Billionaire Tony Tan Caktiong’s Jollibee Foods, run by his brother Ernesto Tanmantiong, is spending big to expand its coffee sales around the world.
By Jonathan Burgos,Forbes Staff
Jollibee Foods has long-sought the turf of American icon, Starbucks, the Seattle-based coffee giant with over 39,000 stores worldwide. The listed operator's popular fast-food chain Jollibee already outpaces its American rivals McDonald's and KFC at home in Philippines, thanks to its bestselling crispy fried chicken and sweet-sauced spaghetti.
Now, in a frothy global market, Jollibee’s push into hot beverages is gathering steam once again under president and CEO Ernesto Tanmantiong, who's eyeing a bigger footprint in the fastest-growing segment of the fast-food industry. According to research firm Statista, the combined revenue of coffee chains around the world climbed 9% to $630 billion in 2023 from the previous year, and will likely reach $800 billion by 2030. By comparison, the fast-food business globally eked out a 1.1% rise in total revenue to $978 billion last year.
“It’s a rapidly growing market—a huge opportunity for us,” says Tanmantiong from a bustling Jollibee outlet in Pasig City, east of Manila, in early July. Just the day before, Jollibee announced its $238 million acquisition of a 70% stake in South Korea’s Compose Coffee, a cup-of-joe powerhouse with close to 2,500 stores, which will bring the group's investments in coffee to about $700 million. Tanmantiong’s dream, no less, is that the Philippines’ largest restaurant chain (by revenue and number of branches) will eventually outsell Starbucks as well.
While the addition of Compose Coffee will take Jollibee's total number of coffee shops to over 4,700, spread across Asia, the Middle East and North America—with only 387 in the Philippines, where Starbucks has 450 stores—the group faces a long march ahead. Though these will outnumber the over 4,600 fast-food branches it operates worldwide, for now its flagship Jollibee restaurant network is the biggest sales contributor accounting for half of the 244 billion-peso revenue the group posted for 2023. Coffee-retailing serves up about 15% of revenue, which the CEO wants to double to 30% by 2030.
It’s one of many stretch targets set by the 66-year-old Tanmantiong, who took over as CEO a decade ago from his older brother and Jollibee founder, Tony Tan Caktiong. Starting out with an ice cream and sandwich shop in 1975, Tan Caktiong broke into the ranks of the Philippines’ richest in 2007 and now appears at No. 6 with a net worth of $2.9 billion, which he shares with his family. (Under his watch, Jollibee Foods also appeared twice on our list of 200 Best Under A Billion companies.) He remains Jollibee’s chairman and CTO—chief taste officer.
“We’re hoping to get a better valuation from Wall Street.”
Chasing Giants
Jollibee aims to be among the world’s five most valuable fast-food chains in a decade, but has plenty of catching up to do.
Jollibee’s caffeine foray began brewing in 2012 when it bought a 50% stake in Vietnam’s SuperFoods Group, operator of the Highlands Coffee shop chain, for $25 million. In 2019 it raised the stakes substantially with the $350 million purchase of the loss-making California chain Coffee Bean & Tea Leaf, which remains its biggest investment to date.
It was far from a sure bet to begin with—and then came Covid-19, forcing the CEO to shut unprofitable outlets. Five years on, the business remains in the red at a net level, but with a positive Ebitda (earnings before interest, depreciation and amortization) in 2023, Tanmantiong is back in growth mode—opening over 90 new Coffee Bean stores last year to bring the total to 1,164—and with a renewed appetite for acquisitions.
In March, the group invested $28 million for a minority stake in another Californian firm, Botrista, which makes DrinkBot, a smart beverages station that prepares drinks such as iced coffees and boba teas. That was just a modest precursor to Jollibee's big move three months later into South Korea, one of the world’s largest coffee-consuming markets per capita. The Compose Coffee purchase, which it expects to complete soon, will give the group an edge with the younger crowd, says Jonathan Ravelas, managing director of Manila business consultancy eMBM. “[It’s] a play on the K-pop wave that’s popular in the Philippines,” he says, noting that artist Kim Taehyung of South Korean boy band BTS is Compose’s brand ambassador.
Elsewhere, Tanmantiong plans to add more outlets of Highlands Coffee, after opening over 170 new stores last year to take the total to 779. He's also expanding Common Man Coffee Roasters, a specialty coffee chain under the umbrella of Singapore-based private equity fund Titan Dining, which is 90% owned by Jollibee. In December, Common Man, with eight outlets in Singapore and Malaysia, opened its first Philippine restaurant in Manila's financial district.
The pandemic slammed the restaurant business worldwide and Jollibee was no exception, with revenue falling 28% to 129 billion pesos in 2020. While annual revenue now tops pre-pandemic levels and profits are back, up 16% year-on-year to 8.8 billion pesos in 2023, shares of the Manila-listed group haven’t fully recovered. On July 19, the stock closed at 229.40 pesos, down 10% over the previous 12 months.
Ian Garcia, a Manila-based analyst at AP Securities, says investors are unsure as to when Jollibee’s aggressive moves in coffee will begin to pay off. “It has made a series of acquisitions with good potential,” he acknowledges. “But the sentiment is that Jollibee has a spotty record of turning them around.” Still, Garcia has a “buy” on Jollibee and a target price of 335 pesos—46% above its July 19 closing price.
Tanmantiong’s first exposure to the food business was as a teenager, working in his father’s Chinese restaurant in Davao, in the southern Philippines. He moved to the capital and earned a degree in business management at Ateneo de Manila University. While studying, he did odd jobs at his brother’s shop in Quezon City, a Manila suburb. In 1978, the shop evolved into the first Jollibee outlet. The brothers went on an expansion tear after they added Chickenjoy, fried chicken served with a juicy marinade, to the menu, which proved wildly popular. Today, Jollibee has 19 brands in 33 countries, which, alongside coffee, sell bubble tea, Chinese cuisine, Filipino barbeque and pizza.
In 2014, Tan Caktiong handed management of Jollibee to Tanmantiong to better focus on his own investments, particularly in real estate, where he teamed up with another fast-food magnate, Edgar Sia II, to develop office buildings, shopping malls and hotels under property unit DoubleDragon. Sia had founded chicken barbeque chain Mang Inasal, which Jollibee bought in two tranches, for a total of 5 billion pesos. (Sia is also ranked among the Philippines richest at No. 39 with a $340 million fortune.)
Beyond coffee, the group has stepped up growth of its Jollibee restaurants overseas. Since bouncing back from a net loss of 11.5 billion pesos in 2020, the group has added more than 1,500 stores in the past three years, bringing the total to 6,885 across all of its brands last year. With the Compose Coffee acquisition plus the target to open 750 stores this year, the group will have over 10,000 outlets by the end of 2024.
Going Global
In the past decade, Jollibee has expanded its international footprint nearly sixfold.
Tanmantiong is also banking on growth from Smashburger, which aims to compete with burger chains such as McDonald’s in the U.S. and overseas. Jollibee bought the struggling Denver-based hamburger chain in stages between 2010 and 2018 for a total investment of $235 million, but the pandemic pounding forced a downsizing. It now has 236 stores mostly in the U.S. and Canada, down from 340 six years ago.
Jollibee’s multibrand strategy has allowed it to penetrate new markets, Tanmantiong says. For instance, the group has yet to open its flagship Jollibee brand in mainland China where it owns and operates 465 stores of Yonghe King, a Chinese cuisine chain acquired in 2004 for $22.5 million. Systemwide sales from the mainland jumped by a quarter to 22.7 billion pesos in 2023 from the previous year.
“It’s not a must that a family member takes over. We have a deep bench of professional managers.”
Additionally, there are cross-selling opportunities for the group's brands. Some Jollibee restaurants in the U.S. recently deployed Botrista’s DrinkBot and that helped boost beverage sales by at least 30%, Tanmantiong says. He plans to roll out the drinks dispenser to more outlets, noting that beverages have much higher margins compared with fast food.
Further synergies can be tapped from Tan Caktiong’s investment portfolio. In June, Jollibee Foods' first multibrand dining format opened in a DoubleDragon shopping mall in Laguna province, where customers can order meals from the group’s restaurants—Jollibee, Mang Inasal, Chinese cuisine Chowking and pizzeria Greenwich—all at one counter, with the food prepared in a common kitchen. “DoubleDragon’s expertise in property development provides the Jollibee group’s restaurant brands with prime locations, boosting visibility, foot traffic and growth potential, while reducing operational costs,” Tan Caktiong says by email.
Tanmantiong is gearing up to reach his ambitious target of making Jollibee one the world’s five most valuable fast-food chains in a decade. Though the timeline hasn’t been firmed up yet, he’s eyeing a U.S. listing, following other Asian restaurant operators, such as billionaire couple Zhang Yong and Shu Ping’s hotpot chain Haidilao’s international unit Super Hi International Holding, which is dual-listed on Nasdaq and in Hong Kong. “We’re hoping to get a better valuation from Wall Street,” he says.
Apart from the two siblings, the involvement of other family members suggests that Jollibee is a family-run business—their youngest brother, Joseph Tanbuntiong, is country head of the Philippines, while Carl, Tan Caktiong’s son, is spearheading expansion into China. But Tanmantiong dispels that notion, saying that when it comes to succession, “it'’s not a must that a family member takes over. We have a deep bench of professional managers.”
The brothers have of late made strategic additions to that bench, including hiring three Starbucks veterans. Looking ahead, Tan Caktiong exudes confidence about their renewed effort to take on the coffee giant: “The coffee and beverages segment will be a very meaningful source of growth for the Jollibee group.”
With additional reporting by Ian Sayson.
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