From local ice cream parlour to global food behemoth: What’s next after Jollibee’s acquisition of Tim Ho Wan?

SINGAPORE: What do fried chicken, coffee and dim sum have in common? In the world of food business deals, a parent company – Jollibee Foods Corporation.

Early in November, the Philippines-headquartered company announced it had reached an agreement for the transfer of ownership and management of Hong Kong’s Tim Ho Wan chain.

The dim sum brand will become a subsidiary of Jollibee in January next year, chief financial officer Richard Shin said during a media roundtable on Tuesday (Nov 19). 

Tim Ho Wan will be transferred from a subsidiary of Titan Fund, a private equity fund which Jollibee has held a 92 per cent participating interest in since January.

Jollibee will pay S$20.2 million (US$15 million) for the 8 per cent held by other investors, the company added in a press release.

Titan Fund also owns and operates Singapore businesses Common Man Coffee Roasters and Tiong Bahru Bakery.

And Jollibee's acquisition of Tim Ho Wan comes after its 2019 purchase of American chain The Coffee Bean and Tea Leaf.

That a Philippine chain known for its crispy fried Chickenjoy meal owns those two big names may surprise some, but analysts said the November announcement was well forecasted.

“The acquisition started with 48 per cent stake of Tim Ho Wan way back on May 8, 2018, with an agreement to fully acquire in seven years,” said Professor Ben Paul Gutierrez of the University of Philippines’ business school.

He said Tim Ho Wan is attractive to Jollibee because of its Michelin-starred reputation. One of the chain’s Hong Kong restaurants was awarded one star and included in the Michelin guide.

Prof Gutierrez also noted that Jollibee already owns two fast-food chains in China, and that Tim Ho Wan would be a good addition to its Chinese food stable.

Mr Mc Reynald Banderlipe II, a lecturer at Manila-based De La Salle University’s school of economics, pointed to Tim Ho Wan’s global footprint.

Having an affordable, Michelin-starred restaurant in the portfolio will also help Jollibee better penetrate the Chinese dining market, he said.

HUMBLE BEGINNINGS

Founded in 1975, Jollibee was started by Dr Tony Tan Caktiong, together with his wife and their families.

The family business initially sold ice cream in the streets of Manila before pivoting to hot meals and taking on its current name three years later.

Nine years after becoming Jollibee Foods Corporation, the company had grown big enough to be part of the Philippines’ top 100 corporations. 

In 1994, it acquired the Greenwich pizza and pasta chain in the Philippines. Ten years later, it acquired its first international brand, Yonghe King, a restaurant chain in China. 

Jollibee now owns or operates thousands of stores globally across a total of 19 brands, according to its website.

Mr Jose Antonio Cipres, a research analyst at the AP Securities brokerage, said Jollibee’s most impressive acquisitions were of Chinese-Filipino fast-food chain Chowking and barbecue restaurant group Mang Inasal.

Chowking had 162 branches when it was acquired in 2000, and that number has now grown to 566, he said. And Mang Inasal has 573 stores, up from 303 when Jollibee took over in 2010.

“Since its founding, Jollibee's journey is testament to effective branding, adaptability and a keen understanding of consumer preferences,” said Mr Jonathan Ravelas, managing director of eMBM, which provides professional services.

It is impressive that Jollibee evolved from a small local business to a global player in the food industry, he added.

CONCERNS OVER QUALITY

Yet Jollibee’s strategy of acquiring businesses has not come without censure. 

De La Salle University's Banderlipe noted how many customers feel that companies acquired by Jollibee will see a drop in their quality of food and services, with priority given to earning higher profits.

“When the cake company Red Ribbon was acquired, many loyal customers complained about losing the ‘liqueur-ish’ aroma of the Black Forest cake that made Red Ribbon famous,” he said.

In the case of The Coffee Bean and Tea Leaf, a tie-up with a large mall operator in the Philippines will have the brand featured in 89 malls – but as kiosks, which Mr Banderlipe described as a downgrade for loyal customers.

On CNA’s Facebook post about Jollibee’s acquisition of Tim Ho Wan, one user posted: “Good luck with the quality!”

Another responded: “Agree. Prices go north and quality of food and service go south.”

“Jollibee has to challenge itself to improve or maintain the quality of the products and services of the brands that it acquires,” said Mr Banderlipe.

Jollibee did not directly respond to questions from CNA on concerns over quality standards as it acquires more brands. 

STILL ON THE RISE

Nonetheless, analysts who spoke to CNA were convinced of Jollibee’s continued growth, as it pushes towards its founder’s goal to have 50 per cent of system-wide sales, which include owned and franchised stores, to come from international business.

For the first nine months of the year, international operations made up 40.3 per cent of system-wide sales.

AP Securities' Cipres noted that Jollibee was making strategic moves to capture market share in other segments.

He pointed to another recent acquisition - of Compose Coffee Company in South Korea - which he said would immediately increase Jollibee’s earnings, since the chain is profitable.  

Prof Gutierrez of the University of Philippines said Jollibee could make further acquisitions in the fast-food, coffee and tea or Chinese food space.

During Tuesday's call with the media, Jollibee CFO Shin pointed out that the brand has not ventured into some Southeast Asian markets such as Indonesia and Thailand. 

Those remain opportunities for growth, he said.

And if nothing, the fried chicken restaurant chain remains a big hit at home, where same-store sales grew 8.2 per cent in the first three quarters of 2024 compared with the same period a year ago.

“Jollibee ... will always be the ‘nightmare’ of the ‘M’ brand,” said Mr Banderlipe. “(McDonald's is) the world’s number one, but not in the Philippines.”