Starbucks Korea posts first loss in 27 years as controversial promotion sparks boycott

Starbucks Korea has reported its first loss in 27 years, amounting to 18.4 billion won (approximately SGD13 million) for the quarter ending June, as the company grapples with controversy over a recent promotion. The operating loss marks a stark contrast to the 40.3 billion won profit the company enjoyed in the same period last year.

Net sales declined by 6.1% from a year ago, reaching 747.3 billion won. Despite adding 49 new stores in South Korea, the market that accounts for the majority of its global presence, the loss underscores the negative impact of recent marketing decisions. The company's troubles began with a controversial "Tank Day" promotion in May, offering discounts on large water containers on the anniversary of the 1980 Gwangju uprising, where South Korean troops deployed tanks to quell protests.

The campaign drew widespread criticism, including from South Korean President Lee Jae Myung, prompting Starbucks Korea's chief executive to resign and the company's chairman to issue a televised apology. In an attempt to regain trust, Starbucks Korea has vowed to focus on stabilizing its business, with the company acknowledging its responsibility for the incident.

Authorities have taken action, with police conducting searches at the company's headquarters in Seoul. The marketing campaign has also led to an investigation into the matter. Following the controversy, Shinsegae Group, the majority shareholder of Starbucks Korea, announced plans to close all of the company's over 2,000 stores in South Korea on June 22 to ensure comprehensive training on modern Korean history and social sensitivity for employees.