The retailer, whose subsidiary E-Mart owns the coffee chain in South Korea, has faced mounting criticism over its ‘Tank Day’ tumbler marketing campaign launched on the anniversary of the May 18 Gwangju Uprising, when the military government deployed troops and tanks to suppress pro-democracy demonstrations.
In a press conference on Tuesday, Shinsegae Group chairman Chung Yong-jin made a public apology and asked people not to take out any anger on Starbucks Korea employees and frontline staff.
“I take it very seriously that Starbucks Korea’s inappropriate marketing hurt and angered many people,” Chung said. “I will take all responsibility for the incident,” Chung added.
Hundreds of people are estimated to have died or gone missing when the military dictatorship of Chun Doo-hwan cracked down on the protests in Gwangju. Many details remain unconfirmed, including who gave the order to open fire.
Shares in Shinsegae fell as much as 2.8% in morning trade before reversing course to rise 1.7% as of 1.16am, while E-Mart shares gained 2.3%, compared with a 3.2% rise in the benchmark Kospi.
A Shinsegae official said sales had fallen sharply since the marketing controversy and an internal investigation was focused on whether there had been any premeditation or intentional wrongdoing by management or employees.
“While sales are not our main concern at the moment, we have seen a very significant drop,” said the official.
‘Serious flaws’ exposed
“Starbucks Korea’s e-commerce team organised the campaign and received final approval from team leaders and executives,” the official said.
The investigation had not been able to conclude whether there was intentional wrongdoing, but the incident exposed serious flaws in Starbucks Korea’s risk management framework, the company said.
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, it said.
“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,” it added.
Shinsegae fired the head of Starbucks Korea last week after apologising over the campaign.
Starbucks Global also apologised and said an investigation had begun.
Starbucks is the leading food and beverage chain in South Korea in terms of the estimated number of customers in the six months to February, according to data firm Wiseapp.
Shinsegae operates Starbucks Korea through SCK Company, which is 67.5% owned by E-Mart and 32.5% by Singapore’s sovereign wealth fund GIC, according to a company filing.
Chung’s apology “seemed sincere” and Shinsegae’s internal probe appeared to have been “wrapped up well”, a spokesman for South Korea’s ruling Democratic Party was reported as saying by the Yonhap news agency.
The spokesman added the party would seek to ensure such campaigns did not happen again.