Prior to the emergence of the pandemic, demand for RTD coffee through off-trade had been positive but undynamic with slowing volume growth noted towards the end of the review period. This was largely due to the strong café culture developing in the country because of rising sophistication, which had seen increasing demand for freshly brewed coffee from specialist coffee shops, driven by younger, urban consumers who are more open to experimenting with different blends and types.
Driven by health and wellness trends, reducing caffeine from one’s diet has become increasingly important to South Koreans. Specialist coffee shops had already responded to this trend by introducing decaffeinated coffee to their menus, which resulted in increasing consumer awareness of alternative options for coffee with reduced caffeine content whilst still delivering an appetising experience.
Lotte Chilsung Beverage retained its leadership of RTD coffee, although it continued to come under increasing pressure from a number of competitors and smaller players under “others”, resulting in share loss in both off-trade volume and value terms. Nevertheless, the player’s Cantata brand continued to experience double-digit volume growth in 2020; responding to consumer demand for larger packaging which offers greater value for money, it introduced bigger formats including a 390ml plastic cup and 500ml PET bottles.
Despite the likelihood of some consumers returning to on-trade establishments such as specialist coffee shops to enjoy freshly-brewed coffee prepared by a barista over the early part of the forecast period, a certain level of price sensitivity will prevail, further driving demand for reasonably-priced RTD coffee and therefore support ongoing demand for this category through off-trade. Greater exploration by players to offer decaffeinated or flavour variants could help to further expand the category’s potential.
South Korean consumers are increasingly set to continue to search for larger formats of RTD coffee, with 2019 and 2020 witnessing multiple large packaging launches up to one litre, with this trend predicted to continue into 2021. Such a high preference is supported by the rapid development of diverse packaging formats including PET bottles, plastic cups and pouches.
Convenience stores is likely to remain the dominant distribution channel for RTD coffee in South Korea, with sales remaining fairly stable even during the pandemic, although e-commerce is a popular alternative offering greater convenience in terms of home delivery for larger formats. Sales of RTD coffee through convenience stores however, will resume impulse purchase occasions for on-the-go consumption over the forecast period, whilst offering attractive price promotions such as buy-one-get-one-free or buy-two-get-one-free, making them more affordable in comparison to hypermarkets.
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This report originates from Passport, our RTD Coffee research and analysis database.
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