Overseas K-Food Craze... Convenience Stores as Forward Bases

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[Asia Economy Reporter Lim Chun-han] The convenience store industry is betting its survival on expanding overseas beyond the saturated domestic market. Riding the wave of K-pop and K-content fever, interest in K-food is also rising, and Korean-style convenience store food is gaining great popularity locally.

◆ K-food sales ‘soaring’ = According to the convenience store industry on the 14th, K-food has established itself as a key product in overseas convenience stores. At GS25 in Mongolia, sales of ready-to-eat foods such as chicken and convenience meals account for 55% of total sales. The fresh milk latte, which combines fresh milk preferred by Mongolians with brewed coffee, sells nearly 1,500 cups a day, and Korean-style chicken ranks third in total sales. At GS25 in Vietnam, instant tteokbokki, Korean-style steamed buns, and rabokki consistently rank within the top five in sales.

The average daily number of visitors per store at CU in Mongolia exceeds about 1,000. Korean-style convenience foods and instant cooked products have captured the local palate, making a significant contribution to sales. Among delivery items, hot dogs have the highest sales. Following are Korean-style lunch boxes (4th), gimbap (5th), and triangular gimbap (10th), which are popular. At CU in Malaysia, Korean products such as instant cooked foods, convenience meals, and private brand (PB) items account for about 75% of total sales.

At Emart24 Malaysia, K-food such as cup rice, tteokbokki, fried chicken, bingsu, and triangular gimbap account for 50% of total sales. Considering that these usually account for 10-20% of sales, this is a very high figure. Cup rice, tteokbokki, and fried chicken sell up to 1,000 units per day, and Ipresso brewed coffee ranks first among about 10 types of instant brewed tea products.

◆ Focusing on store expansion despite deficits = Convenience stores are entering overseas markets not through direct investment but via master franchise models. They entrust operations to local partners and receive royalties by supplying only the brand, business know-how, and products. GS Retail entered Mongolia this year in partnership with the local Sean Kolai Group. Currently, it operates 30 stores and aims to open 500 stores by 2025. In Vietnam, the number of stores increased by 59 this year alone, reaching 145 stores. Notably, this month, the first franchise store targeting the general public was opened four years after entering Vietnam. GS25 Vietnam aims to turn profitable by 2025 and open 700 stores by 2027 as a mid- to long-term goal.

CU began its full-scale local approach by opening its first store in Malaysia last April. It currently operates about 30 stores and plans to sequentially convert about 530 stores of the local partner MyNews Holdings’ convenience store brand ‘MyNews.com’ into CU stores. In Mongolia, it operates 150 stores and expanded by 50 stores this year alone. Emart24 opened 9 stores in Malaysia this year. It plans to expand to 30 stores by next year and 300 stores within five years.

Each company is focusing on expanding stores locally to achieve profitability through economies of scale. However, they are currently struggling due to initial costs and the global spread of COVID-19. In fact, GS Retail has recorded losses every year since entering Vietnam. The Vietnam subsidiary’s net losses were 2 billion KRW in 2018, 3.4 billion KRW in 2019, and 6 billion KRW in 2020. It recorded a loss of 6.2 billion KRW in the first half of this year as well.

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