Gong cha sees profits fall significantly in its largest market, South Korea

Gong cha currently operates more than 2,200 stores across 23 markets globally | Photo credit: Gong cha

Taiwanese bubble tea chain Gong cha struggled in South Korea, its largest market, last year with local franchise partner reporting a significant fall in operating profit. 
 

Gong Cha Korea Co. currently operates approximately 800 bubble tea outlets in South Korea and wholly owns Gong Cha’s 70-store subsidiary in Japan. 

The Seoul-based group posted a 62% year-on-year decline in total operating profit in the 12 months ending 31 December 2023 to KRW 6.3bn ($4.5m), with operating profit in South Korea falling 78% to KRW 3.4bn ($2.4m).  

Revenues in South Korea fell 4% to KRW 123bn ($88m) but total group sales increased 1% to KRW 183bn ($131m) amid record KRW 53.4bn ($38m) sales in Japan. 

South Korean consumers are increasingly turning to value-focused café brands amid the high cost of living and wage stagnation. World Coffee Portal research shows that South Korea’s three-largest value focused coffee chains – Mega Coffee, Compose Coffee and Paik’s Coffee – have more than doubled their combined market share from 9.8% in 2020 to 20.3% last year. 

Founded in Taiwan in 2006, Gong cha has scaled to more than 2,200 stores across 23 markets globally. The bubble tea chain entered South Korea in 2012 with a store in Seoul and opened its first outlet in Japan in September 2015. Gong cha has been owned by US private equity firm TA Associates since 2019. 

In January 2024, the business signed the ‘largest master franchise agreement in its history’ with Saudi Arabia’s Shahia Foods Group to open stores hundreds of Gong cha stores across the Middle East.