Slowing remittances is Jollibee's biggest challenge

By Karen Flores,

Posted at Jun 26 2009 08:00 PM | Updated as of Jun 30 2009 01:36 AM

MANILA - The slowing pace of remittance inflows may be the biggest challenge for fastfood giant Jollibee Foods Corp. this year, its chairman and chief executive officer said Friday.

"The [main] issue this year will be OFW (overseas Filipino workers) remittances, so we're looking at what will happen now," Jollibee chairman and CEO Tony Tan Caktiong told reporters at the sidelines of the company's annual stockholders' meeting.

Remittances in the past months have still been growing but the pace of growth have slowed to less than 5 percent for the past months, compared to double-digit increases in the previous years. Money sent home by OFWs is a key driver of consumption in the local economy, fueling retail sales including that of fastfood companies like Jollibee.

Caktiong expressed concern that the slump in job prospects of OFWs may impact the company's sales this year. "Probably there's a little bit concern on the remittances. We are getting some reports that [remittances] from the United States have lowered," he said.

Money sent home from the US plunged 10.3 percent in April to $2.29 billion from $2.55 billion in 2008. These make up 41 percent of total remittances sent to the Philippines for the said month.

Capitalists watch the pace of remittance growth for their own business and investment strategies. So far, local companies that benefit from remittance-led consumption have disclosed to the stock market lower or flat sales.

Mobile phone companies, for instance, have seen their subscribers making less calls and sending less text messages. Mall giant SM Prime, on the other hand, has earlier reported lower revenues from cinemas and other recreational activities.

Despite this, Tan Caktiong expressed optimism that Jollibee will continue to experience growth this year amid the economic slowdown. Specifically, he said the company is eyeing to sustain its first-quarter growth this year.

"Right now, we hope we can continue the first quarter numbers. We'll see what will happen in the second half, if the crisis continues," he said.

JFC reported a net income of P562 million for the first three months of 2009, a 17.2-percent rise from P480 million recorded in the same period last year. The company warned, however, that sales growth for the year may fall below target due to slowing consumer demand as brought about by the economic crisis.

"In the short term, our operating plan calls for at least sustaining our most recent sales and profit growth rates. The economic situation in the markets, however, may continue to exert pressure on consumer demand and decrease our sales growth to below our target," Tan Caktiong said in an earlier financial filing with the Philippine Stock Exchange.

In his annual report during Jollibee's stockholders' meeting today, Tan Caktiong said the company's main challenge last year was the dramatic rise in the cost of food raw materials. This, he said, has led to the decline in Jollibee's profit margins.

"Even in the face of fast rising costs, we decided to adjust our selling prices to consumers only gradually. Over the years, we learned that this is the effective way of balancing strong consumer demand and profits, between stable growth and consumer loyalty and the financial health of the business," he said.

"The crisis has brought enormous challenges to our company and the organization, but it has opened up opportunities as well. Crises change the market environment and the ones who are adept to change will win," he added.

Jollibee has opened 37 new stores as of end-March. The company is planning to add 186 branches by year-end, the same number it achieved last year.

Some of Jollibee's popular brands in the Philippines include burger chain Jollibee, Chinese fastfood restaurant Chowking, pizza chain Greenwich, Red Ribbon bakeshop, and French cafe Delifrance.