This is the first time that a South Korean coffee brand has been acquired by a Southeast Asian company. Jollibee, which aims to become one of the world’s top five food service providers, is apparently seeking to gain dominance in the Southeast Asian coffee market beyond Korea by banking on its rapidly growing composition coffee. Jollibee also acquired Coffee Bean, once considered a rival of Starbucks. Jollibee, the Philippines’ largest food service provider, bought the coffee proposal…grow in size through acquisitions.
According to the Philippine Stock Exchange on the 4th, JFC announced that its subsidiary Jollibee Worldwide Pte. Ltd (JWPL) will acquire a 70% stake in Compos Coffee for 238 million dollars. The remaining 5% will be held by Titan Fund, which holds 90% of JWPL’s stake, and 25% will be bought by private equity fund (PEF) operator Elevation. The total sale of Compos Coffee’s stake amounts to 340 million dollars. “With the agreement between the buyer and the seller on the 2nd, we have acquired the most beloved low-cost coffee brand in Korea,” JFC said.
JFC is the largest foodservice company in the Philippines. Jollibee is already famous as a “fast food more popular than McDonald’s in the region” among domestic tourists who visited the Philippines. JFC’s market capitalization amounts to 252.4 billion Philippine pesos. It suffered a deficit through COVID-19, but is recording steep growth again after the end of the pandemic. Last year’s sales amounted to 244.1 billion Philippine pesos, up 15.2 percent from a year ago. Operating profit rose 45 percent to 14.4 billion Philippine pesos. JFC’s goal is to become one of the world’s top five foodservice companies. To that end, it is choosing to acquire existing companies rather than create new brands. Key products include Tim Ho-Wan, a franchise dim sum chain in Singapore, and Milksha, a bubble tea brand in Taiwan. In order to increase its coffee market share, it already acquired Vietnam’s No. 1 Coffee Highland 10 years ago and bought Coffee Bean & Leaf in 2019. Why Compos Coffee…The acquisition of JFC, a “real” company with an operating margin of 41 percent, seems to be a stepping stone to increase its dominance in the Southeast Asian coffee market as soon as it begins to tap into the Korean coffee market. In fact, JFC revealed its ambition to pioneer the Korean market in the announcement of its acquisition of Compos Coffee. “With this acquisition, JFC said, Jollibee will cross the gateway to pioneering a fast-growing low-cost coffee market in Korea, the world’s third-largest coffee market.” In Korea during the era of high prices, the high-priced coffee market has slowed down, while the low-priced coffee market is growing steeply. In particular, Compos Coffee is expanding clearly. It also opened 626 new stores, the largest number of coffee franchises, in 2022. According to the Fair Trade Commission, as of the end of 2022, Compos Coffee had 1901 stores, ranking third in Korea after Ediya Coffee (3005) and Mega Coffee (2156). Currently, there are 2,612 stores.
Compose Coffee grew into a net company with $64 million in sales and $26.45 million in operating profit last year. In terms of operating profit, it increased 20.5% from a year ago, and its operating profit ratio recorded 41%, the highest among low-cost coffee brands. This is why Compose Coffee, first established by JM Coffee Chairman Yang Jae-seok in Gijang-gun, Busan, 10 years ago, was acquired by the Philippine fast food giant.
SALLY LEE
US ASIA JOURNAL
