Coffee Bean Supply Disruption! Starbucks Suspends Iced Coffee Sales in Some Regions?!

According to a report by the Korea Economic Daily on April 12, due to the impact of the global logistics crisis, Starbucks coffee beans in South Korea have continued to experience delivery delays. Coupled with insufficient existing coffee bean inventory and instability at logistics centers, more than half of Starbucks stores in South Korea have been unable to serve iced coffee.

Due to the recent continuous rise in coffee futures prices and the impact of logistics tensions, Starbucks in South Korea took the lead in announcing price increases for Americano coffee at the beginning of January this year. By the end of February, Starbucks in South Korea began to experience difficulties in coffee bean supply and demand, but this returned to normal by early March. However, by the end of March, a small number of Starbucks stores began to be unable to serve iced drip coffee, cold brew coffee, and packaged coffee beans. As of April 11, more than half of Starbucks stores in South Korea had temporarily suspended the sale of iced coffee (iced drip coffee & cold brew coffee).

Coffee Preferences and Supply Chain Challenges

A representative from Starbucks South Korea stated that the iced coffee menu changes weekly, and its preparation uses cold brew/drip methods to extract light to medium roast coffee beans. Compared to Americano coffee made with espresso beans, iced coffee offers a more refreshing taste and richer layers of flavor. Therefore, iced drip coffee and cold brew coffee are more favored by South Korean consumers. However, this is just a comparison between iced Americano and iced coffee, as other coffee beverages still rely on espresso. In terms of order quantity, espresso beans are needed in much larger quantities than the beans used for making iced coffee.

The coffee beans and other related materials used by Starbucks South Korea all need to be ordered from the American headquarters. Due to logistics shortages, the American headquarters determines delivery priority based on order volume. Therefore, compared to espresso beans, these beans used for making iced coffee require longer waiting times. The representative also mentioned that due to concerns about further shipping delays, some of the espresso beans currently used by stores in South Korea are now being transported by air, which has also increased transportation costs.

Ownership Questions and Supply Chain Structure

In response to this situation, some South Korean consumers have questioned why Starbucks South Korea, despite being acquired by E-Mart, still needs to wait for coffee bean supplies from the American Starbucks headquarters. They ask: can't they procure coffee beans independently?

An industry insider later responded that although Starbucks South Korea has been acquired by E-Mart, its operational model has not changed at all. Starbucks South Korea still needs to pay approximately 5% in franchise fees to the Starbucks headquarters annually. The menu and material supplies at Starbucks South Korea stores must remain unchanged, which is why Starbucks South Korea still needs to order coffee beans from the headquarters. The headquarters also profits from these material orders, which is one of the conditions set by Starbucks headquarters when authorizing franchise operations.

Company Response

Starbucks later responded: "Each company has different roasting methods, and the roasting and supply order of each bean type will also vary. Currently, the largest shareholder of Starbucks in South Korea is E-Mart, and the second largest shareholder is the Singapore Investment Authority."

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