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South Korea’s Ediya Coffee Co. dropped its plan to go public this year, deeming the timing to be poor amid rises in labor cost, and will re-enter China through a Beijing outpost, said the chief executive of the country’s largest coffee shop franchise.
“In terms of growth and profit margin, we are fully ready for an IPO, but we decided that we must tend to our franchisees first,” said CEO Moon Chang-ki on Thursday.
Ediya Coffee in December appointed Mirae Asset Daewoo Co. as its underwriter for an IPO this year. It would have made Korea’s first coffee stock.
Coffee shops mostly staff temporary workers on an hourly basis. Labor costs shot up after the hourly minimum wage was pushed up by 16.4 percent on year to 7,530 won ($7) from January. It has been the campaign pledge of President Moon Jae-in to make the legal hourly wage base 10,000 won within the next three years.
“Subsidy to help franchisees sustain staff increased by 4.5 billion won. Management decisions must be made strategically and decisively,” Moon said, partly admitting the spike in labor cost had disrupted the IPO schedule.
Instead, the coffee chain will renew its overseas campaign, starting with a shop in Beijing next year.
It had pulled out of China in 2008 after three years of business.
Moon acquired Ediya Coffee from its original founder in 2004 and nurtured it into Korea’s largest coffee house chain by number of stores. In 2016, it became the first homegrown coffee brand to run 2,000 stores. It is expected to open its 2,500th store this month. The company generated 700 billion won in sales last year and employs about 10,000 workers.
Its upscale coffee shop Ediya Lab generates average monthly sales of over 300 million won, making it the top-selling single coffee outlet in the country.
