Jollibee to keep Compose Coffee in Korea, for now

Instead of immediately bringing Compose Coffee to the Philippines, Jollibee Foods Corp. plans to boost first the popularity of the South Korean coffee brand in its home turf and compete with industry giant Starbucks Coffee.

Jollibee chief financial officer Richard Shin told reporters on Thursday that Compose Coffee currently has a market share of 8 percent in South Korea versus Starbucks’ 28 percent.

On the other hand, Compose Coffee currently has over 2,000 stores across its homeland while Starbucks has nearly 1,900 stores.

“We will be very focused on Korea for at least the next five years … market share growth in Korea will be a better return for shareholders,” Shin said during a press briefing.

The CFO also pointed out that South Korea had the largest coffee consumption in Asia, and ranked third worldwide after Italy and Canada.

“It makes a lot of sense for us to participate in the fastest growing segment in the largest coffee consumption market in Asia,” he added.

Shin explained that they would leverage on Compose Coffee’s strength of selling to its franchisees blended and roasted coffee beans that had long been its largest income generator.

Earlier this month, Jollibee announced plans to acquire 70 percent of the popular South Korean coffee chain via Jollibee Worldwide Pte. Ltd. (JWPL) in a $340-million deal with Elevation Equity Partners Korea Ltd. and Titan Dining II LP.

Elevation, which according to Shin approached Jollibee for the deal, will own 25 percent of Compose Coffee. Titan II, a private equity firm in which Jollibee has a 90-percent participating interest through JWPL, will own 5 percent.

Shin said they intended to fund 47 percent, or $111 million, of Jollibee’s shareholding through debt and 53 percent or $128 million through cash.

While Jollibee could not yet say when it expected to break even its investment in Compose Coffee, Shin estimated a 12-percent return on the company’s investment by next year, and 36 percent after five years.

He likewise emphasized that Compose Coffee had a “debt-free balance sheet” due to its capital-light, 100-percent franchise business model.

Founded in Busan in 2014, Compose Coffee currently has 2,470 stores, making it Jollibee’s largest brand in terms of store count. The flagship Jollibee brand, the maker of the iconic Chickenjoy meals, has more than 1,600 stores across the globe.

Jollibee’s acquisition of the Korean coffee chain is also among its largest investments to date after The Coffee Bean and Tea Leaf, which it acquired in 2019 for $350 million. —Meg J. Adonis