans still work an average of 1,915 hours a year according to the Organization for Economic Cooperation and Development (OECD), compared to 1,791 hours in the US and 1,607 in Japan.

“The term ‘competitiveness’ might carry a negative connotation, but it can also be viewed as incorporating a sense of responsibility, diligence, and craftsmanship,” Cho says.

Koreans’ drive for excellence has undoubtedly played a key role in propelling the small nation to one of the world’s foremost industrial and cultural innovators. In the early 1960s, Korea’s per capita income was lower than Haiti, Ethiopia and Yemen, and around 40% below India’s.

However, the so-called ‘South Korean Miracle’ saw the emergence of the chaebol group of industrial powerhouses, including Lucky Chemical Company (which later became electronics giant LG), and Samsung in the 1970s, after which economic growth averaged 6.4% until 2022. Today, Korea’s ₩2.24 quadrillion ($1.72trn) economy is the fourth largest in Asia and 14th in the world.

With Korea’s coffee shop market following the same upward trajectory, it takes an army of skilled baristas, coffee roasters and Q-graders to support the mammoth industry. For that reason, Korea is one of the few directly funded Speciality Coffee Association (SCA) chapters.

After launching the SCA diploma system in Korea in 2011, the chapter now has around 400 Authorized SCA Trainers (ASTs), meaning around one-fifth of the 1,800 ASTs globally are in Korea.

SCA Korea Country Manager, Cera Jung observes a huge appetite for competitors to take home coveted coffee titles, especially after Jooyeon Jeon became Korea’s first World Barista Champion in 2019. Outside of competitions, Jung says it is not unusual for coffee shop owners to prominently display certificates and accolades behind the bar as quiet signifiers of their dedication to excellence.

“Koreans are willing to study and learn more, so interest in coffee education has been very high from the beginning. Even if people are not working in the coffee industry, they still want to learn more about what they’re drinking daily,” Jung says.

Young people meet at a Starbucks store in Busan | Photo credit: Sorbis/Shutterstock 

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The Korean wave

Korea’s close economic and cultural ties to the US and the wider West continue to resonate deeply with consumers and have a profound influence on business, fashion, media and culinary trends.

Raised in the US but now living in Korea to lead Blue Bottle Coffee’s 14 boutique cafés as General Manager, Ryan Suh is emblematic of the cultural cross-pollination that makes Korea such a vibrant and successful coffee market. He agrees that Koreans’ curiosity for overseas trends has played a central role in propelling the coffee shop market to stratospheric heights.

“This part of the world has been and continues to be highly influenced by Western culture. That’s played out over the decades with multinational brands being greeted in Korea with outsized initial demand,” he says.
 

“We had no choice to enter Korea because Koreans chose us”
Ryan Suh, General Manager, Blue Bottle Korea

Opening its first store in 2019, Suh says the California-based coffee chain hit the ground running and by the end of its first year employed 80 full-time team members and generated some ₩8m in sales.

Recalling his first trip with Blue Bottle overseas to Japan in 2017, Suh says around 40-50% of customers at the Aoyama Café in Tokyo were visitors from Korea, “We had no choice to enter Korea because Koreans chose us,” he says.

However, Korea is also firmly treading its own cultural path. Hallyu, or the ‘Korean Wave’ describes the international diffusion of South Korean culture since the 1990s following the end of military rule and the liberalisation of the culture industry – a development that enabled creative industries across film, television, fashion, and of course K-pop, to thrive.

Over 100 million physical K-pop albums were sold in Korea in 2023 and 12 years after Psy’s global sensation Gangnam Style, the genre continues to garner mainstream appeal and generates close to $1bn in sales internationally every year.

In July 2023, Starbucks collaborated with K-pop group Blackpink on a themed Frappuccino and limited-edition merchandise range across nine Asia Pacific markets that reportedly sold out within three hours of launching online. 2023 also saw Mega Coffee launch a branded campaign with K-pop group ITZY and Compose Coffee team up with BTS mega star Kim Taehyung.

“K-pop groups were designed from day one to be exported to other parts of the world. They’re fun, at times nostalgic and community orientated, and I’ve absolutely seen the cultural influence of K-pop, K-cosmetics and Korean food around the world,” observes Suh.
 

“Anything new, distinctive and worth experiencing – we are on it”
Cera Jung, Country Manager, SCA Korea

Meet me for coffee

When Starbucks entered Korea in 1999, the notion of ‘Third Place’ experiences to socialise, conduct meetings or simply recharge, struck a chord with many consumers already captivated by instant coffee and eager to take the next step towards premium and espresso-based beverages and café culture.

“Historically, Koreans haven’t had as many places to spend time outside compared to Western society. Koreans don’t really invite people to their homes a lot, so the café became a place to meet up with your friends or have meetings – all for the small price of a cup of coffee. That also brought daily coffee consumption, which becomes a habit,” says Matt Lee, General Manager, La Marzocco Korea.
 

“The market is saturated but continues to boom – I don't know where the limit is”
Matt Lee, General Manager, La Marzocco Korea

Working with La Marzocco since it began operations in Korea in 2012, Lee has had a front-row seat to view the rapid development of Korea’s coffee market. In those early years, La Marzocco carved a niche market among specialty coffee operators trading on quality and the prestige of owning a La Marzocco machine.

“La Marzocco was considered an expensive ‘dream machine’ at that time,” he says.

“However, as people started to acknowledge the quality our machines could deliver, we saw more and more customers wanting to have a La Marzocco in their cafés. Now, even franchise companies want to serve specialty coffee and show customers that they value quality too.”

Lee says Korea’s coffee shop market already felt saturated 12 years ago. However, colossal scale has brought greater complexity, with many specialty coffee shops introducing small-batch roasting and infused coffee beverages to stay ahead of the competition.

“Koreans’ love for coffee keeps increasing and the pursuit of better quality is growing too. The market is saturated but continues to boom – I don't know where the limit is”, he says.

Pointing to the fact that in 2023 the number of coffee shops exceeded fast-food outlets for the first time in Korea since 2013, Wonjin Cho says the creation of new commercial districts and apartment complexes has led to a surplus of property, which coffee shops often snap up.

“These vacancies are frequently filled by coffee shops, which are perceived as relatively easy to operate and profitable. However, many quickly close if they fail to keep up with fast-changing trends or if too many competitors open nearby,” he says.

The rise of value-focused chains

Despite its seemingly unstoppable ascent, the Korean coffee shop market has not been immune to wider economic challenges. The Bank of Korea forecasts economic growth will slow to an average of 0.6% in the 2030s and contract 0.1% a year by the 2040s. With an ageing population and low wage growth adding pressure to disposable incomes, value-focused coffee chains have stepped up to ensure more Koreans can stay caffeinated.
 

“Demand for low-cost coffee has steadily increased due to the prolonged economic downturn”
Wonjin Cho, specialty coffee author and columnist

“Many predicted low-cost coffee growth wouldn’t last due to inflation-driven increases in raw materials and labour costs. Despite these forecasts, demand for low-cost coffee has steadily increased due to the prolonged economic downturn. This sector has seen explosive growth in recent years, with teenagers, including middle and high school students, now participating in the market,” says Cho.

Having opened its first store in 2015, affordable coffee chain Mega Coffee has added stores at a rapid pace. According to the Korea Fair Trade Commission (KFTC) data, there were 1,184 Mega Coffee locations across the country in 2020, more than 2,150 in 2022 and 3,000 in May 2024. Value-focused competitor Compose Coffee has also seen its portfolio swell from 725 licensed stores in 2020 to 2,571 today.

However, while large coffee chains benefit from franchise expansion through reduced risk and licensee fees, franchise operators can often find themselves on the sharp end of heavy discounting implemented by head offices. In July 2024 an unnamed licensed store owner told Korean reporters that 38% of revenues generated from a ₩1,500 ($1.10) hot americano are lost to production costs.

“The franchise model often benefits the headquarters through aggressive expansion, increasing revenue from franchise fees, interior design, and training costs. However, the franchisees suffer from decreased profits and increased closures due to intense competition.”

Mega Coffee has grown to one South Korea’s largest coffee chains since launching in 2015 | Photo credit: Sarunyu L/Shutterstock

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Now trending

From banana milk to cheese coffee and ‘grain lattes’ – an infusion of popular Korean multigrain powder, Misutgaru – beverage innovation in Korea has taken more than a few weird and wonderful turns over the years. “A unique part of Korean culture is the lightspeed coming and going of trends, so entrepreneurs, artists and creators are always optimising for the next big thing,” says Blue Bottle’s Suh.

Blue Bottle’s top-selling beverage in Korea is the Nola Float, a novel take on New Orleans iced coffee with soft-serve ice cream on top, which counts for around 10% of the brand’s total sales in the market.

The SCA’s Jung also observes that consumer zest for new trends has been a key catalyst for industry development, spurring experimentation and innovation to deliver the next big coffee innovation. “Even if it’s expensive, people in Korea want to try new things to enhance their experience. People are into single-origin coffees and distinctive flavours, but they are also interested in new processing methods like infused coffee. Anything new, distinctive and worth experiencing – we are on it.”

However, iced coffee is the undisputed champion of Korea’s coffee shop market. Starbucks Korea reports that more than three-quarters of all beverages served are cold or iced, with that figure still around 60% during winter months. “When you talk about coffee or even non-coffee beverages in Korea – everything is about iced,” says Jung.

Through the lens of hard work, competition and a thirst for discovering the latest trends, Korea has transformed a unique passion for coffee into an industry that is the envy of the world.

Whether a craft to be mastered, a beverage to be savoured, a brand to aspire to or a café to build community, coffee is the focal point for countless interactions in Korean society – and a national obsession that shows no sign of slowing.
 

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