Tuesday, May 3, 2011

Brews and bruises

I confess : I'm a coffee addict. And for people like me, Korea was not so friendly 20 years ago : except in five stars hotels, finding a real expresso was very difficult, and only a few coffee shops were open in the Capital.

Times have definitely changed, but not necessarily for the better.

On the bright side : coffee is not only available but affordable, and not just the all time fave 2/2/2 coffee/sugar/milk mix ("dulduldul coffee" or 둘둘둘 커피). It started with beans sold at the price of gold in department stores, and now the whole range of products and accessories can be found. Symptomatically, Nestle is quickly gaining ground in the mass market (Supremo instant coffee) as well as with its more upscale and proprietary concept Nespresso, and in the franchise channel (Nescafe Cafe).

As you know, over the past few years, I've often been complaining about the opposite excess : now there are too many coffee shops around, to the point you often can see five or six franchises within a 100 m radius, and some streets look like Monty Python menus (following Coffee Bean & Tea Leaf : Hello Beans, Beanie Bean, Green Bean Coffee, Bean & Leaf, Beans Bins, Bean Tree 200, Taste Bean, Bella Bean, Beans to Coffee, Bean Sausage and Spam**...). The market grew with Starbucks and local franchises (ie Angel-in-us and Hollys Coffee) but literally exploded over the past few years with many newcomers joining the party, including less specialized franchises (McDonalds or Paris Baguette opening special cafe joints), galleries and boutiques growing coffee and waffle branches, and countless individuals tranforming their parkings or basements into coffee shops. So this reaches far beyond the already impressive coffee franchise boom described in a Korea JoongAng Daily focus today* (from 2 to 3,000 shops over the last year only for this single channel !).

This article updated me about the most aggressive player on the market, Caffe Bene. A couple of weeks ago, a fellow coffee addict (sorry to tell you this Chris, but judging by Foursquare, you are at a much more advanced stage than I) wondered how many branches they had and I answered their target was 300 because that was the latest figure I had. And it seemed already crazy for a company that didn't even exist three years ago. Hold on : now the undisputed market leader, Caffe Bene claimed 553 houses last month and targets 800 by the end of this year. That's insane.

The brand was built from scratch with intense marketing and a partnership with iHQ, an entertainment company providing famous, popular faces, and product placement in trendy dramas to fuel the buzz. I don't know if Caffe Bene execs are aware of the kind of quality problems Starbucks faced a couple of years ago, when they were only interested in opening new coffee houses...

Of course, Koreans are consuming more and more coffee every year (an average 312 cups in 2010 according to the same article, +23% vs 2006), but this trend is simply not sustainable and we've got all the ingredients for a bubble (including at the real estate level, because this is Korea).

Many individual are risking all their savings in this bubble. For instance, some parents sign with a franchise to secure a job for their unemployed kids with a cheaper entry-ticket than a restaurant, but the equation doesn't add up, or junior simply doesn't have it. The brand doesn't care much : it's not their money, and they will easily find other suckers to boost their figures in the race for the best locations. But a family is left in shambles.

In the end, everybody loses : brands cannot differenciate anymore because they commoditized everything, consumers lose the pleasure of sipping nondescript KRW 7,000 expressos in tasteless environments, and Seoul loses its very soul.

And I'm not getting any better either : there are three empty mugs on my desk. Gotta refill'em up.

Seoul Village 2011
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* "
Korea’s coffee craze boosts local franchises"
** okay, I made up the last one... but only the last one.

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