SEOUL – Starbucks Korea posted its first quarterly loss since it started operations 27 years ago after a marketing debacle triggered a boycott, criticism from President Lee Jae Myung, and a police raid of its corporate offices.
SCK Company, which operates Starbucks in Korea, recorded an operating loss of 18.4 billion won (S$16.6 million) in the three months through June, compared with an operating profit of 40.3 billion won a year earlier, according to a statement on Aug 13.
Net sales fell 6.1 per cent to 747.3 billion won from a year ago. The loss comes even as the company added 49 more stores in the quarter in South Korea, which is their largest market outside the US and China. Starbucks launched its South Korean operation in 1999.
SCK will “concentrate on business stabilisation by restoring brand trust,” it said in a statement.
The company unleashed public anger with a “Tank Day” promotion in May, offered discounts on large “Tank” tumblers on the anniversary of the South Korea’s 1980 Gwangju uprising, when troops and tanks were deployed to suppress pro-democracy protesters.
US-based Starbucks Corp. issued a statement calling the campaign “unacceptable.” Starbucks Korea’s chief executive was dismissed. Chung Yong-jin, chairman of Shinsegae Group, bowed repeatedly during a televised apology and took responsibility for the episode.
Shinsegae’s supermarket chain E-Mart owns a 67.5 per cent stake in Starbucks Korea, with the remainder held by Singapore’s sovereign wealth fund GIC as a passive minority investor.
Last week, police searched Starbucks Korea’s headquarters in Seoul as part of an investigation into the marketing campaign.
In late May, Shinsegae executives warned that Starbucks Korea had suffered “substantial” declines in revenue as the boycott spread. The company took the unprecedented step of closing all of its more than 2,000 Korean stores early on June 22 so employees could undergo training on modern Korean history and social sensitivity. BLOOMBERG
