Jollibee considering US targets in bid to boost foreign business

JOLLIBEE FOODS Corp. (JFC) is considering further inroads into the United States by acquiring an established brand there, as it seeks to put its foreign operations on equal footing with Philippine businesses in terms of revenue contribution. "We’d like to have more play in the US market, so we’re probably looking at a certain acquisition in the US market," JFC Chairman and Chief Executive Officer Tony Tan Caktiong said after the group’s annual stockholders meeting Friday in the Ortigas district. While there are no negotiation as yet, he said an acquisition has the potential to expedite the firm’s plan to achieve a 50-50 split for local and foreign operations.

"It’s more an issue of what’s available and how big are they, and if it’s too big, then maybe we may have to look for joint partners to go into it. So we’re still very flexible, and more important is we want to go into a brand that is already growing," he said. Mr. Tan explained that a certain size and room for further growth were also criteria and noted that the group’s cash position was "quite healthy," with strong access to credit lines.

He added that the company wants to focus on the US acquisition and on China operations as these are two of the world’s largest consumer markets. Jollibee’s expansion into Canada by next year was also a priority, but the group is still analyzing the Indonesian market. "The only places we are not that profitable are Vietnam and China, but in China the brands are actually profitable; we just have a lot of overhead because of our central plants, but the brands are okay. In Vietnam, we are making investments for our growth," Ysmael V. Baysa, chief financial officer said, adding that those losses were "quite manageable."
He added that for the second quarter thus far, business "continues to be strong" for local and overseas brands, with the group enjoying double-digit sales growth in some brands.

Mr. Baysa noted that the company was behind on spending the P6.3-billion allocated this year for store expansion and renovations. Mr. Tan also noted that his brother, Chief Operating Officer Ernesto Tanmantiong, will take over the CEO position at Jollibee on July 1, with himself remaining chairman, where he will remain in charge of strategic direction, product development, as well as mergers and acquisitions. Mr. Tanmantiong added that the company will open more than a dozen Burger King outlets within the year, with choosing locations requiring extra care because of that brand’s A-B target market.

In the first quarter, the group reported an increase in total net income of 20.5% to P1.08 billion. A 14.6% rise in sales - the fastest in five years -- came off strong performance in its local and overseas stores, with the highest growth rate of 39.1% recorded for its Southeast Asia and Middle East operations. Aside from its flagship restaurant, the group owns the Chowking, Greenwich, Red Ribbon, Mang Inasal, and Burger King brands, as well as the Yonghe King, Hong Zhuang Yuan, San Pin Wang, and Jinja Bar brands, mostly based in China.

According to its first quarter report, the group had 2,805 stores globally, with 2,217 in the Philippines comprising 828 Jollibee, 405 Chowking, 202 Greenwich, 287 Red Ribbon, 460 Mang Inasal, and 35 Burger King branches. Its 588 stores overseas meanwhile consist of:

1.   316 Yonghe King, 45 San Pin Wang, and 43 Hong Zhuang Yuan stores in China;

2.   103 Jollibee stores in Brunei, Hong Kong, Kuwait, Qatar, Saudi Arabia, Singapore, the United States and Vietnam;

3.   32 Red Ribbon branches in the US;

4.   46 Chowking restaurants in Oman, Qatar, UAE, and US; and

5.   three Jinja Bar outlets in the US.

JFC is also a 50% joint venture partner in 77 Highlands Coffee local and Vietnam stores, 58 Pho 24 branches, and 12 Sabu outlets. Jollibee shares shed a peso or 0.56% to P176 on Friday (June 27, 2014).