[Report] "Missing Samgim and Soju" Korean Convenience Store Becomes a Hot Place in Mongolia

[K-Convenience Store Global 1000th Store Era]①
Spicy Ramen and Fish Cake Skewers Hit the Spot
CU and GS25, the 'Two-Strong Structure' of the Convenience Store Market

Editor's NoteK-convenience stores have developed into a representative retail format in South Korea since their first entry into the domestic market in 1982, absorbing various lifestyle convenience services along the way. Beyond being spaces where simple groceries and daily necessities can be purchased, they now also serve as post offices, banks, and pharmacies. However, as they face the need to prepare for the next 40 years, the challenges ahead are formidable. Market saturation, population decline, and other complex factors are narrowing their space. Our convenience stores are seeking answers to these challenges overseas. They are pioneering markets by expanding into Central Asia, Southeast Asia, and beyond. The number of stores has reportedly surpassed 1,000. There is still a long way to go. They must expand the market externally while resolving saturation issues internally. How K-convenience stores solve this task is directly linked not only to their future survival but also to the future of the Korean retail market. This is why the entire retail industry is closely watching the moves of convenience stores.

"Senbenno, En but GS25 (Hello, this is GS25)"

On a cold day when temperatures dropped to minus 30 degrees Celsius, a male student hurriedly ran into the GS25 Zaiseung branch in Ulaanbaatar, the capital of Mongolia. Wrapped tightly in a scarf around his face, he lingered by the ramen shelf. He chose kimchi stew ramen and cheese cup ramen, poured water, and put them in the microwave. Boangnemehe (19), a university student, said, "At first, it was hard to eat, but now among Korean ramen, spicy ramen is my favorite."

GS25 Jai Seung Branch ramen display. Korean ramens fill the entire display. A local employee met that day expressed that many consumers are looking for ramen, so they are busy restocking the ramen display whenever they have time. Mongolian consumers most frequently seek the Buldak series, spicy ramen, and kimchi ramen.
[Photo by Minji Lee]

The same was true at other convenience stores. Mongolian food culture mainly uses seasonings that are not spicy, similar to Korean soy sauce. Nevertheless, young Mongolians these days name ramen, which even Koreans find spicy, as their 'choea (most loved) food.' This is thanks to the increasing number of Mongolians who have attended university in Korea or have come to work in Korea as industrial workers. The K-content and K-food they enjoyed in Korea have become the foundation for Korean-style convenience stores to stand tall in Mongolia as well.

Mongolia is experiencing a golden age of K-convenience stores

Korean convenience store brands dominate Mongolia. CU, operated by BGF Retail, and GS25, operated by GS Retail, are dividing the entire market. CU first set foot on Mongolian soil in August 2018 and currently operates about 380 stores in its sixth year. GS25 opened its first store in April 2021 and has expanded to 273 stores.

Korean convenience stores were not the first to plant their flags in Mongolia. The American convenience store brand Circle K was two months earlier than CU. In April 2018, it signed a master franchise agreement with Mongolia's 'Nano International' and began filling stores in Ulaanbaatar. The start was smooth. They introduced hot dog products sold in American convenience stores, which became very popular among Mongolians. It was said that people would visit Circle K just for the hot dogs.

However, the popularity of hot dogs did not last, and Circle K withdrew from the market after selling its stores to CU in March last year. Nomyn Holdings, which operates large supermarkets locally, opened a convenience store called 'Eco Express' but sold its stores to GS25 last year. Park Jubeom, head of BGF Retail Mongolia TFT team, analyzed, "CU developed menus that appeal to young people’s tastes, such as Korean-style street sandwiches and kimbap, which locals like. On the other hand, Circle K's mistake was bringing in the design and operation methods exactly as before." CU, which was one step ahead of GS25, has established a food manufacturing plant in the western area of Ulaanbaatar to quickly supply products tailored to the local market.

Mongolia Enjoys K Culture, Successful Localization Also Plays a Role

CU's Sangria store, the first convenience food display introduced in Mongolia. The local operator, Central Express headquarters, is located on the upper floor of the store. Sales of convenience foods such as triangular kimbap and kimbap account for about 40% of total convenience store sales. The combination of kimbap and ramen is also popular in Mongolia.
[Photo by Minji Lee]

The biggest success factor for Korean convenience stores is the large number of Mongolians who have lived in Korea. It is estimated that over one million Mongolians have visited Korea since 1995. Even after graduating from a four-year university, local wages do not exceed 1 million won, so it has become common to earn money overseas for 1 to 3 years and then return to Mongolia. The biggest attraction of Korean convenience stores is that they can enjoy the triangle kimbap, ramen, soju, snacks, and other foods they ate in Korea even in Mongolia.

The popularity of K-content also helped, as products featured in Korean dramas can be found locally. Successful localization also played a part. CU and GS25 introduced instant meals and ready-to-eat foods adapted to local tastes rather than selling Korean-style products as they are. They offered Mongolian steamed buns called 'boz,' fried dumplings called 'khoshor,' and Mongolian fried noodles called 'choiwang.' They also sold boz and Mongolian-style kimbap using Korean kimchi. Thanks to diversifying food options, sales of ready meals and instant foods account for 40-45% of total convenience store sales, becoming key products.

GS25 sells kimchi ppojeo (orange), a local-style ppojeo (dumpling) with kimchi added. It is said to be popular among locals who are familiar with the taste of kimchi.
[Photo by Minji Lee]

They also provide clean facilities and services that enhance customer satisfaction. Nandin Chimak (50), who considers visiting the convenience store part of his 'morning routine' after taking his daughter to school every morning, points out that the convenience store offers services he has never experienced before. Restrooms are free to use 24 hours a day at any convenience store, and power outlets are installed everywhere, allowing customers to use charging services freely. He said, "It's much tastier and cleaner than street food," and "Many come to rest briefly, and the greetings and services are good." Coffee is about 3,000 tugrik (1,400 won), roughly one-third cheaper than buying outside, so more consumers deliberately visit convenience stores.

Fish Cake Skewers and Roasted Sweet Potatoes to Taste in Mongolia

CU and GS25, ranked first and second in the domestic convenience store market, are fiercely competing in Mongolia as well. GS25, having entered three years later than CU, is pursuing a more aggressive strategy due to weaker store locations and brand recognition. They are strengthening product competitiveness by actively placing products preferred by Ulaanbaatar citizens.

This strategy is most reflected in GS25 Store No. 250, located in a business center building. This store is the only place in Mongolia that sells roasted sweet potatoes and fish cakes. Upon entering the store, the first thing customers notice is the savory smell of fish cake broth. The sight of fish cakes boiling vigorously in the broth behind a transparent acrylic panel also captures attention.

GS25 250th store. Selling Korean winter snacks such as roasted sweet potatoes and fish cake soup. Locals often search for information on Facebook (Korea's Chorokchang), and it is said that there were many posts asking where to buy fish cake soup at one time.
[Photo by Minji Lee]

Fish cakes became known in Mongolia recently. Mongolians familiar with K-dramas became curious about fish cakes after seeing protagonists in dramas eating them in cold winter from trucks or street stalls. Seeing some local Mongolian stores selling fish cakes, GS25 judged there would be sufficient demand in Mongolia and imported fish cake machines from Korea.

The response was enthusiastic. Customers can buy a fish cake skewer for about 1,400 Korean won, which seemed more cost-effective than the fish cake soup sold in Korean convenience stores. Office worker Batsori (28) said, "I buy a cup of fish cake every morning before going to work," and added, "This place used to be a local convenience store (Eco Express), but the food concept has been strengthened, which is great." A GS25 official explained, "The response to fish cakes and roasted sweet potatoes was better than expected, so we plan to expand sales to 20 stores."

'Attracting Attention' is a Success... K-Convenience Stores Still Have a Long Way to Go

GS25 franchise owners are seen having a meeting before opening their stores. With only a few days left until the first franchise store opens, a heated discussion took place between the franchise owners and management staff.
[Photo by Minji Lee]

Although Korean convenience stores are rapidly growing in Mongolia, more time seems necessary to fully establish themselves. This is because the franchise business model, which is the core of convenience stores, has not yet been settled. CU operates about 30 franchise stores but needs to reorganize as the contract conditions were not fully established at the start. GS25 began testing franchise business for six months from December last year and opened 11 franchise stores.

There are also legal risks. Alcohol sales, which account for more than 10% of convenience store sales, are permitted only in some stores under a licensing system. The Mongolian government accepts applications from stores wishing to sell alcohol annually, conducts inspections, and grants licenses only to those meeting the requirements. For example, newly opened stores after inspection must wait until the next licensing period to sell alcohol.

A CU store located in downtown Ulaanbaatar. It opened last year, but it does not sell alcoholic beverages such as beer and vodka because it has not obtained a liquor license. Even if it obtains a liquor license, alcohol cannot be sold from 11:45 PM to 7:00 AM, as stated on the partition.
[Photo by Minji Lee]

Additionally, alcohol sales are prohibited in convenience stores from midnight to 7 a.m. Due to insufficient retail-related laws and unclear assignment of officials in the Mongolian government, there are concerns that political reforms, such as regime changes, could negatively impact Korean-style convenience stores classified as foreign capital.

There are also concerns about continuously increasing the number of stores. In Ulaanbaatar, where more than half of Mongolia's population resides, the convenience store market is considered saturated. Although stores have expanded to second- and third-tier cities like Darkhan and Erdenet, low population in other regions may reduce profitability, hindering store expansion.

CU Central Logistics Center. Here, goods are received and delivered daily to each store to continue the business.
[Photo by BGF Retail]

New stores are being planned in Ulaanbaatar, but high rental costs limit profit relative to investment. A GS25 official said, "Stores in Ulaanbaatar are reaching saturation, and rents have risen significantly. We are considering reducing store size by strengthening ready meals and instant products while reducing other items." A CU official said, "If franchises are well established and, as in Korea's past, supermarkets convert into convenience stores, there should be no major difficulties in increasing the number of stores."