Jollibee Foods Corporation has always been a fierce competitor in the fast-food industry, consistently going head-to-head with some of the world’s biggest food giants like McDonald’s and KFC. What’s impressive is that Jollibee isn’t just challenging these big names in the Philippines; they’re also expanding their battle to North America, with several stores now open across the United States. This expansion has helped Jollibee become one of the world’s most valuable brands and Asia’s strong representative in the fast-food scene. But Jollibee isn’t stopping there. They have their sights set on a new goal: entering the massive coffee market and challenging none other than Starbucks.
Many people might not know that Jollibee has been quietly making moves in the coffee business for a while now. Beyond their famous fast-food chain, Jollibee Foods Corporation is actually a large food conglomerate owning several other businesses, including some big names in the coffee industry like The Coffee Bean & Tea Leaf, Highlands Coffee, and the recently acquired Compose Coffee. These three brands are Jollibee’s key players in the coffee industry, and they are already strong competitors against Starbucks. Let’s dive deeper into each of these companies to understand their importance to Jollibee’s future.
First up is Compose Coffee, the newest addition to Jollibee’s portfolio.
On July 2, 2024, Jollibee Foods Corporation announced that they had finalized an agreement to acquire a 70% majority stake in Compose Coffee, with the remaining 30% held by two other companies, one of which is Elevation Equity Partners Korea Limited, holding a 25% stake.
So, who exactly is Compose Coffee, and why is it significant? Compose Coffee is a leading brand in South Korea’s coffee industry, known for its rapid growth in franchised stores and high customer satisfaction. As of February 2024, Compose Coffee operates 2,470 stores, supported by South Korea’s largest in-house coffee roasting facility. This setup allows the brand to offer high-quality specialty beans at a low cost. With BTS’s V as their brand ambassador, Compose Coffee is on its way to becoming the largest and fastest-growing value coffee brand in South Korea. Since their inception in October 2014, they have sold over 240 million cups of coffee.
What’s particularly exciting about this acquisition is that it positions Jollibee in one of the most lucrative coffee markets in the world. South Korea has the third-highest per capita spending on coffee globally, with an average of over $208 per person—the highest in Asia. This acquisition not only strengthens Jollibee’s presence in the coffee industry but also pushes them into one of the world’s most competitive markets.
However, this move wasn’t cheap. The acquisition of Compose Coffee was valued at a hefty $340 million. The good news is that Compose Coffee is fully franchised, meaning it maintains a debt-free balance sheet and delivers strong cash returns and profit margins. With this acquisition, Jollibee’s global store network expands to 10,000 locations.
Analysts have praised Jollibee for this strategic acquisition, noting that it will allow them to further expand their global footprint and take advantage of promising market opportunities.
Next, let’s talk about Highlands Coffee, Jollibee’s other major investment in the coffee business. Highlands Coffee is a well-known brand in Vietnam, similar to how Compose Coffee is in South Korea. In 2011, Jollibee pursued a 50% stake in Superfoods Group, the owner of Highlands Coffee and operator of Highlands Coffee Shops. Superfoods also owns Pho 24 restaurants and operates Hard Rock Café franchise stores in Macau, Hong Kong, and Vietnam.
At the time of the deal, Highlands Coffee Shops operated 54 stores in Vietnam, while Pho 24 had 2 restaurants in the Philippines, 48 in Vietnam, and 19 in other Asian countries. After this investment, Jollibee brought Highlands Coffee to the Philippines, where it expanded significantly.
By 2023, Highlands Coffee had become one of the top brands in Vietnam, ranking 6th among the strongest brands in the country. This achievement is remarkable, considering Jollibee acquired the company for just $25 million. As of September 2023, Highlands Coffee is the third-largest brand in Jollibee’s entire business, surpassing well-known names like Chowking, Red Ribbon, and Mang Inasal. Only The Coffee Bean & Tea Leaf and Jollibee itself have a larger store network.
Finally, the most significant coffee brand under Jollibee’s umbrella is The Coffee Bean & Tea Leaf (CBTL). CBTL is the second-largest brand in Jollibee’s portfolio and represents one of the biggest overseas investments ever made by a Philippine company.
In 2019, Jollibee acquired CBTL for over $350 million, gaining 100% ownership of the company. At the time of acquisition, CBTL had a presence in over 27 countries, contributing 14% to Jollibee’s global sales and expanding its store network by 26%. This acquisition also increased the share of Jollibee’s international business to 36% of its worldwide sales, aligning with their goal of becoming one of the top five restaurant companies globally.
CBTL operates 1,180 outlets, with 336 company-owned and 844 franchised. These stores are spread across various regions, including 288 in the US, 439 in Southeast Asia (with 150 in the Philippines, 88 in Indonesia, 100 in Malaysia, and 65 in Singapore), 301 in East Asia (with 290 in South Korea), and 152 in the Middle East and other parts of Asia.
However, CBTL did face challenges. In 2018, it reported a net loss of $21 million. Jollibee was optimistic about turning the company around within 12 to 18 months, but some analysts were skeptical. An article by Esquiremag suggested that one of the reasons Jollibee’s stock had been struggling was due to their recent acquisitions, particularly CBTL, which significantly increased Jollibee’s fixed costs and operating risks.
Before acquiring CBTL, Jollibee’s average operating leverage was relatively low, meaning they had a conservative risk profile. However, after consolidating CBTL and Smashburger into their accounts in 2019, Jollibee’s operating leverage turned negative, indicating that the fixed costs from CBTL negatively impacted the profitability of Jollibee’s other businesses.
In addition to these three major coffee brands, Jollibee also owns Common Man Coffee Roasters, which opened its first café in the Philippines in January 2024. In March, Jollibee made a $28 million investment for a minority stake in Botrista, a California-based company known for its DrinkBot, an automated beverage station that prepares drinks like iced coffees and boba teas.
So, can Jollibee take on Starbucks? While it’s still a long shot, Jollibee remains optimistic. As of now, Jollibee is valued at around $4.52 billion, with total sales of approximately $4.5 billion. In comparison, Starbucks is worth over $87 billion, with sales exceeding $36 billion. Clearly, Jollibee is still a smaller player, but its location in Asia—home to the world’s largest population and some of the fastest-growing economies—gives it plenty of room to grow. If Jollibee plays its cards right, it’s not impossible for them to take market share from giants like Starbucks, KFC, and McDonald’s.