Starbucks Korea trails Two Some Place for fourth straight month, but gap narrows sharply

Estimated card payments Aug. 1-28: Two Some Place tops at 107.7 billion won, Starbucks at 105 billion won

Gap shrinks from 20.3 billion won in June to about 2.6 billion won in August

Starbucks eyes second-half comeback with fall and year-end promotions

A Starbucks store in downtown Seoul. [Herald DB]

Starbucks Korea finished behind Two Some Place in estimated card payments for the fourth consecutive month in August, though the gap between the two coffee chains narrowed sharply. The question now is whether Starbucks can reclaim the top spot before the lucrative year-end season.

According to Mobile Index, a big data platform operated by IGAWorks, Starbucks Korea's estimated credit and debit card payments from Aug. 1 to Aug. 28 totaled 105.07 billion won ($76.5 million). Two Some Place recorded 107.73 billion won over the same period. Starbucks has ceded the No. 1 position to Two Some Place every month since May, when a marketing controversy first erupted. In July, Two Some Place led with 118.89 billion won against Starbucks' 109.32 billion won.

Industry observers point to two main causes: a consumer boycott that drew political attention following the marketing controversy, and a pullback in new promotional campaigns. Starbucks' summer promotions were delayed by about a month and limited to food, beverage and merchandise items starting in late June. Its signature summer event, the "Summer Frequency" loyalty program, was scrapped entirely.

The damage showed up in second-quarter earnings. According to disclosures filed by E-mart, SCK Company — the operator of Starbucks Korea — posted net sales of 747.3 billion won in the second quarter, down 6.1 percent from a year earlier. The company swung to an operating loss of 18.4 billion won, compared with an operating profit of 40.3 billion won in the same period last year — a swing of 58.7 billion won. Operating profit also fell 47.7 billion won from the 29.3 billion won recorded in the first quarter of this year.

The gap between the two chains has been closing rapidly. The estimated payment gap between Two Some Place and Starbucks peaked at 20.3 billion won in June, when Two Some Place recorded 120.68 billion won and Starbucks 100.39 billion won. By July the gap had narrowed to about 9.5 billion won, and for the Aug. 1-28 period it shrank further to roughly 2.6 billion won.

Meanwhile, estimated payments at Mega MGC Coffee — the top budget coffee brand — edged down over the same stretch. Mega Coffee's payments from Aug. 1 to Aug. 28 came in at 89.52 billion won, below the 96.84 billion won recorded in July. "After the 'Tank Day' incident, demand that had drifted away due to the boycott and aggressive marketing by rivals appears to be gradually returning," an industry official said. "Price increases by budget coffee chains likely played a role as well."

Within the industry, there is growing talk that Starbucks could reclaim the top spot in the second half of the year. The company is expected to run its Frequency loyalty event and other second-half promotions as usual ahead of the Christmas and year-end peak season. Starbucks Korea launched its fall season and Chuseok gift promotions on Friday, and this month it partnered with KB Kookmin Bank to release a linked bank account that offers rewards when customers pay through the Starbucks app.

Two new fall-season beverages from Starbucks Korea's autumn promotion, which launched Friday. [Starbucks Korea]

soho0902@heraldcorp.com