21 Oct 2022 – Jollibee Foods aims to double its business in the next five years by aggressively growing in the U.S. and China, the company’s president and CEO told Nikkei Asia, as the Philippine fast-food group famous for its Chickenjoy and Jolly Spaghetti plots a post-pandemic expansion.
Ernesto Tanmantiong said in an interview that one of Asia’s most famous restaurant chains planned to have 10,000 branches in its network by 2027 compared with close to 6,300 as of end-June.
The plan would come on top of further acquisitions that the company might make, Tanmantiong said. Over the past five years, Jollibee has taken over foreign chains such as Smashburger and The Coffee Bean and Tea Leaf in the U.S., and the Milksha bubble tea brand in Taiwan.
“Our ambition is to make JFC (Jollibee Foods Corporation), a Filipino company, into a truly global company,” Tanmantiong said on Oct. 10. International sales should account for half of Jollibee revenues in 2027, he said. Today around 60% of revenue comes from the Philippines, where Jollibee has over 3,000 branches.
The bullish forecast comes as Jollibee increases sales and profits as the company recovers from the COVID pandemic. System-wide sales — which include those from all brands, and both directly owned and franchised stores — grew 35.4% to 133.1 billion pesos ($2.26 billion) in the first half of 2022, while net profit jumped 351.7% to 5.1 billion pesos. Jollibee does not issue specific revenue and profit forecasts.
“We think we can continue to grow double-digit growth in the next five years. And that would mean doubling our business today,” Tanmantiong said.
Tanmantiong said the company is keeping its target of becoming one of the five most valuable fast-food companies in the world, joining the ranks of McDonald’s and Starbucks. He said Jollibee, which operates in over 30 countries, was already among the 10 largest by market cap before the pandemic. It slipped to 18th at one point as the Philippines — its main market — imposed one of the world’s longest lockdowns.
Jollibee already has 18 brands under its wings, including a Burger King franchise in the Philippines, where it also has joint ventures with Japan’s Yoshinoya and Panda Express of the U.S.
Overseas, it is focusing on building its footprint in North America and China, which accounted for 13% and 6% of its first-half system-wide sales, respectively.
Tanmantiong said “strategic acquisition” remains part of the company’s global growth strategy. There are a lot of companies that have been offered to Jollibee, but no deal was in the works, the CEO said.
He said the four key categories for acquisitions are: chicken, burger, Chinese cuisine and beverage.
In Asia, it has taken over Singapore-based franchise Tim Ho Wan, a dim sum chain, and bubble tea brand Milksha in Taiwan. It recently pumped around $60 million into Tim Ho Wan, which is planning to open 100 stores in China.
Jollibee began as an ice cream shop in 1975, founded by now-Chairman Tony Tan Caktiong, Tanmantiong’s older brother. It moved into hot meals in 1978, just as McDonald’s was about to enter the Philippines.
Jollibee would later outsell its U.S. competitor by offering Filipino favorites: savory fried chicken, spaghetti with sliced hot dogs and sweet tomato sauce, and its Yumburger, which uses slightly sweet mayonnaise.
Tanmantiong said Jollibee is attempting to popularize these products overseas. They have so far gained growing but mixed acceptance among non-Filipino customers.
Chickenjoy, he said, is “universally accepted” while Jolly Spaghetti is “polarizing,” Tanmantiong said. “We noticed it is more accepted in Asian markets than in Western markets.”
To suit foreign tastes, the company has introduced a “better burger” that uses American beef and mac and cheese in the U.S., where it is also planning to offer chicken nuggets and chicken tenders.
In Vietnam, “sweet chili chicken” is part of the menu, and the flavor of its spaghetti sauce is being adjusted for some markets that “find it too sweet,” Tanmnationg said.
That strategy could help Jollibee reduce its reliance on the communities with a large Filipino diaspora, the company’s beachhead overseas.
In Singapore and Hong Kong, 50% to 60% of customers are non-Filipino, Tanmantiong said. “In North America, we are also in the crossover stage, wherein there are certain stores that are already generating 70% non-Filipino [customers],” he said.
Tanmantiong plans to increase the number of Jollibee’s North American branches to 500 in five years from less than 100 at present.
Tanmantiong said the company will also invest more in digital initiatives that include development of a mobile app, loyalty programs, virtual drive-thrus and cloud kitchens.
But despite its ambitions, the company is facing challenges. Apart from struggling to turn around Smashburger — a deal often cited by analysts who raise questions about the success of Jollibee’s investment overseas — Jollibee is navigating global supply chain bottlenecks and rising inflation that threaten to squeeze its bottom line. Passing added costs onto consumers, meanwhile, is not easy. “You lose volume if you price too aggressively,” said Richard Shin, the company’s chief financial officer who joined the interview.
Shin also said the strong U.S. dollar is still a “net risk” given the company’s reliance on Philippine revenue. Around two-thirds of the company’s debts are dollar-denominated, although the bulk of them are locked in fixed rates, he said.
At the same time, the coronavirus remains a threat. In China, sales tumbled by nearly 30% in the second quarter when the company had to close some stores under President Xi Jinping’s zero-COVID strategy of sporadic lockdowns to contain even small outbreaks.
Tanmantiong said China’s lockdowns — which have been eased — were “quite severe and our business was badly affected.”
