Jollibee, the Filipino fast-food giant known for surpassing McDonald’s in its home country, has purchased South Korea’s Compose Coffee for $340 million. This acquisition marks Jollibee’s expansion into South Korea’s mid-priced coffee market, previously dominated by brands like Ediya Coffee and Mega Coffee.
The acquisition has elicited mixed reactions within South Korea. Some view it as a positive sign of global investment, while others express concern over Jollibee’s accelerating presence in the South Korean market.
To gain insight into Jollibee’s strategy, The Chosunilbo interviewed Richard Shin, the Chief Financial Officer (CFO) of Jollibee Group. Here are the key takeaways from the conversation:
Why did Jollibee choose Compose Coffee?
“We highly valued Compose Coffee’s potential. As of early July, the number of Compose Coffee stores in South Korea had grown from about 1,900 in 2022 to 2,612. Its growth rate is the highest in the industry. We believe this success is due to Compose Coffee’s ability to offer high-quality coffee at reasonable prices. The company operates a fully automated roasting plant in Busan, producing 9,000 tons of coffee annually with just seven employees. This efficiency made it an attractive investment.”
There are many low-cost coffee brands in South Korea. How does Compose Coffee stand out?
“South Korea has the third-highest coffee consumption per capita globally. The market features a range of brands from premium like Starbucks to various budget options, with classic Americano being the most popular drink. We acknowledge the competition, but we believe Compose Coffee’s quality and pricing will continue to drive its growth. The introduction of new drinks, such as the ‘Ashotchu’ (an espresso shot added to iced tea), shows that Compose Coffee is staying ahead of market trends.”
Does Jollibee plan to expand its fast-food outlets into South Korea?
“Not at the moment. Given the current instability in China’s economy, Jollibee’s growth has been somewhat stalled, with global brands like KFC and McDonald’s also facing challenges. We expect this situation will persist for the next few years.”
Will Compose Coffee be launched in Southeast Asia?
“For the next five years, our focus will be solely on the South Korean market. Given the recent surge in K-pop’s popularity in Southeast Asia, we believe Compose Coffee could also be competitive there. However, we see significant growth potential within South Korea, where the current market share of Compose Coffee is around 8%. We plan to expand primarily in urban areas.”
Are there plans for further acquisitions?
“Not for now. We acquired Compose Coffee because of its brand appeal and its substantial growth potential in the South Korean market. It’s uncertain if other attractive opportunities will arise soon.”
What is Jollibee’s ultimate goal?
“Jollibee aims to expand our brand globally. However, we are aware that brands like Coffee Bean and Smashburger are struggling in the Chinese market, highlighting the need for careful, localized strategies. We plan to analyze each market thoroughly and gradually increase our brand presence and store count.”
