Starbucks Korea has experienced a "very significant" decline in sales following a controversial marketing campaign that evoked the 1980 military crackdown on pro-democracy protesters, triggering widespread public outrage.
Campaign Controversy
The retailer faced mounting criticism over its "Tank Day" campaign, which used tumblers to commemorate the anniversary of the May 18 Gwangju uprising. During this event, the military government deployed troops and tanks to suppress pro-democracy demonstrations, resulting in hundreds of deaths or disappearances.
Public Apology
In a press conference on Tuesday, Chung Yong Jin, chairperson of Shinsegae Group, the American coffee chain's local operator, issued a public apology. He urged the public not to direct anger towards Starbucks Korea employees and frontline staff. "I take it very seriously that Starbucks Korea's inappropriate marketing hurt and angered many people," Mr. Chung said. "I will take all responsibility for the incident."
Internal Investigation
Starbucks Korea's e-commerce team organized the campaign and received final approval from team leaders and executives, a company official said. The investigation could not conclude whether there was intentional wrongdoing, but the incident exposed serious flaws in Starbucks Korea's risk management framework. The e-commerce team had been overly focused on sales amid a large volume of weekly promotional events, leading staff to approve the campaign without proper review or legal scrutiny.
Financial Impact
Shares in Shinsegae fell as much as 2.8 percent in morning trade before reversing course to rise 1.7 percent. A Shinsegae official stated that sales had dropped sharply since the marketing controversy. "While sales are not our main concern at the moment, we have seen a very significant drop," the official said.
Global Response
Starbucks global headquarters in the US was aware of the gravity of the situation and had been receiving updates on the investigation and the company's response. Shinsegae fired the head of Starbucks Korea last week after apologizing for the campaign. Starbucks Global also apologized and said an investigation had begun.
Market Position
Starbucks is the leading food and beverage chain in South Korea in terms of estimated customer numbers in the six months to February, according to data firm Wiseapp. Shinsegae operates Starbucks Korea through SCK Company, which is 67.5 percent owned by E-Mart and 32.5 percent by Singapore's sovereign wealth fund GIC, according to a company filing.
