Starbucks Coffee Korea forecast to post record-high operating profit

Starbucks Coffee Korea’s operating profit is expected to surpass 100 billion won ($88.6 million) this year if it keeps up its sales posted in the first half this year.

The US coffee giant’s unit in Korea posted 52.8 billion won of operating profit and 593.5 billion won of sales in the first half of 2017, the company said.

If this continues, the company’s operating profit is likely to surpass 100 billion won by the end of the year, as coffee shops usually perform better in the second half, due partly to the end-of-year holiday season that includes Christmas. 

In the first half of 2016, Starbucks Coffee Korea posted 458 billion won in sales and 35 billion won in operating profit. In the second half, the company’s sales increased to 544 billion won and its operating profit to 50.3 billion won.

The coffee giant has continued to expand its market presence here, while other coffee franchise companies continue to struggle with increased competition.

As of end-June this year, Starbucks Coffee Korea has 1,050 stores in the nation, marking a rapid increase from 327 in 2010 and 500 in 2013.

The increase was possible as the company is not affected by the country’s fair franchise practices law. The fair franchise practices law is designed to protect franchise contractors from excessive competition by preventing franchises from opening affiliated stores within a 500-meter radius from a shop of the same brand.

However, Starbucks is free of the regulations because its shops are directly managed by the headquarters. Local coffee franchise branches are usually operated by contractors.

Meanwhile, Korean lawmakers have proposed an amendment on the fair franchise practices law to increase the allowed 500-meter radius to 1 kilometer. 

By Shim Woo-hyun (ws@heraldcorp.com)