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 been trying to find a franchise partner in Hong Kong and is listed on the Hong kong Trade Development Council website. But across the border in Mainland China – its largest international market – it is faltering having culled its network from 600 stores back to 400 during the last two years.
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 executive 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 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.