Philippine fast-food giant Jollibee takes global fight to Starbucks

Billionaire Tony Tan Caktiong’s Jollibee Foods, run by his brother Ernesto Tanmantiong, is investing heavily in expanding coffee sales around the world.

_By_{Jonathan Burgos}_{,Forbes Employees}

JOllibee Foods has long courted the territory of American icon Starbucks, the Seattle-based coffee giant that has more than 39,000 stores worldwide. Listed operator Jollibee’s popular fast-food chain has already outpaced its U.S. rivals McDonald’s and KFC in the Philippines, thanks to its best-selling crispy fried chicken and spaghetti with sweet sauce.

Now, in a frothy global market, Jollibee is gaining momentum again under chairman and CEO Ernesto Tanmantiong, who has his eye on a bigger reach in the fastest-growing segment of the fast-food industry. According to research firm Statista, the coffee chain’s total revenue worldwide rose 9% to $630 billion in 2023 from a year earlier and is likely to reach $800 billion by 2030. By comparison, the global fast-food business saw a 1.1% increase in total revenue to $978 billion last year.

Tony Tan Caktiong, founder and president of Jollibee.

BY AUTHORIZATION OF JOLLIBEE

“It’s a fast-growing market—a huge opportunity for us,” Tanmantiong says from a bustling Jollibee store in Pasig City, east of Manila, in early July. Just a day earlier, Jollibee announced a $238 million acquisition of a 70 percent stake in South Korea’s Compose Coffee, a coffee giant with nearly 2,500 stores, which would increase the group’s investment in coffee to about $700 million. Tanmantiong’s dream, moreover, is for the Philippines’ largest restaurant chain (by revenue and number of stores) to eventually surpass Starbucks in sales, too.

While the addition of Compose Coffee will boost Jollibee’s total store count to more than 4,700 across Asia, the Middle East and North America — from just 387 in the Philippines, where Starbucks has 450 stores — the group has a long way to go. While that number will dwarf the more than 4,600 fast-food branches it operates worldwide, for now its flagship Jollibee restaurant chain is its biggest source of sales, accounting for half of the group’s 2023 revenue of 244 billion pesos. Coffee retail accounts for about 15% of revenue, which the CEO wants to double to 30% by 2030.

It’s one of many ambitious goals set by Tanmantiong, 66, who took over as CEO from his older brother and Jollibee founder Tony Tan Caktiong a decade ago. Starting out as an ice cream and sandwich shop in 1975, Tan Caktiong became one of the richest Filipinos in 2007 and now ranks sixth with a net worth of $2.9 billion, which he shares with his family. (Under his watch, Jollibee Foods also appeared twice on our list of the 200 Best Companies Under a Billion.) He remains Jollibee’s president and CTO—chief flavor officer.

“We hope to get a better valuation from Wall Street.”

Hunting for giants

Jollibee aspires to be among the five most valuable fast-food restaurant chains in the world within the next ten years, but it still has a long way to go.

Source: Bloomberg

Coffee Bean & Tea Leaf store in Singapore.

Courtesy of Jollibee

Jollibee’s caffeine expansion began in 2012 when it bought a 50% stake in Vietnamese SuperFoods Group, operator of the Highlands Coffee chain, for $25 million. In 2019, the company upped the ante significantly with a $350 million purchase of underperforming Californian chain Coffee Bean & Tea Leaf, which remains its largest investment to date.

At first, it wasn’t a sure thing — and then Covid-19 hit, forcing the CEO to close unprofitable outlets. Five years later, the company is still in the red on a net basis but with a positive Ebitda (earnings before interest, depreciation, and amortization) in 2023. Tanmantiong is back in growth mode — opening more than 90 new Coffee Bean stores last year, bringing its total to 1,164 — and with a renewed appetite for acquisitions.

In March, the group invested $28 million for a minority stake in another California company, Botrista, which makes DrinkBot, a smart beverage station that makes drinks like iced coffee and boba teas. That was just a modest precursor to Jollibee’s big move three months later into South Korea, one of the world’s largest per-capita coffee markets. The purchase of Compose Coffee, which it expects to make soon, will give the group a leg up among younger audiences, says Jonathan Ravelas, managing director of consulting firm eMBM in Manila. “(It’s) riding on the wave of K-pop that’s popular in the Philippines,” he says, noting that artist Kim Taehyung of the South Korean boy band BTS is a brand ambassador for Compose.

Elsewhere, Tanmantiong plans to open more Highlands Coffee outlets, after opening more than 170 new outlets last year, bringing its total to 779. It is also expanding Common Man Coffee Roasters, a chain of specialty coffee shops under the umbrella of Singaporean private equity fund Titan Dining, which is 90% owned by Jollibee. In December, Common Man, with eight outlets in Singapore and Malaysia, opened its first Filipino restaurant in Manila’s financial district.

Tthe pandemic hit restaurant business worldwide and Jollibee was no exception, with revenue falling 28% to 129 billion pesos in 2020. While annual revenue now exceeds pre-pandemic levels and profits have returned, rising 16% year-on-year to 8.8 billion pesos in 2023, shares of the Manila-listed group have not fully recovered. Shares closed at 229.40 pesos on July 19, down 10% from the previous 12 months.

Tanmantiong at Jollibee’s Pasig City store in Manila.

Gio Panlilio for Forbes Asia

Ian Garcia, a Manila-based analyst at AP Securities, says investors aren’t sure when Jollibee’s aggressive moves in coffee will start paying off. “It’s made a series of acquisitions that have good potential,” he says. “But there’s a perception that Jollibee has a mixed history of turning them around.” Still, Garcia has a “buy” on Jollibee and a price target of 335 pesos—46% above its July 19 closing price.

Tanmantiong first got into the food business as a teenager, working at his father’s Chinese restaurant in Davao City, in the southern Philippines. He moved to the capital and earned a degree in business administration from Ateneo de Manila University. While studying, he worked at his brother’s store in Quezon City, on the outskirts of Manila. In 1978, the store became Jollibee’s first outlet. The brothers got going by adding Chickenjoy, a fried chicken served with a juicy marinade, to the menu, which proved wildly popular. Today, Jollibee has 19 brands in 33 countries, selling bubble tea, Chinese cuisine, Filipino barbecue and pizza in addition to coffee.

In 2014, Tan Caktiong handed over management of Jollibee to Tanmantiong to better focus on his own investments, particularly in real estate, where he teamed up with fellow fast-food tycoon Edgar Sia II to develop office buildings, shopping malls and hotels under the DoubleDragon real estate unit. Sia founded the Mang Inasal chain of grilled chicken restaurants, which Jollibee bought in two tranches for a total of 5 billion pesos. (Sia is also ranked among the Philippines’ 39th richest with a net worth of $340 million.)

In addition to coffee, the group has ramped up growth in the number of Jollibee restaurants overseas. Since rebounding from a net loss of 11.5 billion pesos in 2020, the group has added more than 1,500 stores in the past three years, bringing the total to 6,885 across its brands last year. With the acquisition of Compose Coffee and a goal of opening 750 stores this year, the group will have more than 10,000 outlets by the end of 2024.

Globalization

Over the past decade, Jollibee has increased its international presence almost six-fold.

Source: Jollibee

Tanmantiong is also banking on growth for Smashburger, which aims to compete with burger chains like McDonald’s in the U.S. and abroad. Jollibee bought the struggling Denver-based burger chain in stages between 2010 and 2018 for a combined investment of $235 million, but the pandemic forced it to cut jobs. It now has 236 stores, mostly in the U.S. and Canada, down from 340 six years ago.

Jollibee’s multi-brand strategy has allowed it to enter new markets, Tanmantiong says. For example, the group has yet to launch its flagship Jollibee brand in mainland China, where it owns and operates 465 Yonghe King stores, a Chinese restaurant chain it acquired in 2004 for $22.5 million. Systemwide sales from mainland China rose by a quarter to 22.7 billion pesos in 2023 from a year earlier.

“It is not necessary for a family member to take over. We have a deep bench of professional managers.”

Jollibee Foods’ portfolio includes Filipino-Chinese fast-food chain Chowking. The group also owns the Philippine franchise of Burger King.

Gio Panlilio for Forbes Asia

In addition, there are cross-selling opportunities for the group’s brands. Some Jollibee restaurants in the U.S. recently implemented Botrista’s DrinkBot, which helped increase beverage sales by at least 30%, Tanmantiong says. He plans to introduce the beverage dispenser to more outlets, noting that beverages have much higher margins compared with fast food.

Further synergies can be leveraged across Tan Caktiong’s investment portfolio. In June, Jollibee Foods’ first multi-brand foodservice format opened at DoubleDragon Mall in Laguna, where customers can order from the group’s restaurants—Jollibee, Mang Inasal, Chowking Chinese Cuisine and Greenwich Pizzeria—all from a single counter, with food prepared in a shared kitchen. “DoubleDragon’s real estate development expertise provides the Jollibee group’s restaurant brands with prime locations, increasing visibility, foot traffic and growth potential while reducing operating costs,” Tan Caktiong says in an email.

Tanmantiong is preparing to achieve an ambitious goal of making Jollibee one of the world’s five most valuable fast-food chains within a decade. Although a timeline has not yet been set, he is considering a U.S. listing, following other Asian restaurant operators such as billionaire couple Zhang Yong and Shu Ping’s international hot-pot chain Haidilao, which is listed simultaneously on Nasdaq and in Hong Kong. “We hope to get a better valuation from Wall Street,” he says.

In addition to the two siblings, the involvement of other family members suggests that Jollibee is a family business — their youngest brother, Joseph Tanbuntiong, is the country head for the Philippines, while Tan Caktiong’s son, Carl, is spearheading the expansion into China. But Tanmantiong dispels that notion, saying that when it comes to succession, “it’s not necessary for a family member to take over. We have a deep bench of professional managers.”

The brothers have recently made strategic additions to the roster, including hiring three Starbucks veterans. Looking ahead, Tan Caktiong exudes confidence in their renewed efforts to take on the coffee giant: “The coffee and beverage segment will be a very significant source of growth for the Jollibee group.”

With additional reporting by Ian Sayson.

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