Starbucks Korea has seen its operating profit margins fluctuate in recent years, reflecting challenges behind its rapid expansion. Since entering the Korean market in 1999 with its first store near Ewha Womans University, the coffee giant has grown to nearly 1,900 locations and is on track to surpass 3 trillion won in annual sales. However, despite its expansion, Starbucks Korea’s profitability has weakened, with its operating margin declining from 10% in 2021 to 4.7% in 2022 and only slightly improving to 5.1% in the first half of 2024.
This decline stands in contrast to low-cost coffee chains like Compose Coffee, which posted an operating margin of 41.3% last year. Competitors such as MegaMGC Coffee and The Venti have also outperformed Starbucks Korea, with margins of 18.8% and 14.4%, respectively. Industry experts say that changing consumer preferences have eroded Starbucks’ competitive edge, as budget-conscious customers increasingly favor low-cost brands with fast table turnover time. “In the past, Starbucks’ arrival often forced smaller cafes to close, but today, the landscape has shifted,” said one industry insider.
Starbucks Korea’s financial challenges began after Emart became its majority shareholder in 2021. Emart, in partnership with Singapore’s Government Investment Corporation (GIC), acquired a 17.5% stake in Starbucks Korea, while GIC purchased 32.5%, giving Emart control of 67.5% of the company. Notably, Starbucks’ operating margin fell to 4.7% the following year.
Low-cost competitors, meanwhile, have continued to expand. Compose Coffee now operates over 2,600 stores, while MegaMGC Coffee has surpassed 3,000 locations. These brands have capitalized on a business model that focuses on fast table turnover time and low operational costs. In contrast, Starbucks’ larger stores and higher staffing needs have driven up expenses, limiting profitability. A Starbucks Korea spokesperson explained that the company’s non-franchise model and larger store size contribute to its higher costs.
Despite its profitability challenges, Starbucks Korea has traditionally emphasized personal interaction with customers, with staff calling out customers’ names and personally delivering drinks. This practice, aimed at fostering a sense of connection, helped solidify Starbucks’ reputation as an “affordable luxury.” However, recent moves signal a shift in strategy. As of Oct. 1, Starbucks Korea introduced a subscription service and expanded its online store. It has also placed pagers in 90 stores and is considering installing kiosks—measures that distance the brand from its traditional focus on customer interaction.
