Jollibee Foods Corporation, one of the largest Asian food service companies, is not planning to bring recently-acquired Compose Coffee to the Philippines over the next five years as it will be focusing on growing the brand’s market share in South Korea.
In an interview, Jollibee Chief Finance Officer Richard Shin said “there is no plan to bring Compose to the Philippine” since it still has a large potential for growth in South Korea where it has an eight percent market share.\
“Our infrastructure, in particular the roasting plant, everything, is in Korea. We're very focused on Korea for at least the next five years. We'd like to take market share growth in Korea that will be a better return on shareholders,” he explained.
Shin said Compose Coffee is “quite lucrative and quite profitable. We think, purely from the cash that it generates, we probably would have a very quick payback. I don't know exactly how many years because we haven't really taken over the company (yet). So we don't know in terms of growth rate potential.
“But even if we take a very modest growth rate, just based on roughly 30 to 40 new franchisees opening stores per month... if you just add that in, you get to a pretty decent growth rate.
“And, with that growth rate, there's no reason why five to six years, we should not be able to hit payback on this.”
After acquiring Compose Coffee, Shin said Jollibee is “not looking for acquisitions. We're looking to expand Jollibee internationally as a priority. We're looking to make sure we get through the macro headwinds in China.”
“China is going through some challenges. And we're not looking at a one or two year challenge. We think this could be over an extended number of years...
“So we were geared up. We're very encouraged by our strategy in China, which is to be very capital light, which means our franchisees need to have a good payback,” he added.
Jollibee also aims to grow fast in the Middle East and Southeast Asia and is looking at the US with some strategic moves that will help expand in North America.
Jollibee is acquiring a majority stake in “most loved South Korean value coffee brand” Compose Coffee Co., Ltd. for $340 million.
JFC said it has signed definitive agreements such that its wholly owned subsidiary Jollibee Worldwide Pte. Ltd. (JWPL) shall acquire majority shareholding of effectively 70 percent in Compose Coffee and JMCF Co. Ltd. collectively called Compose Coffee.
The remaining shareholdings shall be held by Titan Dining II LP (Titan Fund II), which is 90 percent-owned by JFC, and Elevation Equity Partners Korea Limited with effective shareholdings of 5 percent and 25 percent, respectively.
“The business that Compose Coffee has built in the past 10 years is impressive and we are excited to play a major role in its next phase of growth,” said JFC Chairman Tony Tan Caktiong.
He added that, “We believe that Compose Coffee is a compelling strategic fit for JFC and is on track to becoming the largest, fastest growing and leading value coffee player in South Korea.”
“Together with Elevation and Titan Fund II, we look forward to working with the Compose Coffee’s accomplished management team to further accelerate the company’s growth in existing and new markets and capture the significant whitespace in South Korea’s value coffee market,” noted Tan Caktiong.
Compose Coffee and its roasting facility JMCF Co. Ltd. were founded in Busan in 2014. It is one of South Korea’s leading coffee franchise in the fast-growing value coffee segment with over 2,600 stores in the country as of June 2024.