Thursday 30 March 2023

Rising international coffee prices pressuring the South Korean market

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SEOUL, South Korea Rising international coffee prices this year could hit South Korea soon, industry officials said Tuesday, although major franchises and coffee companies say they have no immediate plans for a markup.

The International Coffee Organization (ICO) in its October report noted the significant rise in coffee prices, with Robusta, used mostly for instant coffee, increasing 30.1 percent compared to last year.

Arabica, used by Starbucks and other brands of premium coffee, is priced 30.1 percent higher than last year.

The prices have been driven by serious droughts in major coffee producing nations like Vietnam and Brazil, coupled with increasing demand in developing countries, including China.

Industry officials say firms and franchises have purchased their coffee through futures contracts that will last for up to a year and help keep the local coffee price stable. When coffee prices continue to rise, however, there will be pressure for a hike, they say.

Starbucks has already marked up its coffee prices in China and the United States this summer. It hasn’t raised its prices in South Korea for over 28 months after the last hike in 2014.

“It is true that there are factors for a price increase, such as the price of coffee beans, monthly lease fees and employment costs,” an official at Starbucks Korea said. “At this point, however, we are not considering a price hike.”

“Most of the coffee beans at our stores have been purchased through futures contracts. The international price increase is not necessarily immediately reflected in our products,” he said.

Namyang Dairy Products Co. and Maeil Co., leading local producers of coffee drinks, both indicated they are not planning to raise prices for now, but industry officials say they are being pressed by poor corporate performance.

“We are looking at the price graph after coffee prices began to rise this year,” said an official at Maeil, the operator of the coffee franchise Paul Bassett. “If this trend continues for the long term, the effect is inevitable.”

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