The South Korean hot drinks sector, which includes coffee, tea and other hot drinks, is forecast to grow from US$1.8bn in 2018 to US$2.3bn by 2023, registering a compound annual growth rate (CAGR) of 5.4%, says GlobalData, a leading data and analytics company.

GlobalData’s report, ‘South Korea Hot Drinks – Market Assessment and Forecasts to 2023’, reveals that the hot coffee category dominates the South Korean hot drinks market, accounting for 84.1% value share of the overall sector sales in 2018. The category is forecast to grow the fastest at a CAGR of 5.6% during 2018–2023. On the other hand, the hot tea category, which held a 14.7% value share in the same year, is forecast to grow at a CAGR of 4.7% during the next five years.

Mohammed Masiuddin Shajie, Consumer Analyst at GlobalData, says: “Driven by convenience, instant coffee is the most popular hot coffee in South Korea, accounting for 83% of the overall hot coffee value sales in 2018. It was followed by roast and ground coffee, and coffee beans categories with 9.5% and 7.5% sales, respectively. Coffee beans will register the fastest growth among all the segments across all categories, closely followed by roast and ground coffee, and instant coffee during the next five years.”

The per capita expenditure on hot drinks in South Korea is higher than the regional and global averages. It stood at US$33.8 in 2018 and is forecast to reach US$43 by 2023.

Convenience store was the most popular channel for distribution of hot drinks in South Korea, followed by hypermarkets and supermarkets. These two leading channels accounted for a combined value share of 84.5% in 2018, while on-trade transactions held just 8.2% share in the same year.

Ajinomoto Group, Namyang Dairy Products Co and Nestle SA are the leading players in the South Korean hot drinks market. Maxim and Osulloc are the most popular coffee and tea brands respectively. Shajie concludes: “The purchasing power of consumers is increasing in the South Korean hot drinks market. The year 2017–2018 saw 1.9% increase in average prices of hot drinks, as consumers are trading up for premium products. Therefore, manufacturers need to focus on offering better quality products to gain competitive advantage.”