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Starbucks in Seoul: How the Seattle Chain Flooded South Korea

Image: Starbucks to help workers obtain undergraduate degrees

A view of a Starbucks sign in New York, New York, USA, 16 June 2014. JUSTIN LANE / EPA

Travelers to Seoul can sample a wide range of delicacies – bibimbap, kimchi, bulgogi – and wash it down with something to drink. And chances are the drink they will turn to is a Starbucks Frappuccino.

Seoul, South Korea beats out major cities worldwide, including New York City and London, for the distinction of having the most Starbucks locations in a single city, according to a report by Quartz. Seoul’s prominence in the coffee shop industry is no surprise to anyone familiar with Korean culture.

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Well, except for Starbucks maybe. When the caffeinated giant opened its Seoul location in 1999, by the prestigious Ewha Womans University, the company was caught off-guard by the strong response, according to Starbucks spokeswoman Jaime Riley.

“We are really humbled by how we’ve been embraced in that community,” Riley said. Since then, Riley said just under 300 Starbucks shops have opened in the city – Quartz puts the figure at 284.

Much of Starbucks' success in penetrating the Seoul market, Riley said, comes from their joint venture partnership with Shinsegae, a South Korean department store franchise that owns and operates several other businesses. Shinsegae helps to provide Starbucks’ Korean locations with services such as marketing and product development.

Inside a Starbucks coffee shop in Dongbu Ichondong, Seoul, South Korea.
Inside a Starbucks coffee shop in Dongbu Ichondong, Seoul, South Korea. Courtesy Starbucks

Shinsegae didn’t have to do much, though, to make Starbucks a hit. The company had entered and expanded in South Korea right as coffee shops were beginning to flourish across the country, and in Seoul.

“Seoul is just coffee crazy,” said Andrew Hetzel, a coffee industry specialist and owner of Cafemakers, a coffee consulting firm.

The country’s economic growth, which has provided more people with the disposable income to spend on things like a latte, helped drive the expansion. In South Korea a cup of coffee and a pastry could easily cost around $10, Hetzel said. As a result, coffee became associated with a luxurious lifestyle.

A crowded Starbucks coffee shop in Seoul, South Korea.
A crowded Starbucks coffee shop in Seoul, South Korea. Maureen O’Crowley for NBC News

“A paper cup from Starbucks and other franchises has become a status symbol when walking down the street – similar to carrying a famous brand handbag,” said Daniel Jong Schwekendiek, a professor at Sungkyunkwan University in South Korea.

The high prices might also serve another purpose than maintaining coffee’s place as a status symbol – it also ensures profits. South Korea, like most other Asian countries, is still at its core a tea-drinking nation.

Coffee was introduced in Korea, according to Schwekendiek, in the late 1800s and grew more popular during the Japanese colonization of the peninsula. Following the Korean War, however, it become especially popular after American soldiers introduced instant coffee. For decades thereafter, brewed coffee’s popularity remained minimal.

Even today, South Koreans tend to turn to tea or instant coffee, unlike brewed coffee-guzzling Americans, for their morning beverage of choice. So rather than going to a coffee shop for a caffeinated pick-me-up, Seoul residents go there to hang out. In fact, it’s not strange to see a group of five or so students split a Frappuccino among them, mainly using the coffee shop as a gathering space.

Starbucks in Dongbu Ichondong, Seoul, South Korea.
Starbucks in Dongbu Ichondong, Seoul, South Korea. Courtesy Starbucks

“Korean homes are small and therefore, seldom does anyone meet at home,” said Maureen O’Crowley, vice president for the Seoul Convention Bureau. For this same reason, the shops have become popular with businessmen, college students, and mothers who go there while waiting to pick their children up from school.

The coffee shops replaced traditional “da bang,” literally tea rooms, which served as a popular meeting place and served tea or instant coffee drinks. Other “bang” including “PC bang,” which offered computer games, and “norae bang,” or karaoke rooms, also attracted people looking to get out of the house.

To appeal to these people looking for a place to relax, coffee shops including Starbucks have grown to multiple stories in height and are filled with plenty of chairs and couches. On any given afternoon, the stores will be filled to capacity.

Still, given the ubiquity of coffee shops, some doubt how much longer the coffee shop trend can continue. With some parts of Seoul having “seven coffee shops within one block,” according to Ray Park, manager of New York Korean restaurant Barnjoo, the market has become potentially over-saturated by the abundance of coffee shops. One of Park’s friends runs a popular coffee shop in Seoul, but with new shops popping up, customers have become harder to come by.

“There are two other coffee shops within 100 feet from his shop,” Park said. “Does he make a profit? Barely.”

Starbucks has one tool in its arsenal that will likely help to ensure it weathers whatever downturn hits its Korean counterparts – it’s an American brand, and Koreans have had a strong affinity for American culture stretching back to the Korean War.

“They’re really well positioned there because they have the U.S. association,” Hetzel said. “Young people like that American lifestyle.”

Other global food brands work hard to incorporate local cuisines into their menus – McDonald’s, in particular, is famous for this. That’s the strategy American coffee rival Dunkin’ Donuts has used to great success in South Korea, incorporating red bean donuts and other local flavors into its menu, according to Erik Wolf, president of the World Food Travel Association.

Starbucks, on the other hand, uses nearly the same décor and menu across its stores around the world, Wolf said. While in some places that would work to the company’s disadvantage, for Starbucks it’s a gold mine because it helps cement their American status in the minds of Korean consumers.

"I think what they've done is take their formula and say, 'Look, people are either gonna love it or they're not,'" Wolf said.

And in Korea, they’ve definitely loved it – so much so that Riley said the company is now using the success of their Korean stores to inform their strategy in nearby countries like China and Japan.

“Seoul has definitely been a great example for us in the China-Pacific region that we hope we can emulate otherwise,” Riley said.

Image:
In this May 31, 2014 photo, a woman holds a coffee drink outside a Starbucks. Gene J. Puskar / AP