Value focus drives surging sales for South Korea’s Mega Coffee

A Mega Coffee store in Seoul | Photo credit: Romeo A.

Growing demand for affordable coffee in South Korea enabled value-focused operator Mega Coffee to rapidly expand its franchise network and achieve triple-digit sales and profit growth in 2023. 
 

An audit report from parent company Ann House shows the value-focused coffee chain achieved 111% year-on-year sales growth in 2023 to KRW 368bn ($271.6m) alongside a 124% rise in profits to KRW 69bn ($51.2m). 

Ann House credited outlet growth and brand ambassador partnerships with South Korean football captain Son Heung-min and K-Pop group ITZY as key contributors to Mega Coffee’s higher sales. A strong value proposition was also a key component of Mega Coffee’s robust sales as South Korean consumers grapple with high inflation.

The chain charges around 1,500 won ($1.12) for a hot espresso, compared to KRW 3,200 ($2.36) at domestic competitor Ediya Coffee and KRW 4,500 ($3.32) at international giant, Starbucks.  

World Coffee Portal’s Project Café East Asia 2024 report shows Mega Coffee opened nearly 700 stores last year – more than double any other coffee chain in South Korea. The brand has maintained its pace of expansion in the first quarter of 2024 to surpass 2,800 outlets.  

Mega Coffee is currently the third largest branded coffee chain in South Korea behind Ediya Coffee and Paris Baguette, which operate approximately 3,800 stores respectively. 

While higher sales boosted Mega Coffee’s profits, the business said cost of sales and management expenses also increased last year amid rising raw material costs.  

South Korean consumers are increasingly seeking more affordable beverages amid the higher cost of living and falling income levels. The country’s three-largest value focused chains – Mega Coffee, Compose Coffee and Paik’s Coffee – currently hold a combined 20.3% total market share, up from 9.8% in 2020. 

World Coffee Portal forecasts the total 31,000-store South Korean branded coffee shop market will surpass 41,700 outlets within the next five years.