In just three years, the popularity of coffee in Korea has skyrocketed. In 2008, the four leading coffee shop outlets had approximately 6,000 locations; by 2011, that number surged 51 percent to 9,400 locations around the country. The percolating popularity of coffee can be measured another way: during the same three-year period, coffee bean imports grew 27 percent. It’s not just cafés that have become more prevalent: Korea’s coffee craze extends to ready-to-drink (RTD) and instant mix products.
Nielsen took a closer look at this burgeoning market to size the sector, get a better sense of where growth opportunities lie and how manufacturers and retails alike can leverage this exciting trend. Convenience stores were the most popular channel for consumers seeking RTD coffee. During the period March 2010 to February 2011, sales of the category in that channel grew more than 30 percent. Mom and Pop stores also saw a sizable increase in category sales, growing 26.4 percent during that period.
Manufacturers have been active in launching new products – more than a dozen each year since 2008. This has driven overall annual sales growth in the category of more than 30 percent (+39.3% 2009-2010, +30.4% 2010-2011). New packaging that is more convenient and easier to carry have also produced strong sales, with RTD coffee in foil/cartons posting a 114 percent sales increase during the one year period ended March 2011, and PET bottles up nearly 57 percent during the same period.
Each of the various coffee formats has role to play for coffee lovers. Canned coffees are primarily selected for their low prices, and consumers tend to be loyal to their brands. Convenience was also an important factor. Drip coffee is chosen primarily for its taste, while low price and variety of flavors also rank highly for consumers. Meanwhile, take-away coffee from cafés is selected primarily for their taste, while the outlets are easy to get to and offer a cozy atmosphere.
There are a number of ways retailers and manufacturers can boost sales in the coffee category:
- Expand packaging and flavor ranges: Research shows that new packaging formats propel RTD coffee sales. Packaging needs to be convenient to carry, maintain the beverage at the desired temperature and preserve the flavor so that it is as close as possible to freshly brewed coffee.
- Locate a café inside stores: Grocers and other retailers should give thought to locating a franchise or other café in the store to compel shopper to stay longer by providing a convenient place to relax.
- Ensure retail displays catch shoppers’ attention: Previously, RTD cans and cups were displayed by brand, with various flavors and containers adjacent to each other. But different packaging requires different display. Canned coffees should be arranged by price, with promotions on the left and new brands on the right of a shelf, thereby catching consumers’ attention. Cups, on the other hand, should be displayed by flavor horizontally and brand vertically.
“Coffee is all the rage in Korea, and there are no signs that demand is diminishing. But retailers and manufacturers need to continually innovate to keep consumers’ attention, be it through new flavors or containers or how those products are displayed. There’s ample room for growth in the market for those who know precisely what consumers want,” said ChunNam Park, Associate Director, Retailer Services, Nielsen Korea.