From Paul Bassett to Starbucks... Ultimately, the 'Premium Coffee' Play Begins

200 to 400 Won Price Increase for Cafe Latte and More Starting January 23
Starbucks Joins Price Hike Trend Following Coffee Bean
Low-Priced Coffee Brands Still Holding Out, But Price Hikes Remain Possible

From January 2025, the domino effect of price increases among premium coffee brands has begun. As soon as Paul Bassett announced a price hike for the first time in about three years, Starbucks Korea also posted another price increase notice. These companies cite rising coffee bean prices due to abnormal weather conditions such as heatwaves, as well as political instability and soaring won-dollar exchange rates, making it difficult to sustain current prices. However, consumers are expressing concerns that coffee inflation driven by premium brands will intensify this year.

Starbucks Korea announced on the 20th that from the 24th, prices for 22 types of Short (237ml) and Tall (355ml) size beverages will increase by 200 to 300 won.

Following last August’s price increase of 300 won and 600 won for Grande (473ml) and Venti (591ml) size drinks respectively, the company has now decided to raise prices for the Tall size as well in the new year. In November last year, Starbucks Korea also raised prices by 200 won for 11 types of non-coffee iced beverages in the Tall size. Starbucks Korea explained, "In August last year, we only raised prices for Grande and Venti sizes to minimize customer burden, but due to continuous exchange rate and cost increases, we have made this adjustment."

The price of the most sold item, the Cafe Americano Tall size, will increase from 4,500 won to 4,700 won. The Cafe Latte Tall size will go from 5,000 won to 5,200 won. For Today’s Coffee, the Tall size price will rise from 4,200 won to 4,500 won, a 300 won increase.

Earlier, Paul Bassett also decided to raise prices. Through its website, Paul Bassett announced that from January 23, prices for 28 items including ice cream and beverage size-ups will increase. This is the first price hike by Paul Bassett in 2 years and 10 months since March 2022.

The price increase ranges from 200 to 400 won, averaging a 3.4% rise. Specifically, the Signature Lungo will increase from 4,900 won to 5,300 won, a 400 won hike. The Signature Lungo is similar to an Americano but uses more coffee beans, resulting in a stronger coffee aroma. The Cafe Latte will increase from 5,700 won to 5,900 won, a 200 won rise. Ice cream prices will also go up from 4,000 won to 4,300 won. A Paul Bassett representative added, "However, prices for the most sold items like Americano and tea varieties have been frozen to minimize the impact of the increase."

The main reasons behind the domino price hikes at premium coffee shops include ▲rising coffee bean prices ▲rapid exchange rate fluctuations ▲continuous increases in various raw material costs. Among these, the impact of rising coffee bean prices has been significant. Due to abnormal weather conditions such as heatwaves, supply from major producing countries like Brazil and Vietnam has sharply decreased, causing coffee bean prices to soar since last year. The Arabica beans used by major franchises reached their highest price in 47 years as of December last year.

A Paul Bassett representative lamented, "Coffee bean prices have risen more than 40% compared to 2023, and the won-dollar exchange rate has increased significantly from about 1,300 won per dollar in 2023 to around 1,450 won now, greatly increasing import costs."

Following consecutive price hikes, concerns are emerging that coffee inflation driven by premium brands is becoming full-fledged this year. Coffee Bean also raised prices by 200 won last December for chocolate-containing drinks such as Cafe Mocha and Double Chocolate. Other premium coffee brands like Twosome Place and Hollys have not explicitly raised prices but have effectively increased prices by raising prices of seasonal menu items. For example, Twosome Place’s Strawberry Latte price rose from 6,500 won last season to 6,800 won this season. Hollys’ Strawberry Latte also increased from 6,400 won to 6,900 won during the same period.

Amid the wave of price hikes by premium brands, mid-range brands like Ediya Coffee and Mega Coffee are still holding out. According to aT, as of the end of 2022, there are nearly 99,000 coffee and beverage shops in South Korea. Since the coffee market is highly price-sensitive, even a 100 won increase in Americano prices is difficult to implement. Competition is fierce enough that a misstep could lose customers to neighboring stores.

A Mega Coffee representative said, "While international coffee bean prices are difficult to control, we are trying to reduce the burden of bean costs by leveraging our large consumption volume." An Ediya Coffee representative also stated, "There are no plans to raise prices yet. Since we import beans and roast them ourselves before supplying to franchise stores, we can somewhat suppress price increases."

However, since the rise in coffee bean prices is due to abnormal weather, the upward price trend is likely to continue this year. Therefore, solutions beyond just holding out are needed. A coffee industry insider said, "Mid-range brands cannot continue this exhausting chicken game forever, so if there is an opportunity, the possibility of price increases is always open."