Updated August. 27, 2014 01:00
Kim Seong-won, 38, who arrived in New York on Aug. 4 for a vacation, was puzzled. His favorite Starbucks Americano was only 2.45 dollars (tall size, 12 ounces). The coffee that he paid 4,100 won (4.01 dollars) in Korea was 1.56 dollars, 62.1 percent, cheaper in New York. He said, I cant understand why a Starbucks coffee in Korea is more expensive than in New York, which is infamous for high prices.
It turned out that a Starbucks coffee in Korea is twice more expensive than the U.S., the origin of the coffee brand, based on Purchasing Power Parity (PPP). When the prices were translated into market exchange rates, the coffee price in Korea was 1.64 times that of the U.S. Among 20 member countries of the Organization for Economic Cooperation and Development, a Starbucks coffee in Korea is the fifth highest among Starbucks coffee prices. The global comparison proved that coffee prices are generally high in Korea. Compared to other Korean coffee shops, the Starbucks coffee price in Korea is ranked sixth. This indicates that coffee prices are high in Korea, and many people say that Korean consumers are sitting ducks.
The Dong-A Ilbo analyzed with the Hyundai Research Institute the prices of Starbucks Americano in 20 OECD countries with the PPP exchange rates on Tuesday. The analysis found that a Starbucks Americano in Korea was 4.85 dollars, sixth among 20 countries, followed by Japan (3.53 dollars, 10th), France (3.51 dollars, 11th), Germany(3.21 dollars, 14th), and the U.K.(2.67 dollars, 16th).
Even when a Starbucks Americano price in Korea was calculated based on market exchange rates, Koreas ranking did not change. Switzerland topped with 6.22 dollars and Austria ranked second with 4.93 dollars but these countries have high prices generally.
Some say that coffees are expensive in Korea due to high rent rather than coffee bean prices or royalties. Starbucks Korea opened its stores in major commercial districts, which made its coffee prices relatively high. For example, there are as many as 15 stores in Myeongdong, a crowded region in downtown Seoul, if the area around Euljiro 1ga station and Shinsegae Department store is included.
According to the electronic filings of the Financial Supervisory Service, Starbucks rent increased by 20.3 percent from 80 billion (78.3 million dollars) in 2012 to 96.2 billion (94.1 million dollars) in 2013. The Korean National Council of Consumer Organizations said, The coffee price is already expensive but it raised the prices again last month. Starbucks is passing its rent to consumers.
Starbucks said, Starbucks coffee prices are set based on customer value or market conditions of each country to be competitive. It is not appropriate to compare prices by country because countries have different operation costs.
The Dong-A Ilbo compared prices of domestic coffee brands in Korea and Starbucks was ranked sixth. Based on the volume equivalent to a tall-size coffee of Starbucks, Paul Bassett was most expensive (5,100 won or 4.99 dollars) followed by The Coffee Bean & Tea Leaf (4,500 won or 4.41 dollars), and Angel-in-us (4,400 won or 4.31 dollars). According to the Korean coffee shop industry, the coffee market increased 7.6 percent from 1.55 billion dollars in 2012 to 1.66 billion dollars last year.
The market grows despite high coffee prices because there is demand from consumers, said Yeo Jun-sang, a business administration professor at Dongguk University professor. High prices reflect the combination of the coffee brand and drinking experience.