South Korea’s once-booming café industry is now facing an alarming downturn. In 2024 alone, 12,242 coffee shops shut down, following a similar trend from 2023, when 12,433 cafés went out of business. This means that, for two consecutive years, an average of 34 cafés have closed every single day.
Once known as the ‘Café Republic’ due to its overwhelming number of coffee shops, South Korea’s café culture is now at a crossroads. What led to this drastic decline?
1. The Burden of Rising Labor Costs
One of the biggest factors behind the surge in café closures is the increase in minimum wage. Higher wages have made it increasingly difficult for small café owners to afford staff, forcing many to either cut hours, operate alone, or shut down altogether. Unlike large franchise chains that can absorb higher labor costs, independent cafés are struggling to survive under the weight of these financial pressures.
2. The Soaring Cost of Coffee Beans and Supplies
Global coffee bean prices have skyrocketed in recent years, putting additional strain on café businesses. Beyond beans, the cost of milk, syrups, and disposable cups has also increased, further eating into already thin profit margins. For smaller cafés without the purchasing power of major brands, these rising costs make profitability nearly impossible.
3. The Rise of Budget Coffee Chains
The dominance of low-cost coffee franchises has significantly reshaped the market. Affordable brands like Mega Coffee and Compose Coffee have aggressively expanded, offering large-sized drinks at prices that independent cafés simply cannot match. Consumers, facing economic hardships of their own, increasingly prefer these budget-friendly options over artisanal or specialty coffee shops.
The result? Small cafés are squeezed out of the market, unable to compete with these large-scale operations that benefit from bulk purchasing, streamlined logistics, and aggressive marketing.
4. Oversaturation: Too Many Cafés, Not Enough Demand
For years, opening a café was considered a relatively low-barrier business opportunity. With minimal entry requirements, many entrepreneurs rushed into the industry, leading to an oversaturation of coffee shops in every neighborhood.
However, as competition intensified and costs rose, many of these small businesses found themselves unable to attract enough customers to stay afloat. The harsh reality is that demand simply has not kept up with supply, leading to a natural correction in the industry.
The Future of South Korea’s Café Culture
Despite the decline in independent cafés, South Korea’s love for coffee is not disappearing. Instead, the market is evolving. Large franchises, high-efficiency budget chains, and premium specialty cafés catering to niche audiences are likely to dominate in the coming years.
For small business owners, the era of ‘just opening a café’ and expecting success is over. Only those with strong branding, unique concepts, and financial resilience will be able to survive in this fiercely competitive market.
The question remains: Will South Korea’s café industry stabilize, or is this just the beginning of a long-term collapse?