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Feeling the pressure from low-cost coffee brands… The Coffee Bean resorts to '50% discount'

[비즈한국] The Coffee Bean is currently offering a 50% discount on beverages at select locations. As a chain known for being one of the most expensive among domestic coffee franchises, The Coffee Bean’s move toward a "half-price sale" appears to be a desperate step to survive the aggressive competition from low-cost coffee brands.

Offering "Half-Price on All Beverages"

The Coffee Bean’s Kyung Hee University branch in Dongdaemun-gu, Seoul, was bustling with customers from the morning. More than ten tables on the second floor were already occupied, and there was a steady stream of customers visiting to order drinks for takeout. A customer met at the store that day said, "I come out to have coffee with my neighborhood friends in the morning. I used to go to Starbucks, but these days I come to The Coffee Bean because they are running a discount promotion."

The Coffee Bean’s Kyung Hee University branch is holding a 50% discount event on all prepared beverages. Based on a regular size, an Americano (regular price 5,500 KRW) is priced at 2,750 KRW, and a Cafe Latte (6,400 KRW) can be enjoyed for 3,200 KRW. The Coffee Bean's popular menu item, the Hazelnut Americano (6,000 KRW), is also being sold for 3,000 KRW, while the newly launched Gochang Watermelon Juice (6,500 KRW) is 3,250 KRW and the White Chocolate Black Diamond (7,800 KRW) is 3,900 KRW.

There are no special conditions to receive the discount. Customers can still earn "Purple Stamps" while getting the 50% off, and the discount is available throughout business hours on both weekdays and weekends. A store employee stated, "We have been running this discount event since mid-June. A specific end date for the event has not been set yet."

It has been confirmed that since the beginning of this year, The Coffee Bean has been running half-price beverage promotions centered around certain stores. Starting with the Pyeongtaek Sosa branch in January, the event is currently being held at locations including the Kyung Hee University, Hankuk University of Foreign Studies, Sangbong Station, Jangan, Bundang Seohyeon, Bundang Plaza, Eungam-dong, Dongtan Time Terrace, Daegu 228 Park, Songpa Helio City, Chuncheon Onui, Sanbon Station, Ilsan District Office, and Ilsan Western Dome branches.

The participating stores are located in university areas where foot traffic decreases during school vacations, or in districts with heavy competition due to a high density of coffee brands. Even some newly opened stores are subject to the promotion. On the other hand, office-district stores that generate stable revenue were excluded.

A representative from The Coffee Bean explained, "We are offering a temporary 50% discount on specific manufactured beverages at select stores. This is a promotion aimed at providing new and diverse benefits to our customers," adding, "We are selecting different participating stores based on the diverse commercial districts and customer demographics of each region."

The discount stores are clearly seeing the effect of increased customer visits. A frequent visitor to The Coffee Bean’s Dongtan Time Terrace branch said, "The discount started in April, and it’s still going on after three months. They previously only did it on weekdays, but now it has been extended to the weekends as well," and added, "There weren't many people in the store before, but it seems there are a lot more customers since the discount began." A Coffee Bean official also noted, "Some stores have seen results such as increased foot traffic and rising sales. Future plans for discount events are undecided."

Will customers who left for low-cost coffee return?

The Coffee Bean is considered a high-end brand among domestic coffee franchises. A regular-sized Americano costs 5,500 KRW, which is 1,000 KRW more expensive than Starbucks (4,500 KRW). The price gap with low-cost coffee brands is even larger; Mega Coffee and Compose Coffee sell an Americano for 1,500 KRW, making The Coffee Bean more than three times as expensive.

While The Coffee Bean had secured loyal customers through its premium strategy, its growth began to decline from the mid-2010s. In particular, profitability plummeted during the COVID-19 pandemic, leading to consecutive losses starting in 2020. Although the company returned to profit in 2022, profitability dropped significantly last year, heightening the sense of crisis. The Coffee Bean Korea's revenue last year was 158 billion KRW, a 2.9% increase from the previous year (153.5 billion KRW), but operating profit was 1.5 billion KRW, a decrease of approximately 38% compared to 2022 (2.5 billion KRW).

With the recent rise in preference for low-cost coffee due to high inflation, the sense of crisis at The Coffee Bean is deepening. The number of The Coffee Bean stores has been steadily decreasing since 2019. The number of stores fell from 291 in 2019 to 278 in 2020, 256 in 2021, and 241 in 2022. As of the end of last year, the store count was 228, but closures have continued in the first half of this year, bringing the current number down to 225.

Industry insiders analyze that The Coffee Bean has turned to aggressive discounting as it loses ground to the surge of low-cost coffee brands. While The Coffee Bean has provided discount coupons for specific drinks to members or offered discounts during certain time slots like morning or evening, this is the first time it has initiated a 50% discount on all beverages.

Lee Eun-hee, a professor of consumer science at Inha University, said, "Through discount events, The Coffee Bean can create an opportunity for customers who left for the low-cost coffee market due to price barriers to return. Even those who sought low-cost coffee because of the low price would find it worth using The Coffee Bean if it’s half-price."

However, it is uncertain whether customers brought in by temporary discounts can be turned into regular patrons. Professor Lee explained, "As consumers drink coffee more frequently lately, there is a growing tendency to look for coffee in lower price ranges. Given its brand image, The Coffee Bean cannot just lower its prices indefinitely," adding, "They might be using the 50% discount to attract customers who left for low-cost coffee, and then gradually adjust the discount rate in the future to try and retain them."

The Coffee Bean plans to focus on securing profitability by continuing to open new stores and planning further promotions. A Coffee Bean representative stated, "We are planning new store openings in the second half of the year. We will continue to release various new products and conduct promotions."