Mongolia Emerges as a New Battleground for K-Distribution

Mongolia is emerging as a battleground for South Korea's retail industry. With a young demographic and the popularity of K-content, businesses are expanding beyond convenience stores and large supermarkets to include private brand (PB) specialty stores and restaurant franchises.

According to data from the Korea Customs Service on May 10, South Korea's exports to Mongolia rose from $271.16 million in 2020 to $660.46 million last year. This marks a more than twofold increase over five years, reflecting a consistent upward trend in exports during this period.

Analysts attribute this export growth to the influence of K-content. In Mongolia, where over 60% of the population of approximately 3.5 million is under the age of 34, the popularity of K-content has led to a surge in exports of South Korean consumer goods, including cosmetics and food products. Cosmetic exports skyrocketed from $31 million in 2023 to $45 million last year, while exports of K-food items such as ramen, snacks, and seasoned seaweed grew by 8%, 40%, and 38%, respectively.
 

Recognizing Mongolia's growth potential, South Korean retailers are intensifying their efforts to penetrate the market.

E-Mart plans to open three No Brand specialty stores in Mongolia this year. The company entered the Mongolian market in 2016 as a master franchise and currently operates six stores. E-Mart aims to expand its business by establishing No Brand as a separate specialty store. To facilitate this, it signed a business agreement with SKY Hypermarket LLC, the operator of E-Mart in Mongolia, at the end of last month. The goal is to increase the number of No Brand specialty stores to 15 by 2028 and to establish a dedicated logistics cluster, with plans to expand to 50 stores within ten years.

The K-distribution wave in Mongolia is prominently represented by convenience stores. BGF Retail's CU has been operating 556 stores since entering Mongolia in 2018, while GS25, which entered in 2021, has expanded to 292 stores, increasing its market share. These stores have positioned themselves as key cultural spaces for Mongolia's 2030 generation by offering differentiated products such as Korean-style instant foods like tteokbokki and gimbap.

Restaurant franchises and beverage brands are also accelerating their entry into the Mongolian market. CJ Foodville's Tous Les Jours, which entered Mongolia in 2016, operates 24 stores and has sold over 1.7 million cakes in ten years. MegaMGC Coffee, known for its affordable coffee, opened its first store in May 2024 and has expanded to eight locations in just over two years.

Lotte Chilsung Beverage's beer brand, Crush, which entered the market in 2024, is now available in over 2,000 locations, including convenience stores and large supermarkets. This has contributed to a nearly 90% increase in Lotte Chilsung's beer exports to Mongolia last year compared to the previous year. The strong performance in exports to Mongolia has also led to a 40% increase in global beer exports last year.

An industry insider noted, "Mongolia is a new emerging market that the South Korean retail industry is focusing on to reduce its dependence on China. With convenience stores and large supermarkets already established, competition for market share among franchises, PBs, and beverage brands is expected to intensify in the future."