Jollibee Foods Corp. has decided to focus on expanding Compose Coffee’s market presence in South Korea before bringing the brand to the Philippines. The plan is to first compete with Starbucks Coffee in Korea and boost Compose Coffee’s popularity.
Richard Shin, Jollibee’s chief financial officer, stated that Compose Coffee holds an 8 percent market share in South Korea, while Starbucks dominates with 28 percent. Despite this, Compose Coffee has over 2,000 stores in Korea, surpassing Starbucks’ nearly 1,900 outlets.
“We will concentrate on Korea for at least the next five years. Growing our market share in Korea will yield better returns for shareholders,” Shin said during a press briefing.
Shin highlighted that South Korea leads coffee consumption in Asia and ranks third globally, behind Italy and Canada. “It makes sense for us to be involved in the fastest-growing segment of the largest coffee consumption market in Asia,” he added.
Jollibee plans to capitalize on Compose Coffee’s strength in selling blended and roasted coffee beans to its franchisees, which has been its main income source.
Earlier this month, Jollibee announced it would acquire 70 percent of the South Korean coffee chain through Jollibee Worldwide Pte. Ltd. (JWPL) in a $340-million deal with Elevation Equity Partners Korea Ltd. and Titan Dining II LP.
Elevation will retain 25 percent ownership of Compose Coffee, while Titan II, in which Jollibee has a 90-percent interest through JWPL, will hold 5 percent.
Shin said Jollibee would finance 47 percent, or $111 million, of its share through debt and 53 percent, or $128 million, through cash. Although he did not specify when Jollibee expects to break even on its investment, he projected a 12-percent return by next year and 36 percent after five years.
Shin also noted that Compose Coffee has a “debt-free balance sheet” due to its capital-light, fully franchised business model.
Founded in Busan in 2014, Compose Coffee now has 2,470 stores, making it Jollibee’s largest brand by store count. In comparison, Jollibee’s flagship brand, known for its Chickenjoy meals, has over 1,600 stores worldwide.