Jollibee has appetite for expansion
Targets could be fast-food chains
MANILA/SINGAPORE: Jollibee Foods Corp, the fast-food chain that controls more than half of the Philippines’ $4 billion market with its signature fried chicken, is looking for acquisitions to accelerate ambitious expansion plans in the United States and China.
The targets could be other fast-food chains as well as fast-casual restaurants like Smashburger, the US franchise in which Jollibee owns 40%, president Ernesto Tanmantiong said in an interview.
“We are looking at the world arena,” he said. “The acquisition of new businesses is part of our growth strategy and, over the last few years, we have been entertaining opportunities.”
Pasig City-based Jollibee is on track to meet its goal of doubling profit in the five years through 2019, and Tanmantiong now wants it to be one of the five biggest restaurant chains by market capitalisation globally. Its current market value is $5.2 billion.
Jollibee, which had about 14 billion pesos ($272 million) in cash and equivalents as of June 30, operates more than 3,500 stores globally, according to its second-quarter earnings statement. Its bestselling item is called Chickenjoy.
Three-quarters of those outlets are in the Philippines, where the company is capitalising on an economy that’s grown by at least 6% for nine straight quarters.
The World Bank projects that streak to continue through 2019 as consumer spending increases and the population grows at a faster rate than the global average.
“Jollibee is well-positioned for growth given its diversified portfolio,” said Noel Reyes, who helps manage $1 billion as chief investment officer at Security Bank Corp.
“Its Philippine operations will gain from increased consumer purchasing power while its overseas expansion has huge opportunities. It’s not just a chicken-and-burger stock anymore.”
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Jollibee generated 21% of its 113.9 billion pesos in revenue overseas last year, according to data compiled by Bloomberg. When Smashburger is included, that segment increases to 30%, according to the company.
“We are optimistic with the future of the Philippine market,” said Tanmantiong, 59. “Major pillars will still be the Philippines, China and US, although we don’t close our door to opportunities in other
geographic areas.”
Its expansion plans focus on overseas locations with a concentration of Filipinos, such as Florida, California, Hawaii and Guam in the US. The chain opened its first Florida store in Jacksonville in March, making it the 36th outlet in the US.
In 2015, Jollibee spent $100 million for its stake in Smashburger, which had 362 stores in the US as of June 30.
It has completed 12 deals valued at about $301 million since 2010, according to data compiled by Bloomberg.
The company has considered about 20 potential acquisitions during the last two years. Local and international media have reported that Jollibee is considering a bid for Pret A Manger Ltd that values the UK-based sandwich maker at more than $1 billion.
When asked about those reports during the Oct 11 interview, Tanmantiong would only say the company hasn’t made any bids in recent months.
“We are prioritising the markets with bigger Filipino communities,” said Tanmantiong, who became president and chief executive officer in 2014. His older brother, Tony Tan Caktiong, founded the chain as an ice cream parlor in Quezon City in 1975.
Jollibee’s Chinese operations include Jollibee and Hard Rock Cafe outlets in Hong Kong and brands on the mainland that include Dunkin’ Donuts, noodle chain Yonghe King and congee outlet Hong Zhuang Yuan.
“China is now one of the highest growth areas in our business,” Tanmantiong said.
“The company wants half of its sales to come from overseas in five to seven years, with China and the US being key markets,’’ he said. “Yet those plans may be complicated by territorial disputes with China over islands in the South China Sea.’’
In Europe, the chain is targeting Filipino communities in the UK, Italy and Spain. Jollibee will open its first stores in Milan and London next year, with plans to push into Japan and Australia by 2020.
The company also wants to take its Philippine chicken barbecue chain, called Mang Inasal, and its Chinese restaurants global.
“Our assumption is: the growth we’ve had in the last six years, we can double,” Tanmantiong said. “The opportunities are out there.”