With employees returning to workplaces in South Korea, instant coffee has seen a rise in consumption, bolstering the growth of the hot drinks sector in the country. Hot tea is also gaining favor, underpinned by the heightened health-consciousness in the light of COVID-19, and celebrity endorsements. As a result, the South Korean hot drinks market will grow at a compound annual growth rate (CAGR) of 4.7% from KRW4.0 trillion ($3.5 billion) in 2021 to KRW5.6 trillion ($5.0 billion) in 2026, forecasts GlobalData, a leading data and analytics company.

GlobalData’s latest report, “South Korea Hot drinks – Market Assessment and Forecasts to 2026,” reveals that the hot drinks market will be primarily driven by the hot tea category with a projected value CAGR of 7.5% during 2021-2026. While coffee remains the most popular hot beverage, the rising health and wellness trends are catalyzing the demand for hot tea. The hot coffee and other hot drinks categories will record 6.7% CAGR and 5.5% CAGR over the forecast period, respectively.

Anush Shaw, Consumer Analyst at GlobalData, comments: “With most COVID-19 restrictions being lifted, South Koreans are flocking to their favorite cafes and restaurants to savor made-to-order hot drinks. As consumers return to their pre-pandemic lifestyle, they are sipping instant coffee to power them through their daily grind.

“However, the heightened health consciousness amid COVID-19 is accelerating the shift from sugary coffee mixes to decaffeinated coffee. The growing inclination for immunity-boosting beverages is spurring the demand for green teas. However, young consumers are opting for herbal/fruit teas that are sweet on the palate.”

While cocooning at home longer amid the sporadic COVID-19 outbreaks, consumers strived to recreate cafe-style hot drinks in their home cafes. With demand on the rise for gourmet coffee and organic teas, the per capita expenditure (PCE) on hot drinks in South Korea surged from $17.6 in 2016 to $33.8 in 2021. This surpassed the global average of $17, and the regional average at $11.1 in 2021.

As the economy recovers, and consumer purchasing power increases, this premiumization trend will only grow stronger. As a result, South Korea’s PCE on hot drinks is set to soar to $47.5 in 2026.

According to the report, convenience stores was the leading distribution channel in the South Korean hot drinks sector in 2021, followed by hypermarkets & supermarkets. Convenience stores gained an edge amid the pandemic by introducing “affordable- premium” private labels with proprietary blends. In the terms of sales, The Kraft Heinz Company, Nestlé, and Namyang Dairy Products were the top three companies, and Maxim and Nescafé were the leading brands in the South Korean hot drinks sector in 2021.

Shaw concludes: “Baristas are striving to deliver an authentic consumption experience that sets them apart from the plethora of coffeehouses that have mushroomed in top cities over the past decade. Multinational players are also adopting a premium play with diverse options for customization inspired by the local culture and preferences. Similarly, manufacturers and retailers are rolling out specialty coffee and novelty tea blends to tap the premiumization wave. Functional teas that aid in weight loss, skin health, digestive wellness, detoxification will surge in demand and help the market players expand their consumer base.”