[Weekender] Korean startups craft mix of beer and subscriptions

Following the rise of the subscription economy, an increasing number of startups have launched services adopting the new business model. One such startup is Daily Shot, which offers a craft beer or cocktail at a pub for a monthly fee of 9,900 won ($8.70).

Daily Shot includes a drink at partner pubs and bars to customers who sign up for the monthly plan. The average price of a craft beer or cocktail is set at about 10,000 won at Daily Shot, but subscription customers can enjoy a daily drink for just 300 won. 

Daily Shot CEO Kim Min-wook told The Korea Herald that he was originally preparing to launch an online-to-offline service that involves bars and alcoholic beverages. But he soon came to realize that without an innovative business model, an O2O venture could hit limitations in operation.

Kim switched his strategy toward offering “free” drinks in exchange for a monthly fee. And his idea received plenty of attention. The subscription business model was new, but attractive enough to entice both customers and bar operators.

Customers find the service appealing because they are able to enjoy the drinks at such a reasonable price. Many pub and bar owners are also eager to partner with Daily Shot, especially because it helps with marketing.

“For many bar owners, handing out fliers like casual or barbecuerestaurants do for advertising seems a little unfitting for their brands. It is also difficult to know how their customers come to their pubs and bars,” Kim said. “But partners can easily tell which customers come via Daily Shot, and thus check out the marketing results right away.”

With no partnership fee, all pubs and bars have to do is simply offer a welcome drink. 

However, due to concerns about customers who might end their visit with the welcome drink, Daily Shot encourages their users to purchase at least one more drink aside from their free one.

Though the subscription model may sound impeccable so far, some companies that had tried similar services involving alcoholic beverages made strategic retreats. For instance, startup Drinkat, which embraced a paid subscription plan, is now offering only discounts to free registered users.

When asked about the problems with the subscription business, Kim set out both the pros and cons of the business strategies.

“I think it’s a matter of choice,” Kim said. “Receiving commissions and offering discounts can easily garner traffic, but such a strategy entails risks and sometimes unexpected outcomes. Subscriptions can be slow in growth, but instead they are stable in the long run because of fans who become constantly interested in the service.”

Given the startup’s success, however, it appears the subscription business model benefits both bar owners and customers.

“Many consumers prefer a subscription to purchase because they can use the product or service without worrying about maintenance, and easily cancel it whenever they want,” Kim said.

“The subscription model appeals to companies as well because of the stable income. For instance, Adobe and Microsoft have adopted monthly subscription models for their software, and ridesharing companies like Uber and Lyft are also offering monthly subscription plans.”

Kim attributed the growth of subscription-based business to advances in pricing technology. With the introduction of analytical business tools to unlock big data, companies can more easily experiment and expand services that offer unlimited services through subscription plans.

Kim said Daily Shot is currently working with more than 100 pubs and bars in Seoul and plans to expand the service nationwide.

While customers have to go to a Daily Shot-affiliated bar, Veluga is going the opposite path of reaching out to the customers. The startup built upon the subscription business model offers a delivery of craft beer every second and fourth Thursday of the month.

“I first got the idea from the home milk delivery service, only replacing milk with craft beer,” said Kim Sang-min, CEO of Veluga, in an interview. “Craft beer was starting to trend nationwide when we launched our business, so it received great attention from beer lovers and from those who wanted to try new kinds of craft beer but had difficulty in choosing what to drink.”

Veluga focuses on offering a changing mix of carefully selected craft beers and snacks, reflecting changing seasonal trends and preferences. The startup wants to identify itself as a friendly brand emotionally in sync with customers.

By Kim Jee-min (jeeminkim@heraldcorp.com)