W790 coffee touches off price war

A fresh price war among coffee vendors looms as a domestic franchised shop began to sell its standard product at close to one-fifth the market price last week.

Manoffin, owned by popular local pizza franchise Mr. Pizza Corp., offers Hawaiian Kona coffee, one of the most popular brands here, at 790 won ($0.70) per cup.

This price is far lower than its peers from Starbucks, Coffee Bean and other brands ranging from 3,000 to 4,000 won.

Late last year, Lotte Mart, a major retailer, stirred widespread disputes with its short-lived ultra-cheap chicken, which had been well-received by consumers suffering from sharp rises in food prices.

“Since the ingredients cost only 460 won when excluding the rental and interior costs for the store, we’re going with the small-profit and quick-return strategy,” said an official at Manoffin.

The move is expected to send an alarming message to major players criticized for high prices.

In the midst of the dispute over chicken prices, chicken franchise representatives defended themselves by claiming that coffee is sold at prices 24-29 times higher than the raw materials cost.

The number of small and large coffee breweries has been fast expanding in a country where coffee has become one of the most favored drinks for many people.

Starbucks Coffee Korea, a subsidiary of the Seattle-based group, opened 49 new stores last year alone, operating a total of 335 stores in 35 different cities.

Coffee Bean, which was initially introduced here in 2001, has over 190 stores across the nation and the most recently established Caffe Bene has recorded the highest growth rate in the industry in 2010, setting up more than 300 stores in Korea.

(Bloomberg)

The dispute over franchise food prices was initially sparked by E-Mart’s cheap pizza brand earlier last year and developed into a political and social issue following Lotte Mart’s steep discounting of its chicken.

Taking advantage of good publicity for the chicken, Lotte Mart has continued to apply the price strategy to other products such as bicycles, handheld computers and meat.

The company said Sunday that it will hold a 10-day event from Monday to sell premium Korean beef and pork at discounted prices of up to 58 percent.

“We have been promoting the consumption of Korean beef more than our competitors by holding four special events in the past month involving Korean beef since the spread of the foot-and-mouth disease,” said a Lotte Mart official.

“However, we felt it was a shame that such efforts were not recognized and misunderstanding spread instead with last week’s promotional event of marinated ribs from the U.S., which was planned ahead of the disease outbreak.”

At the mart’s event that takes place until Jan. 19, 100 grams of sirloin steak will be offered at 5,700 won, down from 7,480 won, and 100 grams of bulgogi will cost 2,900 won, down from 3,880 won, according to its officials. About 100 grams of pork sirloin will also be available at 500 won, discounted from 1,180 won.

By Cho Ji-hyun (sharon@heraldcorp.com)