December is the last month in the tumultuous 2010s, a decade that saw the rise of new political heroes and villains, a changing of the guard in different sectors of society, the growing concern for climate change taking a more desperate turn, and an unending cacophony of opinionated people screaming into the Facebook void. In "The Last 10 Years," a series of pieces scattered over these last 30 days, we look back at what happened to try to figure out what comes next.
The year was 2010, Injap Sia and his Mang Inasal barbecue chicken fast-food chain was challenging Jollibee outlets everywhere across the Philippines. Mang Inasal was less than a decade old at the time, but Sia’s offerings of Ilongo chicken inasal, chicken oil, and unlimited rice were cutting into Jollibee’s Chicken Joy sales at a rate even Ronald McDonald could not replicate. What did Tony Tan Caktiong and Jollibee Foods Corporation do? It bought Mang Inasal for PHP 3 billion, a record takeover in the Philippine restaurant industry. That was how Jollibee’s decade started.
Now 2010 was not a terrible year for Jollibee. It grew its net income by 16 percent to PHP 3.1 billion, powered by the Philippines’ largest fast-food chain network, 1,921 stores at the time. Its international portfolio however was still quite small, at just 395 stores overseas. (The Mang Inasal chain giving Jollibee so much trouble had 303 stores.) Jollibee was also in the process of rationalizing its assets. That same year it sold its stake in the French pastry store Delifrance after just four years of operations. Just a few quarters earlier, it sold restaurant chains in Taiwan and China that were contributing less than one percent to their global sales. Its bankable assets however were still quite impressive. Aside from the flagship Jollibee franchise, Tony Tan Caktiong also bought out Greenwich, Red Ribbon, and Chowking, which celebrated its 25th anniversary in 2010. But the company wanted more.
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Throughout the decade Jollibee would continue to accumulate more, by gobbling up more of the competition in the Philippines, and acquiring new businesses across the globe. It bought the Philippine Franchise of Burger King, half of the SuperFoods Group which controlled the brands Highlands Coffee and Pho 24 in Vietnam, 100 percent of US based fast food chain Smash Burger, Mexican food chain Tortas Frontera, multiple restaurant chains in China including the franchise for Dunkin Donuts there, the Singaporean franchise for Michelin starred Tim Ho Wan, and most recently, the US based Coffee Bean and Tea Leaf. All of these acquisitions, alongside openings of Jollibee’s other brands, are expected to push the group’s global store count to over 6,000 in over 35 countries by the end of 2019.
Anthony Bourdain’s blessing
Jollibee’s aggressive expansion into parts previously unknown to Filipino food business led to a now immortalized encounter with Anthony Bourdain. The late, great food critic featured Jollibee in his show Parts Unknown in 2013 and famously said “I sneer at fast food, revile it at every opportunity, but I am also a hypocrite because to me, Filipino chain Jollibee is the wackiest, jolliest place on Earth.” He would go on to praise Jollibee’s sweet and tangy spaghetti which he described as “deranged yet strangely alluring,” and Halo-Halo to which he said “I love it, it’s oddly beautiful.” Bourdain was well respected in the food industry and his blessing of Jollibee signaled a significant change for the food giant. For the longest time, Jollibee had expanded abroad with the intent of servicing Filipinos overseas. But here is this very well known foreigner, and incredibly discerning food critic, who absolutely loved Jollibee food. Jollibee was no longer for the Filipino diaspora. Jollibee was for everyone.
Bourdain tragically passed on, but he wasn’t the only foreigner who has caught on to Jollibee. Simply going to Jollibee’s restaurants around the world would show just how much foreigners love the distinctly Filipino flavors offered by the Bee. Jollibee Restaurants in Canada, the U.S., the Middle East, and all across Asia were now catering to people of all nationalities. Indians, Americans, Chinese, Europeans, all kinds of people were eating Jollibee’s Chicken Joy, Spaghetti, and even Tuna Pie everywhere around the world. There are Youtube videos of people trying, and liking the food. The globe has developed a taste for Filipino food, and Jollibee has been working double time to make sure that kind of food Is always within reach.
By 2013 Jollibee would breach annual sales of PHP 100 billion, or USD 2 billion for the first time. By 2014, Jollibee would claim the title of largest fast-food chain in Asia in terms of market capitalization, again through aggressive expansion and acquisitions. Halfway through the decade, Jollibee announced it had broken into the world’s 10 largest quick service restaurant groups. It was right there with McDonald’s, Subway, Wendy’s, Pizza Hut and KFC, and Burger King and Tim Horton’s. But Tony Tan Caktiong and his family wanted more. They wanted to become top five largest in the world. Judging from its progress this decade, it’s not a far fetched goal at all.
The union between Injap Sia’s Mang Inasal and Tony Tan Caktiong’s Jollibee fostered another venture for the Jollibee group—in real estate. Sia and Caktiong became co-chairmen of the board of DoubleDragon properties, which specializes in office and retail space development. DoubleDragon also partnered with the SM Group to create a three-way partnership called CityMall, a community mall developer focused on opening locations across the Philippines. This venture would help pave the way for a more aggressive expansion plan for Jollibee, Mang Inasal, and all the other brands Jollibee Foods controls in the Philippines.
The Founder, which starred Michael Keaton, shined the light on a little known fact about Jollibee’s US based competitor McDonald’s. McDonald’s wasn’t a fast food chain business, it was a real estate business. In the movie, Ray Kroc (Keaton) convinced the McDonald’s brothers to put him in charge of franchising McDonald’s restaurants across America. The brothers wanted full control of how business was done, to ensure the quality of their product was sustained at every franchise restaurant. Kroc however would find a way to gain control of the entire operation, by controlling the real estate all McDonald’s franchises were set up on. As a result, the McDonalds brothers lost out and Kroc became known as the "founder." Jollibee’s entry into real estate through DoubleDragon is no coincidence. It is building an empire through food, and property.
Challenges for the next decade
Such aggressiveness however does not come without problems. This 2019 Jollibee’s net income for the first three quarters of hit PHP 4.5 billion, down 25 percent year on year. That’s also not too far from Jollibee’s net take in 2010 of PHP 3 billion. Where was all the growth? Why wasn’t expansion and acquisition translating into bigger profit? The company itself offered up explanations including the negative impact of fluctuating foreign exchange rates on sales and costs across different continents, and expenses related to acquisitions including reorganization costs. That’s all quite technical. But just like in 2010, Jollibee Foods will have to rationalize its massive organization sooner or later, if its newly acquired assets, or its older assets, fail to perform profit wise.
Looking at Jollibee Foods’ share price at the Philippine stock exchange using Bloomberg data, it started 2010 at PHP 59 a share. As of the last trading day of November 2019, it is at PHP 192. That’s an over three fold return in 10 years, not bad at all. But if you look at what has happened over the last five years, we see the peak of Jollibee’s value hitting over PHP 320 pesos earlier this year. The drop in value came after Jollibee acquired The Coffee Bean and Tea Leaf, which as shown by the market, represents a risk investors do not like. While Jollibee has had some experience with coffee chains, including Highlands coffee, it appears the stock market isn’t convinced it has the institutional knowledge to make this latest acquisition a success. The coffee chain’s less than stellar financial performance before the acquisition was also discouraging.
Still, it is hard to bet against the Bee. After celebrating its 40th anniversary in 2018, Jollibee has decades worth of success in expansion, and sustained profitability. It has cut ties with bad apples in the past, and it won’t likely have any problems doing the same again if any of its investments turn sour. It’s management has a clear goal that includes competitive and vigorous international expansion. It’s got a real estate arm that can help secure choice property for its formidable portfolio of brands. It’s got burgers, dumplings, donuts, noodles, coffee, barbecued chicken, fried chicken, tacos, nearly every kind of food under the sun. Its name is recognizable and present across multiple continents on online. It has indeed been a hell of a decade for the red and yellow bee, and even more is likely to come in the new decade ahead.