Korean convenience store brands continue global expansion

CU in Malaysia [Courtesy of CU]

Leveraging the popularity of Korean cuisine worldwide, South Korean convenience store brands are rapidly expanding the number of overseas countries in which they have branches.

As of the end of 2023, the number of overseas convenience stores opened by Korean companies such as BGF Retail, GS Retail, and Emart 24 totaled 1,054, a remarkable surge of 37 percent from 769 stores the year before. The success comes after five years since convenience store chains like CU under BGF Retail and GS25 under GS Retail ventured into Mongolia and Vietnam respectively in 2018.

GS25 in Mongolia [Courtesy of GS25]

With the exponential increase in local stores abroad, the overseas revenues of these brands are also growing rapidly. GS25, for example, reported that overseas sales in 2022 soared to 103 billion won ($79.1 million), a staggering 35-fold increase compared to its entry year in 2018. CU, which holds the most overseas stores at 510, saw an average annual sales increase of 12 percent in Mongolia and 10.5 percent in Malaysia over the last five years. The CU stores abroad attract around 330,000 daily visitors, or one billion annually.

Analysts attribute the global popularity of Korean convenience stores to the power of K-Food. Korean products constitute over 50 percent of CU’s total sales in overseas stores, reflecting their pivotal role in introducing Korean goods beyond domestic boundaries.

The convenience store expansion into international markets is set to continue in 2024. CU is planning to open its first store in Kazakhstan in the first half of 2024, becoming the first Korean convenience store brand to enter the country. Emart 24 will set foot in Cambodia, aiming to expand its first store to 100 within five years after it opens in mid-2024.

Large retail chains in Korea are also gearing up for overseas expansion this year. Emart, after opening its fourth store in Ulaanbaatar, Mongolia, in September 2023, launched its third store in Vietnam. Emart plans to create the leading outlet among Vietnam’s large retailers, serving as a hub from which to tap the Southeast Asian market.

Lotte Mart has been engaged in overseas operations, particularly in Vietnam and Indonesia, since 2008. The company operates 64 stores, including 48 in Indonesia and 16 in Vietnam. Lotte Shopping Group’s subsidiary opened ‘Lotte Mall West Lake Hanoi’ in September 2023, and aims to expand into the Asian market.

Notably, Korean retailers’ affordable private label (PB) products are gaining attention amid global inflation. Emart increased its export volume of PB products like No Brand from 25.4 billion won in 2022 to 37.4 billion won the year after. Lotte Mart’s PB product exports increased by about 30 percent on-year in 2022, followed by an additional 5 percent increase in 2023. These products, priced around 40 percent lower than regular items, are gaining popularity among overseas consumers.

The popularity of PB products in overseas markets is also helping Korean SMEs enter the market, and thus fostering mutual growth. Around 70 percent of No Brand PB products are manufactured by domestic SMEs, and CU also features about 30 percent of its products made by Korean SMEs under Heyroo PB brand in Mongolia, indirectly facilitating entry for about 40 SMEs.

Homeplus plans to target the Mongolian market by expanding the range of PB products in the chilled and frozen food categories after seeing high sales from its first frozen fruit exports to Ulaanbaatar in October 2023. Homeplus currently sells over 200 PB products in 14 stores in the city.