Starbucks Korea: Growth, Challenges, and Future Prospects

Chairman Jung Yong-jin's journey with Starbucks, from its Korean launch to recent challenges, reflects the company's significant impact and evolving strategies.

### The Evolution of Starbucks in Korea: From Luxury to Everyday Necessity
* ☕️  Starbucks entered the Korean market 25 years ago, initially seen as a luxury item more expensive than a meal like jjajangmyeon, but it has now become a **ubiquitous part of Korean daily life**.
* 🌐  Inspired by the success of Starbucks in the U.S., Shinsegae Group's Chairman Jung Yong-jin brought the brand to Korea, opening the **first store in front of Ewha Womans University in 1999**.
* 📈  Despite facing challenges during the IMF crisis and anti-imported goods movements, Starbucks Korea has grown significantly, with over **20,000 partners** and annual sales of **nearly 3 trillion won**.
* 🤝  The joint venture with Starbucks' U.S. headquarters ended in 2021, with **Shinsegae Group's E-Mart becoming the largest shareholder**.
* 🔍  The company faced controversies, including a recall incident and criticism over social media posts, leading to a **drop in stock price** and a **boycott**.
* 💼  Despite these setbacks, Starbucks Korea recorded its **highest sales ever in 2021**, but the operating profit margin dropped to **4.7%**.
* 🏞️  As E-Mart faces challenges, including recording an annual deficit for the first time, Chairman Jung Yong-jin is implementing new management strategies, including **cutting back on social media and hobbies**.
* 🔮  The future of Starbucks Korea remains uncertain, with questions about its **relationship with the U.S. headquarters** and how it will **adapt in a changing market**.

Do you remember the topic you first covered when you started spending money four years ago? The top topic that beat the luxury of all luxuries, Hermes, was Hyundai, and the dream comes true. In 2002, it wasn't the World Cup, but the success story of Elon Musk from Tesla had the highest views. The first item is something many people think of when they think of coffee. Four years ago, it was at the top of the world, with many stores domestically. But now, it has taken another step up, almost surpassing one more. It was originally famous for not changing much, but there have been significant changes here in the past four years. I'm trying to update the first topic. The U.S. headquarters' stake has completely disappeared, and Shinsegae Group's E-Mart has become the largest shareholder. Also, there have been various attachments that weren't there before. Lately, due to the poor performance of the parent company, there are rumors of selling off shares.

No, this is not what they sell here. Such stories have also come up. At first, when it came into the country, there were even comments like, What kind of coffee is more expensive than a meal like jjajangmyeon, it's a luxury item. It's almost like a typical lunch now. That was 25 years ago, but let's take a closer look at the process of how it first came in. Now, jjajangmyeon is more expensive. There are even more expensive coffees here. Hello, I'm Shin Jae-woong, a journalist. I've worked with Hyunyong as both a senior and junior, and I will work hard with all of you to create better consumer money in the future. So, this week's topic is about a company in Korea that attracts 1 million visitors a day and sells more than 100 million cups of americano a year, which is the number one coffee shop in Korea that traces back to the study abroad days of Chairman Jung Yong-jin of Shinsegae. [MUSIC] Starbucks. This is what a leader like this looks like to me.

It's not easy, right? Whether you are a conglomerate or a celebrity, SNS was sincere, so you were evaluated as a great communicator like a close neighborhood friend, or received other evaluations. Your hobbies, leisure activities, and interests were always hot topics. Anyway, Chairman Jung Yong-jin, also known as Yongjin Hyung, separated from wealth after 18 years and was promoted this year. In terms of age, compared to other top executives, he was a bit late. Samsung's Chairman Lee Jae-yong became a top executive the year before last, and Hyundai Motor's Chairman Chung Eui-sun became one in his late thirties in 2020. SK's Chairman Chey Tae-won and LG's Chairman Koo Kwang-mo reached their forties, so in any case, leading various affiliate companies such as E-Mart, SSG.COM, Market, Starbucks, Starfield, and Shinsegae Construction would seem like a heavy burden on their shoulders. Today, among the various brands of Shinsegae, I will only talk about Starbucks. Chairman Jung Yong-jin, who was born as the eldest son of Samsung's Chairman Lee Byung-chul, and Chairman Lee Jae-yong, who was born as the eldest son of Chairman Lee Kun-hee, agree on this.

My cousin, who was born in 1968, is a bit peculiar. He graduated from the same school from elementary to high school with a three-month age difference. He was a strict father to the children of the late Hoam Lee Byung-chul, who was the chairman of Samsung and the brother-in-law of Chairman Jung Yong-jin, but he was a kind grandfather to his grandchildren. Even though he truly appreciates humanities, he says he hasn't deeply read many books. To become a great leader, he believes that it's important to broaden one's understanding of human beings, more than just knowing management theories. He recommends studying humanities for this reason. Influenced by this, both of them entered the Humanities Department at Seoul National University side by side. The competition rate for Western History, Eastern History, and Western History was slightly higher. After completing his undergraduate studies, Lee Jae-yong earned his master's degree in Japan and his Ph.D. in the United States. Jung Yong-jin attended undergraduate school for only a year and then went to the United States for further studies. It is said that this was the intention of Chairman Lee Myung's mother.

In Korea, we'll stop talking about Starbucks, which is not here. Let's talk about it later. Originally, the background of our country's coffee culture was cafes. Starting with 2, which was opened by Shin Ee-sang, there were two Sparrow Lecture Rooms at the 25th Physics Building of Seoul National University, also known as the University Road Haglim Dabang. At that time, the menu was simple and stylish. If you wanted something a bit fancy, you could have black coffee or something like egg yolk. I haven't tried it. Oh, I haven't tried it. How many were there? In the early to mid-90s when I went to the U.S., there were about 30,000 to 45,000 Dabang stores nationwide. At that time, instant coffee was popular. Coffee was separate, sugar was separate, and cream was separate. There were also coffee mixes for convenience. The first place to invent this was Dongseo Food in Korea. Recently, the founder of Baedal Minjok, Kim Bong-jin, called mixed coffee the Korean soul drink.

There are memories of the coffee vending machine, and there are memories of the coffee vending machine, too. Light-pocketed office workers or students would gather in front of the vending machine, insert 100-won coins, and enjoy coffee. There were various options like premium coffee and special coffee, but I didn't really know the difference. For those who couldn't drink coffee, there were alternatives like herbal tea and cocoa. At that time, indoor smoking was allowed, so people would smoke in front of the vending machine. Later on, going back to the United States, Yoon Yong-jin, a student from a country deeply connected to coffee, experienced a whole new world of coffee. Not only the taste of the coffee but also the sophisticated interior, lining up to place orders, paying first, and the takeout culture amazed him. It was the time when Starbucks was explosively growing, with the number of stores in the U.S. increasing from 1,000 in 1991 to 5,000 in just five years, even expanding to airports and hotels.

Every time a newcomer like this comes in, around the time Jung Yong-jin graduated from Brown University in the U.S., the U.S. economic magazine, Forbes, featured the face of the Starbucks CEO on its cover and titled it Starbucks Turns Coffee into Gold. Seeing all this, Jung Yong-jin, who had just entered the company after working at Samsung C&T, was promoted to a planning team manager at Shinsegae. At that time, Shinsegae established a secret Starbucks domestic launch project team. Oh, what was the operation name? It was the Shinsegae Shinsegae Project. They selected five elite members and sent them to the U.S. Seattle headquarters for three months of intense training. Among them, there was a person who later created Hollys Coffee, led the cafe van, and was called the coffee king. They started at 5 a.m. and worked until 8 p.m., receiving some kind of mental training as well.

We learned about the values, vision, and so on, and although it was tough physically, everyone was excited about the dream of a new business. By the way, talking about Hollys Coffee, it is said that the name Hollys was derived from the name of a female employee at the Starbucks Seattle headquarters who always made people around her happy with a smiling face. At that time, according to books and interviews, there are many stories that this name was brought in by the chairman's order to create and bring in a team. So, we should consider that the entire organization's energy was mobilized. At that time, various domestic companies here jumped in to secure the hot Starbucks franchise. Companies like Miwon Group, which created the first corporate coffee shop, Nice Day, including the current Daesang Group, competed for it. Shinsegae emphasized the strengths of a distribution company as much as possible, and finally, in October 1997, they signed a contract with Starbucks.

Originally, we were planning to open the first store in Gangnam just a few months later. However, at that time, the IMF crisis broke out, followed by the wave of anti-imported goods movements due to the aftermath of the IMF crisis. Traditional tea became popular, saying, Let's drink traditional tea instead. However, it was unfair for the coffee industry because even things like dandelion tea and mulberry tea are 90% imported. As these unfavorable situations continued, the project was indefinitely suspended and faced a crisis. We need to find a breakthrough. Originally, we had a trademark licensing agreement with Essenso, but we changed direction to a joint investment. Since the Korean won was plummeting, it was also an investment opportunity from abroad. From Shinsegae's perspective, a lot of money went in while restructuring, so let's try to reduce costs. By doing so, both sides each invested 100 billion won, forming a joint venture company, Starbucks Korea.

We established it, but the opening time of the first store was delayed, and the location changed from Gangnam to in front of Ewha Womans University. At that time, the area in front of Ewha Womans University was full of youth, and it was a major commercial area where university students led trends and fashion. Also, from the mid-1990s, there was a sharp increase in university students going to the U.S. and Canada for language study and exchange programs. Just last semester, 250 students left. Articles like this were coming out. However, the landlord of the Ewha store initially opposed Starbucks' entry, saying they would open a café in that upscale building. It was absolutely impossible to open it on the first floor. Nowadays, it's not surprising. There were talks about the value of the location and such. Anyway, after repeated persuasion, in July 1999, we launched the first store in Korea. Exactly. It seems younger now, right? Yes, it looks even younger now.

I heard that in the early days of The Rayne, all Starbucks employees would come to work carrying coffee cups, and even the CEO would walk the streets carrying a coffee cup every time he went out. There were even employees who would wander around various places in downtown Seoul holding coffee cups. It was said that dressing up nicely and establishing a takeout culture was one of their strategies. Coincidentally, when the movie You've Got Mail was released in Korea, the scenes of the main characters walking the streets of New York with Starbucks coffee cups seemed fresh and cool. Anyway, after the emergence of Starbucks, the takeout culture began to take root. Among the books related to Starbucks, I found this passage impressive: With Starbucks as a turning point, the consumer base of coffee shifted from men to women. In the era of traditional coffee shops, women were the objects of coffee consumption rather than the subjects. However, Starbucks changed everything.

I have changed it. Since childhood, the younger generation who were exposed to foreign cultures early on have often imported items they liked from studying abroad or visiting overseas. Brands like Friday Bennigans, On The Border, Tony Roma's, and Dr. Robin have had cases where they did well until the trend ended and disappeared. Among them, Starbucks, which Chairman Jung Yong-jin suggested and Shinsegae drove forward, was outstanding enough to say it changed the culture. They seemed to have an excellent sense of reading trends. Have you heard of the term third place? An American urban sociologist said the first place is home, the second place is work or school, and the comfortable space for resting or recharging is called the third place. It seems to be becoming more and more important, and Starbucks made it more valuable and sold it. Only direct stores.

The insistence was an intention to uphold those common values. Everywhere, familiar coffee and a similar cozy atmosphere were present, while also adding a Korean touch. In Insa-dong, they put up signs in Korean, and in Gyeongju, they even used traditional tiled roofs and cultural heritage as interior motifs. Some places were officially called Byeoldabang. There were many menus made from local specialties. As a trend business, ideas were crucial. They introduced the drive-thru order system, inspired by the U.S., where customers could order via smartphones. Services like Call My Name also received great responses. They gathered car enthusiasts in Korea by offering the My DT Pass for purchasing drinks while in the car, installing outlets in stores, and providing free Wi-Fi. They succeeded in monetizing MD products that were initially souvenirs. They were particularly successful in commercializing items like diaries.

The MD products were popular, and internally, programs for women restarting their careers after a break and hiring disabled baristas received high praise. In 1999, we opened the first store with 40 partners, and now it's well over 20,000. I firmly believe that the most basic social responsibility of a company is job creation. In fact, it is widely said that in Starbucks, the CEO role was more significant than the owner's role in its growth. There are talks of the management style coming down from Samsung's Lee Byung-chul. He was the mentor for over ten years while being the CEO of Starbucks, and even now, he holds the record for the longest-serving CEO in Shinsegae. His management philosophy resonates with me. We think of ourselves as not just in the coffee business but in the people business. By aligning all aspects of the business with human-centered values, we elevate customer value and respect employees who serve customers. Through this, we believe we will achieve mutual growth.

After 20 years of entering the market, a significant change occurs. Earlier, it was mentioned that a joint venture was established with a 50-50 ownership split. Their partnership comes to an end in July 2021 when the U.S. headquarters completely divests its 50% stake. Shinsegae Group's E-Mart acquires an additional 17.5% stake, becoming the largest shareholder. The decision was led by Chairman Jung Yong-jin. However, after the U.S. headquarters divested its stake, various issues arose. They promised to give out all Daehyung cups, but from the start, people flocked in overwhelming numbers, making it unbearable. There were even truck protests at that time. I also directly conveyed the voices of these people during the Sabu era, and the CEO immediately apologized. Subsequently, controversies arose over Chairman Jung Yong-jin's social media posts. The stock price dropped, leading to a boycott, and criticism emerged for not taking ownership of the risk. They said to refrain from doing bad things, but then did them again. Therefore, there were criticisms of not taking responsibility. They were advised to be cautious, saying that a crisis is coming soon, and soon, the bad news broke out.

The Caribou Wind Material Incident was the deciding factor, and with the recall incident, they suffered nearly 50 billion won in operating losses, dealing a big blow. The CEO was summoned to the National Assembly audit and was dismissed. So, 2020 was a tough year. Despite these setbacks, Starbucks recorded its highest sales ever last year. In its first year of business, sales were 600 million won, but it grew to nearly 3 trillion won after 25 years, an increase of 12.9% from the previous year. During the same period, operating profit also increased by 14.2%. The problem is that the operating profit margin, which was 10% in 2021, dropped to 4.7% in 2022. Also, they practically failed to rebound last year. As the U.S. headquarters lost its color, there were talks about whether it was becoming like an E-Mart Hwajeong branch. Despite maintaining a 5% royalty payment, there were concerns about purchasing coffee beans and interior design.

We are in discussions with the headquarters, and so far, no significant changes have been detected. However, our parent company, E-Mart, is still facing significant challenges amidst the onslaught of competitors. They recorded an annual deficit for the first time last year, leading to hope for voluntary retirement from the founding day to the sale of subsidiaries. Although E-Mart denied this, Chairman Chung Yong-jin declared an emergency management and is showing a completely new way of innovation by changing himself first. He abandoned his heavy presence on social media, deleted posts with negative feedback, cut back on golf, a hobby, by extending work hours, and stopped frequent visits to the baseball field. Just by looking at the articles, you can feel the determination. Now, as Starbucks Korea celebrates its 25th anniversary this year, what will its future hold?

Through various changes, what kind of Starbucks will we see on its 50th and 100th anniversaries? Will it firmly maintain its position as the industry leader as it does now? Also, how will Chairman Jung Yong-jin's endeavors, who brought Starbucks to Korea and proudly claims to be a fan, unfold? Will he be able to maintain the status of the original pick he had during his study abroad days? Let's watch together. Rather than the soft coffee aroma, when you open the window, the expectation you had sat down for [MUSIC] Don't be tired eyes, low.

스타벅스 편 4년 만에 업뎃! 한국 스벅 근황 / 소비더머니

브랜드에 얽힌 사람과 돈, 그리고 세상의 변화.
하지만 소비더머니를 통해 전하고 싶은 것은,
'이야기' 그 자체입니다.


* 문의  
brandstory@mbc.co.kr


소비더머니

The Transformation of Starbucks Under Chairman Jung Yong-jin's Leadership

Starbucks in Korea has undergone significant changes in the past four years, with E-Mart becoming the largest shareholder and rumors of selling off shares due to the poor performance of the parent company.

The company, once considered a luxury, has now become a daily essential with more expensive coffee options than ever.

Under Chairman Jung Yong-jin's leadership, Starbucks has become a top brand in Shinsegae's portfolio, following in the footsteps of other top executives in leading various affiliate companies.

The Journey of Coffee Culture: From Korea to the United States

A prominent figure in Korea's coffee culture had experiences with coffee both in Korea and the United States.

In the early 90s, Korea had a significant number of Dabang stores and a unique coffee vending machine culture.

made a profound impact on this individual's perception of coffee.

The Birth of Hollys Coffee and the Starbucks Franchise in Korea

Jung Yong-jin, a former Samsung C&T employee, played a key role in the launch of Starbucks in Korea, which faced challenges during the IMF crisis.

The name "Hollys Coffee" was inspired by a beloved female employee at Starbucks' Seattle headquarters, reflecting the chairman's vision for the brand.

Despite economic difficulties and a suspended project, Shinsegae restructured its agreement with Starbucks, leading to the formation of Starbucks Korea through a joint venture.

The Impact of Starbucks on Korean Culture

Starbucks' first store in Korea faced location and opening time challenges but eventually launched in front of Ewha Womans University.

The introduction of Starbucks in Korea influenced the takeout culture and shifted the consumer base of coffee from men to women.

The chain's success was driven by a keen sense of reading trends and creating a valuable "third place" for people to rest and recharge.

Starbucks in South Korea has integrated Korean elements into its stores while also introducing American-inspired innovations.

The company has successfully expanded its business, focusing on job creation and social responsibility.

However, a significant ownership change and a series of controversies, including social media posts and stock price drops, have impacted its reputation and led to criticism of its risk management.

Starbucks Korea's Challenges and Future Prospects

The Caribou Wind Material Incident led to a significant operating loss for Starbucks Korea and the dismissal of its CEO.

Despite these setbacks, the company achieved its highest sales ever in 2021, but faced a drop in operating profit margin in 2022.

Meanwhile, Starbucks' parent company, E-Mart, is also struggling, recording an annual deficit for the first time and facing challenges amidst competitors.

Chairman Chung Yong-jin is leading innovation efforts through personal changes and a new management approach, raising questions about Starbucks Korea's future and his impact on the company's direction.