Caffe Bene Korea losses soar

Beancounting has taken a turn for the worse for Caffe Bene Korea, which has just reported a net loss of US$30 million.

The coffee shop chain’s turnover was $97 million, according to a corrected annual report filed with South Korea’s Financial Supervisory Service. This was down from $122.5 million the previous financial year, when the net loss was $7.1 million.

It has been three years since the company turned a profit.

The chain – which specialises in iced desserts as well as hot and cold coffees – has culled its Mainland China network from 600 stores back to 400 during the last two years. It has apparently failed to find a partner with which to enter the Hong Kong market.

For the quarter ending March 31, Caffe Bene had $15.6 million in sales, down from $23.7 million for the same period last year.

According to the company’s latest count in April, its Korean outlets have fallen to 850, from a 912 peak two years ago. It is competing against about 30 coffee chains in Korea.

“Too many menu items brought considerable operational burden to each outlet store,” says deputy-GM for Korea Jong Wook Kim. “To resolve this issue, Caffe Bene is reducing the number of items and focusing on what customers prefer most.”

Founder Kim Sun-Kwon’s stake in Caffe Bene has dwindled from nearly 50 per cent to 4 per cent, and last year he stepped down as CEO in favour of Choi Seung-Woo, a former chief of Woongjin Food. In March, Kim was out as president.

Meanwhile, Korean investment firm K3 Equity Partners converted enough preferred shares to take a 52 per cent stake in Caffe Bene, and in March, Hallyu Ventures – a joint venture between Singapore’s Food Empire and Indonesian conglomerate Salim Group – paid $13 million for an initial 38 per cent interest.

Units worldwide, including a claimed presence in seven Southeast Asian markets, including the Philippines where it operates five stores after landing in 2008, and in Vietnam, stand at 1364, down from 1560 two years ago.

Caffe Bene has also had a roasting in the US, where it has been the subject of several lawsuits by franchisees.