From Starbucks to Paik's Coffee, Sweeping the Market... The Silent Milk War and the Identity of the Undisputed No. 1

Seoul Dairy Cooperative Supplies 11 Out of 15 Major Brands

Starbucks, MegaMGC Coffee, and Compose Coffee Use Multiple Suppliers

The 'milk war' surrounding South Korea's coffee market is intensifying beneath the surface. As coffee franchises increase, cafes are emerging as a key axis in the business-to-business (B2B) market for dairy companies, and competition over supply leadership is also heating up.

According to the food industry as of April 1, six companies currently supply milk to 15 major cafe and bakery franchises: Seoul Dairy Cooperative, Maeil Dairies, Namyang Dairy Products, Dongwon F&B, Busan Dairy Cooperative, and Yonsei Milk. The recipients include Starbucks, MegaMGC Coffee, Compose Coffee, Paik's Coffee, Ediya Coffee, Twosome Place, The Venti, Hasamdong Coffee, Mammoth Coffee, Ten Percent, Hollys, The Coffee Bean & Tea Leaf, Paris Baguette, Pascucci, and Dunkin Donuts.

Among these, 11 brands have chosen products from Seoul Dairy Cooperative. Namyang Dairy Products supplies four brands, Maeil Dairies supplies two, while Dongwon F&B, Busan Dairy Cooperative, and Yonsei Milk are each included in the supply network for one brand. This analysis indicates that the cafe milk market is effectively centered around Seoul Dairy Cooperative.

Photo by Hyunmin Kim kimhyun81@

Starbucks Diversifies; Low-Cost Brands Use Multiple Suppliers

Supply strategies vary depending on store size and operating methods. Starbucks, which has over 2,100 locations nationwide, has established a multi-supplier system, sourcing milk from four companies: Seoul Dairy Cooperative, Maeil Dairies, Namyang Dairy Products, and Yonsei Milk. The company applies its own standards—such as setting fat content at 3.3%—to maintain consistent taste and quality, distributing supply to each store based on each supplier’s capacity and regional volume. A Starbucks representative stated, "Seoul Dairy Cooperative accounts for the largest share, and the rest is supplied by other companies. After the 2010 foot-and-mouth disease outbreak, we diversified our supply chain."

Low-cost coffee brands are also securing cost competitiveness through multiple suppliers. MegaMGC Coffee, with more than 4,000 stores, and Compose Coffee, with around 2,600 stores, do business with several suppliers based on bulk purchasing. MegaMGC Coffee works with both Seoul Dairy Cooperative and Dongwon F&B, while Compose Coffee uses products from Maeil Dairies and Busan Dairy Cooperative. Their strategy is to increase negotiating power and maintain price competitiveness by leveraging their purchasing volume.

Ediya Coffee, Twosome Place, and Paik's Coffee maintain a single-supplier system, with most using products from Seoul Dairy Cooperative. It is believed that single-sourcing is considered efficient due to nationwide logistics networks, stable supply, and quality control.

Last year, Paik's Coffee used approximately 12.28 million units of milk (1L each), up from about 11.99 million units the previous year. The 'Seoul Dairy Baristas Milk' used by Paik's Coffee is designed to enhance foam retention during latte preparation. A Paik's Coffee representative said, "We select products based on foam retention during steaming and suitability for beverage preparation."

90,000 Coffee Shops: Cafes Driving B2B Growth

In the dairy industry, the B2B market includes the entire food service sector, such as cafes, bakeries, catering, hotels, and military supply. Among these, the cafe channel is considered the fastest-growing segment. Typically, the revenue structure for dairy companies is 70-80% from business-to-consumer (B2C) and 20-30% from B2B channels. Within B2B, cafes and bakeries are estimated to account for more than 60-70%. The expansion of low-cost coffee franchises and the rise in coffee consumption have increased demand for raw materials, including milk.

According to the National Tax Service, as of last month, there were 93,453 coffee and beverage shops nationwide, up about 28% from 72,686 in February 2021. As the number of cafes grows, competition among dairy companies is also intensifying. In particular, rising cafe and dessert consumption is steadily boosting demand for related ingredients. For Seoul Dairy Cooperative, sales of cafe-use milk have increased by about 10% each year for the past four years.

Dairy companies are also changing their business models. In the past, they merely supplied raw ingredients like milk or cream. Recently, however, they have evolved into a 'solution-type B2B' model that designs entire cafe menus. This approach involves jointly developing and supplying beverage bases, teas, and dessert ingredients to create franchise-specific signature menus. The structure is shifting from simple volume competition to designing menu competitiveness as well.

However, profitability remains a challenge. Increases in raw milk prices and other material costs continue, but it is difficult to raise supply prices in the B2B channel, leading to ongoing pressure on profitability. The potential for increased imports of sterilized milk is still considered limited. An industry insider said, "For cafe beverages, flavor and foam texture are crucial, so there is not much preference for sterilized milk. Going forward, functional and premium products, as well as customized supply capabilities, will become key factors in competition."

This content was produced with the assistance of AI translation services.