Fruitas braves the stock market
As a teenager before the age of Google, Lester Yu sold encyclopedias as a summer intern. He also sold a bunch of rulers to a toothpaste brand that bundled them as part of a product promotion. Because he was not given any allowance for school–he brought food prepared from his house and had no budget to court girls–commission earned from his early days as a salesman made a lot of difference to his schoolboy lifestyle.
One can say that vending is in his DNA. His nearly century-old maternal grandmother still runs a jewelry shop in Ongpin. His parents also set up their own jewelry store in Ongpin and Yu was required to tend the shop when he was in college.But he didn’t become an entrepreneur right away. Yu, who majored in Industrial Engineering at the De La Salle University, worked for a bank for four and a half years, during which he was inspired to go into business as he was impressed by the cash flow generated by banking clients.
But his first attempt at incubating a business didn’t exactly pan out. He got into the pearl shake bandwagon, which turned out to be fad.
In 2002, at the age of 28, he set up a fruit shake kiosk in SM Manila. He invested around P200,000 to P300,000, using his savings as a banking professional.
Selling fruit shakes was a fun job for him. The mall was his playground. He got to watch movies in-between peak hours and talk to pretty girls who bought from his store. But in the succeeding years, Yu had to work really hard to expand the business.
Now 45 years old, Yu has grown his business to be the largest multi-brand kiosk operator in the country.
Fruitas Holdings Inc. is a holding firm for food and beverage kiosk operators with 24 active brands across its portfolio and 1,036 stores across the country to date. From fresh fruit shakes and juices, the group has diversified into lemonade, coolers, milk tea, desserts, meat- filled pastries, and lechon (roast pig), among other products. He employs about 2,000 people, mostly elementary and high school graduates.
The first kiosk operator to brave the stock market, Fruitas recently sold 533.66 million primary common shares to the public at P1.68 per square, raising P896.55 million in fresh funds for expansion. Based on the most sanguine forecasts, this translates to 15.25 times likely earnings for 2020.
This initial public offering (IPO) brought at least 28.21 percent of its shares to public hands, excluding the overallotment option. BDO Capital & Investment Corp. and First Metro Investment Corp. (FMIC) were the joint issue managers, joint bookrunners and joint underwriters while RCBC Capital Corp. was a participating underwriter.
“We are happy with the results of the offering of Fruitas. The broker tranche was more than 2.5 times oversubscribed, while the local small investor tranche was a record amount for a Philippine IPO. The exceptional performance and positive response from the market prove that the public believes in Fruitas’ strong fundamentals and aggressive expansion plans in the country,” FMIC executive vice president Daniel Camacho said.
When Fruitas lists on the Philippine Stock Exchange today under the ticker “FRUIT,” it will have a market capitalization of P3.58 billion.
Proceeds from the IPO will finance the company’s store network expansion, the improvement of existing stores, introduction of new concepts, acquisition of new brands, commissary expansion and debt repayment.
Yu brought his company public because he was inspired by the likes of Jollibee, SM group and Megaworld Corp., which accelerated growth after raising funds from the public. Although now nearing a footprint of 1,000 stores, Yu said Fruitas was still in its infancy stage and is well-positioned to ride on improving consumer affluence and growth in the countryside.
To date, Fruitas is being pitched as a consumer/food and beverage play but it is the only kiosk operator in the market. Yu’s dream is to turn his products into household brands.
The brand portfolio includes Buko Loco, Buko ni Fruitas, Juice Avenue, Johnn Lemon, Black Pearl, Tea Rex, De Original Jamaican Pattie Shop and Juice Bar, The Mango Farm, and Sabroso Lechon. Through one of its subsidiaries, Fruitasgroup Inc., the group also operates two food parks in Quezon City, which Yu uses as an incubator/testing ground for new food and beverage concepts.
Fruitas also relaunched Coffee Talk, a coffee and tea kiosk concept. It also recently started to sell some of its bottled fruit juices on open refrigerator shelves inside top supermarkets
Based on a research by UA&P, Fruitas is now the top player in four kiosk categories: fruit shakes, lemonade, buco and meat segment.
Apart from building its own brands, Fruitas has done a number of mergers and acquisition (M&A) deals. It acquired Negril Trading, the company housing De Original Jamaican Pattie Shop and Juice Bar, in 2015. It acquired a food park on Maginhawa Street, Quezon City, in 2017 and the assets of Sabroso Lechon in 2018.
M&As are still seen to be part of its strategy to speed up growth. In its IPO prospectus, Fruitas shared plans to “acquire other food service brands and businesses and expand in new formats where our cost-efficient model can be replicated” and added that it was conducting due diligence on a number of prospective acquisitions.
Moving forward, Fruitas aims to open 150 to 250 new stores each year through 2022. It also plans to open two more food parks up to 2021, in addition to existing two hubs which are both in Quezon City.
“The story of Fruitas is an inspiration for the business sector : that your business is never too small to fly and never big enough that you cannot gain from new opportunities,” FMIC president Rabboni Arjonillo said.
