Korea coffee white paper

KOREA COFFEE WHITE PAPER 2015 COFFEE CONSUMER AWARENESS

CONTENTS

0 1 Background Information 02 Survey Outline 03 Survey Results General Public Baristas Coffee Companies

01

Background Information

Korea Coffee White Paper_Summary Majority of coffee companies have a positive view towards their sales prospects for 2016.

This shows that the growth of coffee market is more expected, in contrast to those that momentarily claim that public craze for business start-up is no longer prevailing. According to survey results of ‘Korea Coffee White Paper’, many coffee businesses forecasted ‘consistent growth’ of their sales next year. Moreover, one of the companies that went through more than 10% of their growth scale has announced to reach 54% this year. Coffee market grew 9% each year since 2000, market share reaching 5.4 trillion KRW last year, which offers a proof that it will continuously grow in the future. According to the survey results, most of the baristas in Korea are consisted of women in their twenties with 2 years of experience in average. To elaborate, it was shown that 65% of respondents are women, 41% are women in their 20’s and 38% are consisted of women with 1~3 years of working experience. In context of wage of the baristas, 90% of the respondents were said to receive ‘less than 2 million won’ per month. ‘Seoul Labor Statistics Data’ from Seoul Labor Center reveals that workers in the service sector, in average, receive an monthly salary of 1.66 million KRW. In comparison, monthly wage level of baristas (which is considered as a specialized job) was not too high. Especially, highly experienced baristas receive similar amount of wage that baristas get with just 1 year of experience.

Moreover, there are many cases where their welfare package including 4 major insurances (health, national pension, unemployment pension, occupational health and safety insurance) do not apply to them, which is why it is still a critical problem for baristas to claim their labor rights within the coffee scene in Korea.

In contrast to such labor problems, there have been some favorable results shown in the survey.

Increasing number of people is drinking coffee at home. According to the survey targeted on general public, 80% of the respondents are said to have their coffee at home. 39% among them were claimed to having their coffee at home for more than 3 months to less than 2 years, another 23% for more than 2 years to less than 4 years and 19% for more than 4 years. These results prove that increasing number of people are starting to enjoy coffee at home, which could provide better opportunities for B2C companies and roastery coffee shops.

As much as coffee businesses are vastly related to other industries, by carrying lines of products produced by other companies, the statistics data showed stability between their relationships. Yet in regards to their sales target, various companies claimed to focus on both B2C and B2B. Also, 57% of the respondents were baristas (working under a certain company) without past working experience or just received education training, which leads us to assume that office work ability is more required than coffee knowledge.

Lastly, when respondents were asked to share their opinion about the Korea coffee market, they replied as follows: ‘It is too expensive’, ‘We are busy following the trends’ ‘There is no more demand because the market is already saturated’, ‘Lacks Diversity’. Some respondents replied that due to its rapid growth, the market itself lacks internal stability. However, we are pretty sure that there are hopes about the market which the general public and coffee companies are both aware of. We hope that they can put great effort to improve the problems they encounter every day and prepare enough for their future.

02

Survey Outline

Survey Conductor

Time Period

November 11th ~ 17th, 2015

Place

On-line Facebook/Official Website Off-line Seoul Int’l Cafe Show 2015 / World Coffee Leaders Forum 2015

Respondents

Purpose

General Public 652 people

Baristas 416 people

Coffee Companies 372 people

Coffee TV and Seoul Int’l Cafe Show prepared a consumer awareness research survey to reflect on the reality of Korean coffee market. This research survey embraces both general public and coffee business world and the data is planned to be analyzed by Coffee TV at the end of the year. We hope that this data becomes a source that can help you prospect the development and future of coffee industry.

03 Survey Results

General Public 1. Basic Information\ 2. Preference 3. Home Coffee Style 4. Coffee Education 5. Other

Korea Coffee White Paper_General Public

Coffee dominates Korean Food & Beverage Industry Long time ago, there used to be vending machines in every street, and every corner of buildings in Korea.

But now, coffee shops are taking their roles. Those days when coffee shops were criticized for selling ‘a cup of coffee that costs more than a meal’ and for ‘being a place for snobby people’ have become history. This survey was answered by visitors of Seoul Int’l Cafe Show including 652 respondents that do not work in this industry, and asked them questionnaires related to how they consume coffee. The result that catches attention most is on the daily amount of coffee they consume. If people that drank 1 cup a day only account for 24%, people that drank more than 2 cups a day reached 36%, 3 cups a day drinkers reached 25% and people that drink more than 4 cups/day reached 15%. According to ‘Processed Food Segment Market Status Report’ in context of instant coffee written by Ministry of Agriculture, Food and Rural Affairs and Korea Agro-Fisheries & Food Trade Corp., coffee is said to be the most consumed(12.2 times) after Kimchi in Korea according to its weekly frequency of consumption. Now, coffee has deeply settled within our lives that we may have to present coffee as our national food instead of kimchi.

Instant coffee has lost its position within the coffee consumption society. When respondents were asked about their coffee consuming style, 42% of the people said they buy coffee from ‘a coffee shop’. 38% of the people answered to ‘brew their own coffee’ and instant coffee only accounted for 13%.

We are pretty sure that this survey contains details that does not concord with the reality since it is taken on-site at the exhibition, Seoul Int’l Cafe Show, but it isn’t too different from the flow within the market. According to ‘Processed Food Market Report – Instant Coffee’ written by Ministry of Agriculture, Food and Rural Affairs and Korea Agro-Fisheries & Food Trade Corp., the consumption of instant coffee has dropped to 14.7% in contrast to 2012. ‘Americano’ seems to be slowly replacing instant coffee. 60% of the respondents were said to enjoy ordering ‘Americano’ as their favorite menu even though they had other choices within the range such as ‘latte’ or ‘aides’. Not only because it is a simple menu to enjoy, it’s also because Americano is the least expensive menu you can enjoy at a coffee shop. 24% of the respondents replied to enjoy ‘latte’ and another 6% enjoyed ‘brewing coffee’. Starbucks was ranked as the most favorite coffee brand by the respondents that accounted for 47%.

Mainly, the key was in its consistent taste that can be experienced in any other Starbucks stores in Korea.

We assume this is due to their effort to systemize their internal regulation and management. Also their approachability and coffee shop atmosphere could be other reasons why they enjoy going to Starbucks. 15% of ‘personal coffee shops’ ranked second. We guessed that this is due to their effort to get out of the mainstream coffee industry by showing their unique interior design and concept drinks. ‘Ediya’ coffee ranked third, accounting 11% of the respondents. Ediya coffee is a Korean franchise company that possesses most amount of stores in Korea and their business shut-down possibility rate is only 1.2%, the lowest among coffee shop brands in Korea.

Moreover, Ediya is one of the most original Korean coffee brands found far before ‘Bbaek Dabang’ or ‘Mammoth Coffee’ and people find their drinks taste as good as their price.

Korea Coffee White Paper_General Public

Coffee dominates Korean Food & Beverage Industry Thus, we were able to understand that taste is the most important factor for consumers to choose their own favorite coffee shop. In fact, there may be different opinions to whether or not Starbucks coffee has the best taste.

However, we cannot overly deny that people do not care about the taste of coffee served at Starbucks.

Price is another factor. The current purchasing trend is ‘performance per price’, which is a term and a factor generally used when buying electronic products. Ediya’s popularity can be explained for this reason.

Brand preference was one of the survey results in which we did not consider including ‘instant coffee brands’ but certain respondents answered names of instant coffee brands. Just by looking at the results of Maxim (5%) and Kanu(4%), we can tell how instant coffee is slowly losing their popularity. More and more people are seeking for packaged stick coffee (with grinded coffee beans) instead of instant coffee. While analyzing by coffee consumers by age, 39% of respondents were in their 20’s, 31% in their 30’s which showed identical results with currently working baristas. Also, as coffee shops became more and more common, we were able to see some respondents in their 40’s and 50’s, which leads us to conclude ordering coffee at a coffee shop is not a challenge anymore for them, considering how reluctant they were a while ago. Many people answered that they spend ‘3,000KRW ~ 6,000KRW’ for coffee per day, which accounted for 63% of all respondents. ‘Americano’ costs 2,800 KRW at Ediya Coffee and 3,800 KRW at Starbucks, so when people are given a chance to choose the shop they prefer to buy coffee from, they evenly chose to spend money on both places – instead of ordering a cup of ‘Americano’ twice from Starbucks, they chose to order the same drink at both Ediya and Starbucks – which is a very strange consuming pattern.

In our modern society, coffee shop is not a just place for just drinking coffee anymore. It is now a multi-functional space for people socialize, experience new culture and spend personal time. However, it is unfortunate that franchise coffee shops are busy trying to imitate Starbucks. We hope to see further development of personal coffee shops that could lead the Korea coffee market and culture.

03

Survey Results

Q1

1 Basic Information

General Public

Q2

How old are you?

What gender are you?

Unit: Number of people

Unit: Number of people 500

300

252 200

200

300

120

200

100

49

16

195

100

15 0

0 10’s

Q3

457

400

20’s

30’s

40’s

50’s

Men

60’s and more

What is your job?

Unit: Number of people

60

50 40

21

20

16

13

Housewife/Homemaker

Other

0 Office Worker

The survey was conducted on/offline from November 11 to 17, 2015.

Student

Women

03

Survey Results

Q4

2 Preference – Coffee shops

General Public

Which coffee brand do you enjoy the most?(short answer question)

Individual coffee shops Unit: %

16%

5% 4%

47%

2% 2% 2% 5% 6% 11%

The survey was conducted on/offline from November 11 to 17, 2015.

03

Survey Results

2 Preference – Coffee shops

General Public

Q6

Which factors define your favorite coffee shops?

1%

Service

13%

Approachability

20%

5%

Q5

Price

Side menus

What is your favorite Coffee Menu

61%

1%

Taste of Coffee

3% Tea

Fruit aide

5%

Smoothy or Frappuccino

Unit: %

1% Dutch coffee or Cold Brew

5%

Brewing Coffee

25% Latte

60%

Americano

Q7

How much do you spend on coffee per day?

Unit : %, 1,000 KRW=0.81 USD

Unit: %

100

16%

63%

16%

5%

less than 3,000 KRW

more than 3,000 KRW but less than 6,000 KRW

more than 6,000 KRW but less than 10,000 KRW

more than 10,000 KRW

50

0

The survey was conducted on/offline from November 11 to 17, 2015.

03

Survey Results

Q8

2 Preference – Individual

Q9

How much do you drink per day?

100

General Public

Do you brew your coffee at home?

Unit: % Unit: %

24%

36%

25%

15%

100

50

71%

29%

Yes

No

50

0

1cup

2cup

3cup

4cups and more

0

Q 10

How do you drink your coffee?

Unit: %

7%

other ways

38%

brew coffee at Home

42% coffee shop

13%

instant coffee

The survey was conducted on/offline from November 11 to 17, 2015.

Korea Coffee White Paper_General Public

Coffee at Home We conducted an in-depth survey towards respondents of ‘Korea Coffee White Paper - General Public’, to figure out whether they brew their own coffee at home. Out of 652 respondents, 466 people (71%) claimed that they brew their own coffee at home.

We were able to know that the number of home brewers are annually increasing, as we asked them of how long they have been brewing their own coffee at home. 19% of respondents replied they have been brewing at home for ‘more than 4 years’, 23% of the respondents have done this for ‘more than 2 years but less than 4 years’ and 18% of people claimed ‘ less than 3 months’. ‘Arounz’, a company that has been selling coffee tools, device and other related products have stated that they accomplished 200% of their sales growth compared to last year.

People that brew their coffee 4 times a week accounted 39% of the respondents, which is quite a lot. There were much more people than we expected who spent more than half of their week brewing their own coffee at home.

To us, this was an implication that the consumers generally do not feel too burdened about affording expenses on coffee items. Other than that, 22% of the respondents brew their home coffee twice a week, 20% of the respondents do this for 3 times a week and 18% of the respondents claims to brew their coffee once a week.

While there are various brewing options and tools, respondents picked ‘Kalita’(32%) as the most preferred brand due to its user-friendliness. The second most preferred product was Espresso Machine(29%) which has long been a conventional device used by people. The third most used item was ‘Hario V60’, which is actually the most common and popular hand-drip brewing tool used by coffee maniacs and baristas. Kalita and Hario V60 are the two most used brewing products at coffee institutes. Not only they are easy to use, but they are great when trying to maintain consistency of coffee taste.

Korea Coffee White Paper_General Public

Coffee at Home The new trend of ‘Home cafe’ is capsule coffee machine. We found out that capsule coffee machine users accounted 9% of the respondents, but considering the distinct characteristics of the area where the survey was taken Seoul Int’l Cafe Show, we expect that there should be more. Not just due to its convenience, the greatest advantage of capsule coffee machine is that it produces coffee that is nearly similar to those of coffee shops, such as vanilla latte, and caramel macchiato. Moreover, there are brands that actively market their products by lending free machines when consumers buy their capsules. However, we should focus on the fact that unlike those days in the past, 38% of respondents were said to visit roasters and coffee shops from their neighborhood rather than going to department stores and marts that sell cheap and convenient coffee products. This implies that coffee is not just a drink for caffeine boost or for their bitter taste anymore. In our current society, more and more people are willing to spend on freshly roasted coffee beans and care about its quality and supply chain.

When asked about their coffee selection standards, 43% of the respondents said they care about the ‘country of origin’, 23% cared about the ‘quality’ of beans. Those that cared about ‘brands’ only accounted 9%. Unlike before when people were willing to pay for the least expensive coffee, we are able to assume that people seem to be less reluctant to spend more on good coffee these days. Various coffee education programs played a crucial role at such shift in consumption trend. Majority of home coffee brewers were trained to make espresso and hand-drip coffee, and 7 of them owned their Q-grader license even if they were did not work in the coffee industry.

We expect that those that have not been trained were users of capsule coffee machines and espresso machines.

Approximately one hundred thousand people acquired a second-grade barista license. By looking at this number it is certain that coffee consumption and home cafe standard will further improve in the future.

There is only one way to enjoy coffee outside home, but there are various ways to enjoy home brews. It is expected that the coffee industry grew along with the popularity of DIY industry. We hope to see more home brewers in the future.

03

Survey Results

Q 11

3 Home Coffee Style

General Public

Q 12

How long did you brew your own coffee at home?

100

How much coffee do you drink per week?

Unit: %

18%

40%

23%

Unit: %

19%

50

39%

More than 4 times

0

Less than 3 months

Q 13

More than 3 months, less than 2 years

More than 2 years, less than 4 years

20%

More than 4 years

3 Times

What tool do you use to brew your coffee?

Unit: %

32

29

30

20

14 7

10

10 3

2

3

Chemex

Aeropress

French Press

0

Kalita

Clever

Hario V60

The survey was conducted on/offline from November 11 to 17, 2015.

Capsule Coffee Machine

Espresso Machine

19% Once

22% Twice

03

Survey Results

Q 14

3 Home Coffee Style

General Public

What are the important factors to consider when choosing your coffee beans?

100

50

Unit: %

43%

9%

16%

5%

23%

4%

Country of Origin

Price

Brand

Easy to Purchase

Quality

Other

0

Q 15

Where do you buy your coffee from?

Unit: %

8%

15%

Subscription (Shipment)

22%

Roastery coffee shop

Department store / Marts

On-line stores

9%

Franchise coffee shops

The survey was conducted on/offline from November 11 to 17, 2015.

38%

Q 16

How much coffee beans do you buy each time?

100 50

25

42% 26%

Unit: %

18%

14%

13%

Specialty coffee shop

0

100g

200g

300g

1kg 이상

03

Survey Results

Q 17

4 Coffee Education Information

General Public

From where did you get your coffee education?

Q 18

Unit: %

What is your education level?

11%

Culture Center

31%

79%

16%

None

Coffee Shop

12%

30%

Self-study

Coffee Academy

Q 19

For how long did you receive your education?

11%

Unit: %

7%

Unit: %

18%

21%

More than 3months, less than 6 months

20%

More than 6 months

The survey was conducted on/offline from November 11 to 17, 2015.

3%

Less than 1 month

41%

– More than a month, less than 3 months

Espresso & Hand drip Brew

Roasting

Cupping

Q-grader

03

Survey Results

Q 20

5 Other Information

General Public

Which app do you use the most?

Unit: %

49%

12%

10%

8%

Starbucks

Coffee TV

Hollys Coffee

Coffee Bean

5%

4%

2%

Cafe Show

Arounz

1kg Coffee

1%

1%

1%

7%

Grazie

Nescafe

Mega Coffee

Other

The survey was conducted on/offline from November 11 to 17, 2015.

03 Survey Results

Barista 1. Basic Information 2. Coffee Education 3. Work Place 4. Details of Work Place

Korea Coffee Whitepaper_ Barista

Baristas and their passion We have decided to analyze the barista field by dividing this subject into two : barista & coffee shop. The barista part is mainly focused on the average amount of wage that baristas get as well as their working circumstances.

Since we have met a lot of baristas whining over their visions of coffee shops, we were curious about their working condition. Coffee shop owners, managers, baristas and roasters were all required to answer the survey questions.

So, we were able to hear the answers from 476 people in total. Among the 476 people, 310 people were baristas (65% of the respondents). At franchise coffee shops, baristas’ occupational group rate is higher so the survey value was higher than other criterias. Roasters accounted 4% of the respondents, which makes us assume that the entry barrier of roasting technology is higher than other fields as it requires higher knowledge and techniques.

Also, we found out that 42 % of the baristas were in their 20’s and another 28% were in their 30’s. This result was somehow anticipated because coffee started taking over trend from the year 2000 and barista’s job started to rise.

Also, considerable number of baristas were in their 40’s, which implies that 70% of older generations in Korea plan their retirement life by starting a coffee shop. Also, number of women who were currently baristas were twice more than that of men.

By combining all these pieces together, we are able to know that baristas in Korea are mostly consisted of women in their 20’s.

Next, we looked into their wage and working experience. 34% of the baristas replied they get ‘less than 1.5 million KRW per month’, 40% said they get ‘more than 1.5 million KRW ~ less than 2 million KRW’. As analyzed above, most of the baristas that make money for their living are mostly in their 20~30’s. However, according to ‘Current State of Korea Employment based on the Perspective of Generational Occupation’ data provided by the LG Economic Research Institute, it is mentioned that the average monthly salary of people in their 20’s and 30’s is 1.45 million to 1.53 million KRW. Since this survey did not independently assort baristas with owners, roasters and managers, there is a possibility that monthly wages of the baristas could be more or less than the survey results, taking owners’ income into consideration. (1 million KRW = 833.3 USD)

Korea Coffee Whitepaper_ Barista

Baristas and their passion When calculating the baristas’ salary compared to their working experience, baristas with working experience ‘less than 1 year’ accounted up to 26%, whereas the baristas who get their monthly salary of ‘less than 1.5 million KRW’ accounts 34% in total. Which means that 8% of the baristas with ‘ more than a year but less than 3 years’ of working experience get their monthly salary of ‘less than 1.5 million KRW. Even if we take a look at baristas with longer working experiences, baristas with ‘more than 1 year but less than 3 years’ account to 39%, and 40% of them gets a monthly salary of ‘more than 1.5 million ~ more than 2 milllion KRW’. This shocking result shows that their monthly salary amount is less related to their career. One of the most important factors to focus on, is how much welfare benefits they get. The 4 major insurances and retirement fee, which are the welfare benefits that are supposed to be provided by all employers to their workers, were rarely settled or systemized. According to the ‘National Pension Act’ of Korean Law, Article 8, the 4 major insurances includes ‘health insurance’, ‘national pension’, ‘unemployment pension’, ‘occupational health and safety insurance’, thus all business owners (with more than 1 employee) and employees are obliged to apply for it according to ‘Enforcement Decree of National Health Insurance Act’, Article 62-2. If the corporation is found out to not have submitted their application, not only they are fined, they will be mandated to pay the unpaid insurance fees to the government.

(1 million KRW = 833.3 USD) Despite this legislation and policy, it is a shame to hear that only 64% of the respondents were said to receive these insurance benefits. The insurance fee which the baristas have to afford could be a burden to them (due to their relatively low salary). However, a much serious problem lies on their retirement fee. Just like the 4 major insurances, retirement fee is also an important right of workers protected by law, yet only 37% of the respondents replied that they are guaranteed.

Korea Coffee Whitepaper_ Barista

Baristas and their passion If we state that this basic provision of law is the standard to judge whether we should accept baristas as laborers, those that do not abide by law should truly reflect themselves. While coffee companies anticipate to have their sales increase next year, it is still uncertain whether baristas will be rightfully treated in the near future.

In order for baristas to get out of this working environment, we think that they need to work on their career even more. It seems that barista’s professionalism is not too outstanding in our society, since their job is not too different from that of part-timers, according to some of the on-site baristas. According to our survey result, majority of baristas start their official career after getting their training for less than 6 months. Only 10% of the respondents got their education from a vocational school or community college, and 79% of them received their education from coffee academies, culture center and coffee shops. Culture center hosts exams for people that wish to get their barista license, which is why it is difficult for examinees to do in-depth learning. When we think about who creates the coffee industry and market, we cannot give a clear answer due to these welfare issues.

In reality, barista’s wage is considered the lowest anyone could get despite their hard-work and effort. The market appears to grow each year, but many baristas frequently turn their backs after facing the truth. Global coffee market showed unprecedentedly rapid growth from the past, and it is not an exaggeration to state that this phenomenon is just like a mini-version of the history of Korean economic development. Before the society starts creating mocking terms, such as ‘hell barista’ or ‘hell café’, we hope that those who demanded ‘passion and effort’ reflect themselves and judge whether they really did put their own effort to create a working environment that only requires ‘passion and effort’ from their employees.

03

Survey Results

1 Personal Information

Q1

Barista

Q2

Age?

Gender?

Unit: Number of people

99

42

100

84 17

5 20 ’s

30 ’s

The survey was conducted on/offline from November 11 to 17, 2015.

154

150

68

10 ’s

Unit: Number of people 200

40 ’s

50 ’s

7 60’s and more

50

0 Men

Women

03

Survey Results

Q3

1 Personal Information

Barista

Q4

What is your job?

For how long did you work as a barista?

Unit : % Unit : Number of people

75

65 50

26

39

18

more than 1 year but less than 3 years

more than 3 years but less than 5 years

17

50

4

25

14

17

0

Barista

Roaster

Manager

Coffee shop owner(CEO)

25

0

less than 1 year

The survey was conducted on/offline from November 11 to 17, 2015.

more than 5 years

03

Survey Results

Q5

2 Coffee Education

Barista

Q6

Where did you get your education from?

How long was your training period in order to become a barista?

Unit : %

20%

More than 1 year

12%

Self-study

10%

Vocational school /Community college

23%

Coffee shop

The survey was conducted on/offline from November 11 to 17, 2015.

Unit : %

50%

Coffee Academy

5%

Culture Center

18%

More than 6 months but less than 1 year

28%

less than 3 months

34%

More than 3 months but less than 6 months

Korea Coffee Whitepaper_Coffee Shop

Coffee Market within Progress and Stagnation Our survey based on ‘coffee shop’ was taken along with that of ‘Barista’, to check out the actual condition of the stores.

There were 476 respondents in total (same number of respondents to ‘Barista’). We wanted this part of the survey to exclude any sorts related to business start-ups, so we mainly focused on how the stores are currently being operated and managed. When we asked the location of their coffee shops, 246 respondents replied, ‘Seoul’ (56%). When considering the geographical limits of Seoul and having your off-line store in here, this is a huge number. According to a research data published by ‘Statistics Korea’, about 25% of 50,000 coffee shops in Korea are located in Seoul.

Nowadays, opening a coffee shop in Seoul and putting effort is almost impossible for you to accomplish great success.

When conducting survey, we narrowed the target group down to general coffee shops that do not deal with other services (such as comic book cafes or dog cafes) or shops that do not deliver coffee beans. Next were franchise coffee shops (23%) and Roastery coffee shops (17%). There were other coffee shops that showed relatively high response rate, and this is because there has been increasing number of unusual coffee shops that applied various services, as coffee and espresso machines became more common. We researched on the coffee price with ‘Americano’ as a standard menu, and 40% of the stores responded that Americano costs ‘more than 3,000 KRW but less than 4,000 KRW’ in average, which turned out to be the majority. 26% of the respondents said their Americanos cost ‘more than 2,000 KRW but less than 3,000 KRW’ and only 8% replied that their Americanos cost ‘less than 2,000 KRW’. Coffee shops with low coffee price are popular these days, but since competition is inevitable, other coffee shops are still maintaining their previous price range. When asked about their sales per day, there was not much of a huge gap among their answers. 33% of the respondents reported to have ‘more than 100,000 KRW ~less than 500,000 KRW’, 33% said to have ‘more than 500,000 KRW ~ less than 1,000,000 KRW’ and 29% replied ‘more than 1,000,000 KRW and more than 3,000,000 KRW’. By taking a look at annual average sales information of each stores provided by Franchise coffee shops like Ediya we can tell that their daily sales is about 700,000 KRW per day. So when compared to shops like Ediya, we can tell that there are great number of coffee shops with such high sales record.

Also, the correlation between sales and internal space of the coffee shop is another important factor to consider.

Our research result shows that 10% of the respondents own a coffee shop with ‘less than 10 pyeong (1pyeong = 33.057851m2 ), 34% of the respondents own a shop that is ‘more than 20 pyeong but less than 40 pyeong’, 24% respondents own a shop that is ‘more than 40 pyeong’. So we were able to prove that the internal space area of a coffee shop does have an impact on its sales. It is time we should stop believing in those false advertisements that lure you to open a small coffee shop for success. (1 million KRW = 833.3 USD)

Korea Coffee Whitepaper_Coffee Shop

Coffee Market within Progress and Stagnation Also, we could see similar patterns among the number of employees. When asked about the number of employees working at the store apart from the shop owners, 27% answered ‘less than 2 employees’, 44% answered ‘more than 2 employees but less than 5’, 22% answered ‘more than 5 employees but less than 10’. Stores with more than 10 employees account 7%, which concords with the number of stores with daily sales more than 3,000,000 KRW. However, with just simple research, we couldn’t tell if this number of employees suit to the area size of the coffee shop and its sales record. These days, coffee shops tend to prepare as much beverage menus as possible, to fulfill the needs of their customers. According to our research, 37% of coffee shops replied to have ‘more than 10 drink menus but less than 20’. We could find out that 30% of the respondents had shops that sell 20 to 30 different kinds of beverage menu. It seems to be a different trend from some specialty coffee shops that limit all of their beverage menu on coffee. Fruit-aides using fresh fruit and concentrated liquid are partially the reason why there are more and more drink menus at stores. Compared to other drink menus, snacks and desserts are not much sold. 26% of the respondents said they sell ‘more than 3 types but less than 5 kinds of snacks’ and 20% were said to sell ‘more than 5 types but less than 7 types’. This is because snacks and desserts are more difficult to dispose than coffee.

(1 million KRW = 833.3 USD) Moreover, the amount of coffee shops that are specialized in desserts and brunch menus are constantly increasing, but not to compete with others but to diversify. It is a risk to afford for coffee shops that need to raise their customer transaction. However, if you are still willing to reinforce your dessert menu, we recommend you to mainly repair the cake menus. As we researched on the top 3 dessert menus that are sold the most in coffee shops, cakes ranked the highest among the sales record, which accounted more than 30%. This is 3 times higher than menus such as waffles and honey bread. If you are thinking of dessert menus that you can dispose easily of, making cookies is a good choice. Since it is cheap, customers can easily purchase them. However, we should remember that desserts are sensitive to trends, so we need to renew or change them on time. We are now living in the stable era where we are able to operate coffee shops by anticipating the sales based on factors such as the shop’s scale and style.

However, stabilization is not everything. National economy shows a flat line and we need to brainstorm other business ideas. Fortunately, coffee consumption is expected to continuously rise in the future and we assume the business start-up market will attract more attention from public. Yet, we shouldn’t cross a line by starting a coffee business with these expectations. Working in a coffee shop requires physical labor. Not only you need to stand up for a long time, you need to carry out heavy materials and deal with unpleasant customers etc. If you are planning to do a business with more convenience, coffee shop is definitely not going to be what you are looking for.

03

Survey Results

Q7

3 WorkPlace

Barista

Q8

Where do you work at?

How many hours do you work per day? (lunch time excluded)

50

46

12%

23

25

Less than 5 hours

30%

More than 5 hours but less than 8 hours

Unit : %

17

14

47%

More than 8 hours but less than 10 hours

0

Coffee Shop

Q9

Unit : %

Roastery coffee shop

Franchise coffee shop

Other

Q 10

How much is your monthly salary?

11%

More than 10 hours

What kind of welfare benefit do you get?

50

Unit : %

34

10%

40 Unit : %, 1 million KRW=833.3 USD

25

16 10

Incentives for self-improvement

9%

Transportation fee

29%

Food expense 0

less than 1.5 million KRW

More than 1.5 million KRW but less than 2 million KRW

More than 2 million KRW but less than 2.5 million KRW

The survey was conducted on/offline from November 11 to 17, 2015.

More than 2.5 million KRW

33%

4 major insurances

19%

Retirement fee

03

Survey Results

Q 11

3 Workplace

Barista

In which area is your work place located at?

52%

20%

7%

5%

Seoul

Gyeonggi

Gyeongnam

Other

5%

3%

3%

Chungbuk

Gyeongbuk

Jeonnam

Unit : %

2%

2%

1%

0%

Kangwon

Chungnam

Jeonbuk

Jeju

The survey was conducted on/offline from November 11 to 17, 2015.

03

Survey Results

Q 12

4 Details of Workplace – Price and Sale

Barista

Q 13

How much is your coffee?

(Americano standard)

How much is your daily sales output?

Unit : %, 1 million KRW=833.3 USD

Unit : %, 1 million KRW=833.3 USD 40

40%

30

26%

26% 8% Less than 2,000 KRW

More than 3,000 KRW but less than 4,000 KRW

The survey was conducted on/offline from November 11 to 17, 2015.

More than 4,000 KRW

32%

29%

20

10

More than 2,000 KRW but less than 3,000 KRW

33%

6%

0

More than More than More than More than 100,000 KRW 500,000 KRW 1,000,000 KRW 3,000,000 KRW but less than but less than but less than 500,000 KRW 1,000,000 KRW 3,000,000 KRW

03

Survey Results

Q 14

4 Details of Workplace – Sales

Barista

Q 15

How many different kinds of beverage menus are sold in your coffee shop? ( both hot & iced drinks unsorted)

How many different types of snack & desserts are sold in your coffee shop?

26%

30 Unit : %

26%

30%

19%

19%

19%

16%

10

Less than 10 kinds

Q 16

20

37%

Unit : %

20%

More than 10 but less than 20 kinds

More than 20 but less than 30 kinds

More than 30 kinds

0

Less than 3 kinds

More than 3 but less than 5 kinds

More than 5 but less than 7 kinds

Which dessert or snack menu is most sold in your coffee shop?

30

30

Unit : %

20

10

8

10

10

9

9

Cookie

Honey Bread

Bagel

Muffin

8

0

Cake

Sandwich

The survey was conducted on/offline from November 11 to 17, 2015.

Waffle

4

3

2

Bakery

Panini

Pizza

7 Macaron

More than 7 but less than 10 kinds

More than 10 kinds

03

Survey Results

Q 17

4 Details of Workplace – Other Information

How many employees work at your store?

What is the actual internal area of your store?

24%

44% 27%

Q 18

Barista

More than 1,322.4㎡ 단위 : %

22% 7%

32%

34%

less than 2

10%

Less than 330.6㎡

More than 3 but less than 5

More than 5 but less than 10

More than 10

The survey was conducted on/offline from November 11 to 17, 2015.

More than 661.2㎡ but less than 1,322.4㎡

More than 330.6㎡ but less than 661.2㎡

03 Survey Result

Coffee Company 1. Basic Information 2. Career 3. Company Information

Korea Coffee Whitepaper _ Coffee Company

Coffee businesses with hope All of the respondents of this survey were exhibitors of Seoul Int’l Cafe Show, and we were able to hear responses from 248 companies. The survey features multilateral questions based on their business area, field and sales, in order to conduct deeper analysis of coffee companies in general. What’s interesting is the fact that within the Korean coffee industry(in which we thought was mainly focused on consumers), the performance of the B2B companies were higher. Companies mainly focused on B2B accounted 23%, whereas companies that deal with both B2B and B2C accounted 52%. Companies that only focus on B2C accounted only 9%. This is because apart from supply and demand of coffee beans, it is inevitable for companies to maintain good relationship with other manufacturing companies to buy/import raw materials and machines.

As we looked into the job specifications of the respondents, most of them worked in a sales department, which points out that the number of B2B companies outweighs that of B2C. 34% of the total respondents were working in the sales team, 18% were working at promotion/marketing team and 17% were working in the management team. It is somehow ironic to see that the rate of people in the marketing team was also quite a lot, yet their actual budget assigned for marketing use wasn’t much. We assumed this is because their annual sales and business method is quite different from that of regular larger companies. 66% of companies answered that they invest less than 50 million KRW on marketing, 23% answered that their company uses ‘more than 50 million but less than 100 million KRW’. For promotion, majority of companies preferred using the conventional method: media advertisement. Since B2B sales is the most important work for a coffee company, it seemed that they prefer coffee magazines and on-line keyword advertising (instead of being exposed to unsorted, extensive range of consumers). (1 million KRW=833.3 USD) Next, ‘Direct visiting’ ranked the highest rate. It is the most fundamental sales method generally used by F&B businesses, since their products require verification by taste.

SNS and exhibition seemed to be the secondary promotion/marketing method for coffee businesses as both of their rates were similar in this survey. One of the most used marketing method for SNS was Facebook. According to a recent research data revealed by DMC Media called ‘ 2015 Digital Consumers and Korean Digital Life Style Analysis Report’, 59.8% of domestic internet users said they own a personal Facebook. Kakao story (16%) and Instagram (13%) were the next most used SNS in Korea.

Korea Coffee Whitepaper _ Coffee Company

Coffee businesses with hope When asked about their business scale, majority of the respondents were part of small companies.

43% of the respondents said that their company’s average annual sales is ‘1 hundred million ~ less than 1 billion KRW’, 27% answered that their company’s average annual sales is ‘More than 1 billion but less than 10 billion KRW’.

Recently, it was reported that Mcnulty is now listed on the KOSDAQ (Korea Securities Dealers Automated Quotations), but apart from this, company maintaining such scale rarely seen. However, 83% of the companies responded that they have undergone an increase in sales over last year. Among them, companies that grew 10~20% reached 37%, which considered the highest. When compared to ‘2014 Profit-making Business Administration Statistics Provisional Result’, the numerical values were positive, and it is mentioned on this research data that total sales of the whole of companies increased 1.4% from 2013. So it is no different to say that majority of the businesses have not gone through a considerable growth. But many of the coffee businesses have continuously shown high growth rate. Other than this, many of the respondents showed hopes for their increase in sales for next year. The KDI(Korea Development Institute) anticipates next year’s economic growth to rise up to 3.0% and other economic research labs and fiduciary institutions showed future predictive values up to late 2%. Even in this economic climate, it is analyzed that the coffee businesses still have high growth potentiality compared to other manufacturing or service industry. (1 million KRW=833.3 USD) We also tried to see the impacts of barista’s working experience on the business output, since they deal with various kinds of products. Beforehand, we would like to let people know that we got the information based on this issue through our survey to grasp the general flow, so the answers do not exactly represent all of them. Among all of the responses, 47% of the respondents replied they do not have the experience and 10% answered they only received coffee related training/education. However, respondents with experience ‘less than 2 years’ reached 49% and but had high level of coffee knowledge and working experience. We assume this is because many employees move to another team to improve their professionalism in the office.

‘Coffee Company’ is the last content of the 6 chapters of ‘Korea Coffee Whitepaper’. With different index and surveys, we tried to reveal the reality of Korea coffee market in general.

Since it was the first survey that we have ever done, we did not have enough data but tried to analyze the environment as much objective as possible by comparing with other international & domestic survey results. It is up to you to judge and evaluate whether we were able to accomplish our goal to show the present Korea coffee industry through our articles. For next year, we, Coffee TV will try our best to deliver a much accurate and objective analysis by using this year’s data as a reference.

03 Survey Results

Q1

1 Basic Information

Q2

How old are you?

Unit : %

100

Coffee Company

90

What gender are you?

Unit : %

200

150

26 0

100

46

50

21

10 ’s

20 ’s

30 ’s

40 ’s

The survey was conducted on/offline from November 11 to 17, 2015.

50 ’s

64

50

3

0

122

60’s and more

0

Men

Women

03 Survey Results Q3

2 Career

Coffee Company

Q4

How did you get your job?

Unit : %

50

Before your current job, have you ever worked as a barista?

42

Unit : %

29

43

23

25

Yes

6

47 10 No

I was only trained or educated

0

On-line Recommended advertisement

by Friends or Family

Q5

By getting promoted at your work

Other

Q6

What is your main job?

How much experience do you have as a barista?

Unit : %

16%

Other

17%

Managing the store

18%

Promotion / Marketing

15%

34%

Sales

Development / Education

The survey was conducted on/offline from November 11 to 17, 2015.

15%

50%

More than 2 years

15%

More than 1 year but less than 2 years

Less than 6 months

20%

More than 6 months but less than 1 year Unit : %

03 Survey Results Q7

3 Company Information

Coffee Company

What are the products that your company operate with?

Unit : %

25 20

22 17

15

12 8

10

8

8

Supply/ Demand Coffee Beans

Tea

7

9

9

Academy/ Education Institute

External Device/ Peripherals

5 0 Espresso machine & grinder

Q8

Green beans

Raw materials

Franchise

Who are your major customers?

Unit : %

B2B

23

B2C

9

Both

53

Others

15 0

The survey was conducted on/offline from November 11 to 17, 2015.

10

20

30

40

50

60

Others

03 Survey Results

Q9

3 Company Information-Marketing/Promotion

Q 10

What is the main marketing method of your company?

How much is your annual marketing fee?

Unit : % 1 million KRW=833.3 USD

100

15%

SNS Promotion

50%

Media Advertisement

66

Unit : %

20%

Coffee Company

23

50

Direct Marketing (Face to Face)

6

5

15%

Exhibition

0

Less than 50 million KRW

The survey was conducted on/offline from November 11 to 17, 2015.

More than 50 millionKRW but less than 100 million KRW

More than 100 millionKRW but less than 360 million KRW

More than 300 million KRW

03 Survey Results

Q 11

3 Company Information-Marketing/Promotion

Which SNS method does your company use the most?

Q 12

Coffee Company

Which coffee related app do you use the most?

Unit : %

2%

37%

12%

12%

Stabucks

Coffee TV

Paul Bassett

13%

13%

13%

Your Business

Naver Cafe

Band

Unit : %

Twitter

8%

Blogs

12%

Instagram

57%

Facebook

5%

Naver Blog

16%

Kakaotalk

The survey was conducted on/offline from November 11 to 17, 2015.

03 Survey Results

Q 13

3 Company Information-Export/Import

Does your company import/export?

Coffee Company

Q 14

To which countries do you export your products?

11 North/South America

68

16 Europe

11

Unit : %

17

21

South East Asia

14 China

Export

Import

Both

4 Japan

38 None of the above

The survey was conducted on/offline from November 11 to 17, 2015.

Unit : %

03 Survey Results Q 15

3 Company Information-Export/Import

Coffee Company

How much is your business average annual sales?

23

Less than 100 million KRW

More than 100 million but less than 1 billion KRW

40

More than 1 billion but less than 10 billion KRW

8%

10

I don’t know Unit : % 1 million KRW=833.3 USD

0

18%

Similar to 2015

Q 16

How much was your increase in sales over the last year?

29

Less than 100 million KRW

More than 100 million but less than 1 billion KRW

37

More than 1 billion but less than 10 billion KRW

18 9

More than 10 billion but less than 100 billion KRW More than 10 billion KRW but less than 1 trillion KRW

More than 1 trillion KRW

What is your prospect of sales for 2016?

27

More than 10 billion but less than 1 trillion

More than 10 billion

Q 17

5 2

Unit : % 1 million KRW=833.3 USD

The survey was conducted on/offline from November 11 to 17, 2015.

10%

It will decrease

64%

It will definitely increase

Unit : %

03 Survey Results

Q 18

3 Company Information-Strength / Weakness

What is your company’s greatest advantage?

18%

Price Competitiveness

Unit : %

41%

10%

Product lineup

12%

Promotion / Marketing

Product Design

After sales service / Follow up-service

The survey was conducted on/offline from November 11 to 17, 2015.

19%

Q 19

Coffee Company

What needs to be improved in your company?

7%

Price Competitiveness

Unit : %

20%

13%

Product lineup

13%

Promotion / Marketing

Product Design

After sales service / Follow up-service

47%

KOREA COFFEE WHITE PAPER