Hot Drinks in South Korea

COVID-19 impact on hot drinks

The emergence of COVID-19 in South Korea has had a major impact on certain categories within hot drinks in 2020 as a result of the country’s efforts to slow the spread of the virus, including social distancing measures, and travel restrictions. While overall, retail volume sales are set to benefit from work and study from home measures as encouraged by the government, demand for hot drinks through foodservice has notably declined; although many establishments were permitted to remain open, social distancing measures and the initial fear of being exposed to the virus in public spaces significantly reduced footfall through horeca outlets.

COVID-19 country impact

South Korean authorities avoided lockdowns and instead pursued a strategy of early and aggressive mass testing, isolating anybody infected and tracking their movements to locate other people who had come into contact with them. Within two weeks of its first case, the country was producing more than 100,000 test kits per day and it had tested over 600,000 people by early May.

Company response

Dongsuh Foods Co Ltd is set to retain its overall convincing leadership of hot drinks in South Korea in 2020, due to its dominance of the largest category of coffee, and in particular, instant coffee, despite the latter’s waning popularity, offering brands such as Maxim. However, Dongsuh Foods has continued to lose share to competitors including smaller players under “others”, with the level of competition in hot drinks intensifying in 2020.

Retailing shift

While demand for hot drinks through retail during the pandemic increased in South Korea, there was no sign of panic buying or stockpiling, with stable supplies noted for both physical retailers and online shopping channels. While the pandemic has been reshaping the hot drinks landscape, e-commerce has benefited the most by providing greater perceived safety and convenience to consumers in terms of home delivery.

Foodservice vs retail split

Although foodservice outlets were permitted to remain open for the most part, fear of exposure to the virus resulted in significantly reduced footfall, resulting in declining demand for hot drinks through this channel. Coffee shops located near office districts were particularly hard hit due to the closure of offices as a result of government guidelines advising people to work from home, although foodservice establishments in residential areas were less impacted.

What next for hot drinks?

As the country recovers from the impact of COVID-19 and lifestyles gradually return to normality, there is likely to be increased demand for hot drinks through foodservice, in particular, coffee. This trend is set to emerge in 2021, resulting in actual volume sales of coffee through foodservice surpassing pre-pandemic levels the same year, as consumers regain their confidence in leaving the home environment.

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