Kimchi or Starbucks?

Inflation causes drop in Starbucks sales

Office workers head into a Starbucks Coffee branch during their lunch break. Inflation has pushed meal prices so high that ordinary workers find themselves having to budget their lunchtime spending and buy coffee from convenience stores. / Korea Times By Kim Tae-gyu Park Seon-young, a 30-year-old office worker in Seoul, used to drink coffee every day after lunch with her colleagues. Her favorite place was Starbucks just next to her company. But she these days skips the high end latte and instead relies on a convenience store for her afternoon caffeine fix where cheaper coffee products are available. The rising cost of agricultural items such as rice and vegetables has eaten away at her budget. ``My lunch allowance is 10,000 won ($9.4). When a typical meal was only around 5,000 won in the past, I could have a cup of Starbucks coffee, which is also about 5,000 won,’’ Park said. ``Nowadays, there are hardly any restaurants offering lunch at 5,000 won excluding some fast-food chains. Staple dishes are priced often at 7,000 won or 8,000 won. Obviously the cheaper coffee was my only option.’’ Park and her coworkers represent a new trend as shown by the solid sales of the country’s top 24-hour convenience shops such as Family Mart, GS 25 and Seven Eleven. Both Family Mart and GS 25 saw their sales of ice coffee products more than triple during the first six months of 2011 from a year ago, while Seven Eleven also chalked up more than 100-percent growth over the span. Family Mart sells ice coffee at between 1,000 won and 1,500 won and claims that the taste and flavor are not inferior to those at coffee-only outlets such as Starbucks or Caffe Bene. ``The soaring prices of meals prompt Koreans to opt for inexpensive quality ice coffee. We expect that this tendency will continue throughout the summer due to the strong inflationary pressures,’’ a Family Mart official said. Seven Eleven, which increased the number of ice coffee products from only four in 2009 to a whopping 25 this year to meet the mounting demand, reasoned with a similar analysis. The cost of vegetables and rice has remained high over the past several months under an unfavorable climate and there have been some ups and downs. Beef and pork also rose in the aftermath of the foot-and-mouth disease, which hit the country late 2010 and early 2011 leading to the culling of millions of livestock. As a result, restaurants have revised their prices to financially weigh on people. When contacted, however, Starbucks Coffee Korea said that the subsidiary of the Seattle-based international coffee shop brand has yet to see any effect on its bottom lines. ``We are not direct competitors of convenience stores. The increase in their sales would mean the expansion of the overall market rather than our losing ground,’’ a Starbucks Korea official said. The U.S.-based java giant tapped into Asia’s No. 4 economy in 1999 and now maintains more than 350 outlets across the country.