Philippine fast food specialist Jollibee hungry to expand in U.S., China
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[September 13, 2019] By
Neil Jerome Morales and Martin Petty
MANILA (Reuters) - Jollibee Foods Corp <JFC.PS>,
the Philippine fast food specialist known for fried 'Chickenjoy' and
chopped hotdogs in sweet spaghetti sauce, is doubling down on expansion
plans in the United States and China that are likely to include more
M&A.
Helped by the purchase of California-based Coffee Bean & Tea Leaf in
July and having taken full control of Denver-based Smashburger in 2018,
it wants to earn 30% of its revenue in the United States in a decade's
time, executives told Reuters.
It is also aiming to lift revenue in China to 30% of overall sales,
while the Philippines would fall to 30%.
That would represent a major rejig of revenue streams for Jollibee,
which ranks No. 4 among Asia's listed quick service restaurant firms,
and would build upon plans to cut its reliance on its domestic market to
50% of sales in the "medium term".
Prior to its acquisition of Coffee Bean, the Philippines accounted for
73% of sales while the United States represented 15% and China 12%.
![](http://archives.lincolndailynews.com/2019/Sep/13/images/ads/current/graue_19TRAX_082619.png)
"We want to spread our portfolio and risk," Jollibee CEO Ernesto
Tanmantiong said in an interview. "There's huge opportunity out there."
Jollibee, which is valued at $4.8 billion and has 16 brands or
franchises to its name, aims to have six brands each in the United
States and China, just as it does in the Philippines.
In the U.S. market, it currently has five including its namesake
Jollibee restaurant chain and a minority investment in Tortas Frontera,
run by Michelin-starred chef Rick Bayless and which offers
Mexican-inspired sandwiches at just three outlets in Chicago's O'Hare
airport.
It has three brands in China - the Dunkin Donuts franchise, as well as
the Yonghe King noodle and Hong Zhuang Yuan congee restaurant chains.
(GRAPHIC: Jollibee: The little bee that could -
https://graphics.reuters.com/
JOLLIBEE-EXPANSION/0100B26012Q/
PHILIPPINES-JOLLIBEE.jpg)
TRUSTING ONE'S GUT
Jollibee likes to acquire quite small, loss-making firms at low prices
and turn them around. It receives business proposals frequently but
acquisitions are more often stumbled upon during one of Chairman's Tony
Tan Caktiong long food tasting trips than sought out through bankers.
"Most of the acquisitions resulted from Tan Caktiong eating in a
restaurant, liking the food and asking 'who runs the place?'," said
Erwin Elechicon, former chief of Jollibee's international operations.
That was the case with Tortas Frontera. Tan, also founder of the company
and brother of CEO Tanmantiong, had eaten one of its sandwiches at the
airport.
While noting they tend to buy small, Jollibee executives say they are
open to any type of acquisition if the food is good.
But they acknowledge their immediate focus is on turning around
Smashburger and Coffee Bean - both loss-making and bigger than
Jollibee's usual acquisitions with $210 million spent on Smashburger and
Coffee Bean costing $350 million including debt.
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![](../images/091319pics/busine31.jpg)
Ernesto Tanmantiong, the president and CEO of Philippine national
champion Jollibee Foods Corp., poses for a picture beside a Jollibee
mascot outside a Jollibee branch in Pasig City, Metro Manila,
Philippines, July 30, 2019. Picture taken July 30, 2019.
REUTERS/Eloisa Lopez
![](http://archives.lincolndailynews.com/2019/Sep/13/images/ads/current/fcs_funeral_lda082613.png)
Investor concerns that Jollibee is overextended were exacerbated by first-half
profit sliding by a third to 2.66 billion pesos ($51 million) due to losses at
Smashburger and deliveries problems with its Red Ribbon Bakeshop. Its stock has
lost 18% since late July when it announced its purchase of Coffee Bean.
"It would be better for them not to do another acquisition at least of this
scale until Smashburger and CBTL become profitable," said Renzo Louie Candano,
analyst at DBP-Daiwa Capital Markets in Manila.
Jollibee believes, however, that it has not overreached. Nor is it concerned
that any of its targeted markets are saturated or that it might not be able to
compete with the likes of Starbucks <SBUX.O>.
"Every restaurant in the Philippines has fried chicken, in Vietnam there are
maybe 10 coffee shops on every block. In the midst of all of this competition,
there's always a standout one or two," said Chief Financial Officer Ysmael Baysa.
"How are you going to do it? Our formula is very simple. Offer the best tasting
food at the right price and you're going to make it."
He noted that Coffee Bean had a strong presence in Southeast Asia and the Middle
East, regions where coffee culture still has a lot of room to grow and that its
Highlands Coffee stores in Vietnam logged revenue growth of around 32% last
year.
It has also taken on big chains before.
Not long after Jollibee, originally an ice cream parlor, started selling burgers
in 1978, friends advised Tan Caktiong and his brothers to quit, warning the
imminent arrival of U.S. giant McDonald's <MCD.N> in Philippines would decimate
Jollibee's six branches.
Undeterred, the firm took on McDonald's by surrounding each big branch with
smaller Jollibee outlets, and measuring the U.S firm's sales by counting trash
outside its branches. Since 1984, Jollibee has outsold McDonald's domestically.
(GRAPHIC: Jollibee and McDonald's in the Philippines -
https://graphics.reuters.com/
JOLLIBEE-EXPANSION/0100B26112S/
PHILIPPINES-JOLLIBEE2.jpg)
Outside the Philippines, Jollibee restaurant locations tend to be in areas with
large expat Filipino populations. But executives point to its growing popularity
with non-Filipinos, particularly in Vietnam, Singapore and Hong Kong.
![](http://archives.lincolndailynews.com/2019/Sep/13/images/ads/current/charrons_bch041713.png)
It also has big plans to expand the Jollibee chain in North America, aiming for
150 U.S. stores and 100 in Canada over five years, up from 37 and 4
respectively.
(Reporting by Neil Jerome Morales and Martin Petty in Manila; Additional
reporting by Anshuman Daga in Singapore; Editing by Edwina Gibbs)
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