Budget coffee franchises in South Korea are expanding beyond coffee and desserts into food items such as tteokbokki and chicken as they seek to boost profitability.
The move comes as the low-price coffee market reaches saturation, prompting brands to differentiate their menus to increase store visits and raise average transaction values.
Mega MGC Coffee will begin selling "MGC's Seasoned Cup Chicken" at stores nationwide from Dec. 12, the company said. The product, which was first introduced at select company-owned stores on Nov. 25, is priced at 4,400 won ($3.10) for 1.5 servings.
Mega MGC Coffee has been steadily increasing its non-beverage offerings, including shaved ice cups in summer and "Ramyeon-ddang" as a winter limited menu item in November last year.
Compose Coffee launched "Chewy Bunmoja Tteokbokki" on Nov. 10, strengthening its snack food lineup. The product sold more than 140,000 units within two weeks of launch and sold out at some locations, according to the company.
Ediya Coffee introduced winter limited items including bungeoppang (fish-shaped pastry), hotteok, corn cheese egg bread and corn glutinous rice bread. Paik's Coffee has also expanded its snack menu with bungeoppang.
Industry analysts attribute the menu expansion to the "high volume, low margin" business model of budget coffee chains. Rising international coffee bean prices and a weaker won have increased costs, while prices for milk, cups, syrup and other supplies have also climbed. Combined with minimum wage increases and rent burdens, profit margins per cup have been shrinking.
Intensifying competition from rapid store expansion has also been a factor. Major brands have aggressively opened new locations, pushing competition in commercial districts to near saturation levels.
The number of coffee shops in South Korea rose 19.1% to 107,055 last year from 89,892 in 2020, according to the National Data Agency. During the same period, stores operated by the four major budget coffee brands—Mega MGC, Compose, Paik's Coffee and The Venti—surged 242.3% to 10,782 from 3,150.
Ready-to-eat items like tteokbokki and chicken are seen as realistic alternatives in this environment. Simple preparation and manageable ingredient costs make them attractive options for generating additional revenue.
"The budget coffee market has reached a point where price competition alone is no longer viable," an industry official said. "Menu expansion has effectively become a survival strategy."
