Jollibee keen on US, China expansion

MANILA, Philippines — Asian food conglomerate Jollibee Foods Corp. (JFC) is unfazed by the ongoing trade war between the US and China and its negative impact on both countries as it targets to expand in the two biggest economies in the world, its chairman told The STAR.

In an interview last week, JFC chairman Tony Tan Caktiong said the company is on the lookout for local brands to acquire in the US and China.

“We are looking at China and the US and our target is still food and beverage and preferably their local brands,” Tan Caktiong said.

He said the company prefers to acquire brands in those countries as they are already established. However, while these brands are locally owned, they don’t necessarily have to be distinctly Chinese in the case of China or distinctly American in the case of the US.

“So for example, in China, it may be a local brand, but it’s not necessarily Chinese food,” he said.

JFC is already scouting for opportunities in the two countries unfazed by the trade war of the two superpowers which is characterized by the imposition of tariffs against each other’s products.

In all, the buying binge would continue even after the controversial acquisition of California-based The Coffee Bean & Tea Leaf (CBTL), which many analysts believe would be a drag on JFC’s earnings growth for the next three years.

“In our view, the acquisition would be earnings dilutive in the next three years given the competitive nature of the coffee industry,” Unicapital said.

First Metro Securities Corp. also said that  the coffee company incurred a $21.4 million and $25.5 million loss in 2018 and 2017, respectively.

But Tan Caktiong said he has no regrets buying CBTL.

“No regrets, it’s a long-term business. It’s a good opportunity and the global coffee market is huge,” he said, noting that Starbucks alone has a market capitalization of over $100 billion.

He believes JFC would be able to turn around CBTL in three to five years.

According to Tan Caktiong, JFC has been able to acquire the right brands and has successfully turned around the companies.

Smashburger’s finances, he noted for instance, have already turned around and the improvement would likely be reflected in JFC’s second half earnings.

The company fully acquired Smashburger in December 2018 and has been a drag to company’s finances.

In the second quarter, JFC’s net income dropped by 50.2 percent to P1.1 billion from P2.2 billion, while first half income was down 34 percent to P4 billion from P2.7 billion.

Forbes also noted in its latest issue that Tan Caktiong, who is number seven in the latest 2019 Philippines Rich List, saw its fortune declined to $3 billion or a drop of $850 million after JFC shares took a hit in July 2019 after announcing the $350 million acquisition of CBTL.

JFC’s share price lost 7.99 percent to finish at P251 after the announcement.