Rules on franchises give convenience store bakeries a boost

[Courtesy of CU]

Once perceived as purveyors of cheap bread, convenience store bakeries are now challenging the dominance of franchise bakeries in South Korea. The shift comes as regulations imposed on bakery shops since 2013 to protect neighborhood businesses led to a drop in the number of outlets for major franchise brands like Paris Baguette and Tous Les Jours, creating space for bakery products from convenience stores, department stores, and large supermarkets to thrive.

According to sources on Tuesday, bakery sales at Korea‘s four major convenience store chains have been experiencing double-digit growth for the past three years from 2023. Comparing sales figures from the previous year, GS25 recorded a 34 percent increase, CU saw a 28 percent rise, 7-Eleven experienced a 30 percent surge, and Emart24 marked a 68 percent growth rate.

The convenience store industry is going beyond traditional bakery offerings by introducing their own premium bakery brands. Notably, CU’s bakery brand ‘BakeHouse 405’ series, launched in August 2023, recorded a cumulative sales volume of over 4.8 million units just six months after its release. GS25 and 7-Eleven also have their own premium bakery brands.

While bakery products across various distribution channels are thriving, major franchise bakeries including Paris Baguette and Tous Les Jours are restricted by regulations limiting new store openings. Opening new franchised outlets was restricted to an up-to 2 percent increase from the previous year when bakery shops were designated as an industry suitable for small and medium-sized enterprises in February 2013, and new openings were prohibited within 500 meters of existing independent bakeries.

In response, franchise bakeries are seeking opportunities in overseas markets. SPC Group, which operates Paris Baguette, currently has a presence in 10 countries, including the United States and Europe, operating over 550 stores. Similarly, CJ Foodville, which operates Tous Les Jours, topped 400 outlets in its overseas network.