Successful Korean coffee retail cafe chains like Caffe Bene and Paris Baguette already have dozens of locations within the United States and are eyeballing thousands of units in the next decade. What makes these brands so appealing to American consumers and can they beat Starbucks at the game it invented?
Read my comments in today’s CNBC article, “Korean coffee chains look to fill America’s caffeine fix.”
There’s a good chance that the java you drank this morning was not quite all-American. Korean coffee chains have been ramping up their efforts to expand in the U.S. market, threatening to give the coffee industry a bit more than a morning jolt.
Korean coffee heavyweights such as Caffe Bene and Paris Baguette first started setting up shop in the U.S. almost decade ago, but they are just now beginning truly to take hold of the American market—and American taste buds.
In the U.S., Caffe Bene and Paris Baguette currently operate 50 and 37 cafes, respectively, mainly on the East and West coasts near major cities like New York and Los Angeles. Tous les Jours, a French-Asian bakery, has a respectable 31 stores across the country, including four across Georgia. Another major Korean chain, Tom N Toms Coffee has just 10 stores, all in Southern California.
Taking on Starbucks, one cup at a time
That’s well over 100 Korean coffee shops across the country—an impressive number considering that other foreign imports, such as Israel’s Aroma Espresso Bar haven’t fared as well. What appears to be making these Korean coffee shops so successful, for starters, is that they’re not all that Asian.
“The brand proposition that they’re offering has a very American feel to it, which makes it very easy for the American consumer to accept,” said Andrew Hetzel, coffee industry specialist and owner of Cafemakers, a coffee consulting firm.
One thing that all of these Korean companies share is their Western inspiration. When you enter a Caffe Bene, you’re not about to find bibimbap or bulgogi—although you might be able to get Asian snacks like shaved ice or bubble tea. Instead, what you’re more likely to find are Belgian waffles and French croissants—and lots of coffee.
And while the shops’ menu items may have a decidedly European flare, these offerings and the cafes’ decor likely will transport the American consumer back to a time when coffee wasn’t so grab-and-go.
“What they’re offering is really getting back to the roots of the American coffeehouse concept, which was a location that is welcoming and has a substantial menu of pastries,” Hetzel said. “This is something that coffeeshops have gotten away from because it’s really less profitable than selling coffee specifically.”
While American brands in recent years have embraced their brews and shied away from the snacks, Korean coffee shops are still very much places to stay and hang out, Hetzel said. Still, coming to the U.S. wasn’t all about transporting a well-worn concept from South Korea.
“With the menu and everything, we do localization, which is the most important thing to be successful in the American market,” said Jason Lee, marketing manager for Caffe Bene. “We changed everything except the Caffe Bene brand.”
Of course, the Korean chains don’t do everything the same way. When it came to choosing where to build their first American outposts, very different strategies emerged. For Paris Baguette, it was all about setting up testing grounds in heavily Korean communities in the U.S., hoping to tap their familiarity with the brand.
“The reason we expanded into the Korean market is because we wanted to test out whether this would work in an American market,” Paris Baguette’s director of marketing Jessie Sou said.
Caffe Bene, meanwhile, took a different, perhaps bolder, approach by setting up shop in Times Square. This, Lee said, helped the company to build its identity among Americans overall. That strategy has helped it attract franchisees who will help grow the company’s U.S. footprint.
Despite their differences, the two strategies have worked, and the likelihood you’ll visit a Korean-born coffee shop is only going to grow. Caffe Bene is looking to have up to 100 locations by the end of next year, according to Lee. By the end of this decade, Lee said the chain is looking to have over 4,000 locations in the U.S. Similarly, Paris Baguette plans to have around 1,000 American shops by 2020, Sou said.
Ironically, according to Hetzel, the growth could spell good news for Starbucks and its tens of thousands of locations worldwide. As the coffee consultant explained, the coffee sector is hardly a zero-sum game.
“There’s actually quite a bit of elasticity in this market,” Hetzel said. “So head-to-head competition in the coffee sector tends to be actually quite good because it makes more coffee drinkers.”
And given these companies’ ambitions, that’s good news for everyone, whether you’re a Starbucks fan or a Korean coffee devotee.