Americans Lose Filipino Burger War
26 March, 1999
By Al Labita
CNS Special CorrespondentMANILA (CNS) - Filipino hamburger chain Jollibee has achieved what its rivals thought was unthinkable: beating American multinationals in their own fast food game.
The Philippines' largest fast food chain, Jollibee's local market dominance has become so consistent it has shifted its "hamburger war" with McDonald's and other rivals to their own turf - the U.S. mainland.
As its opening salvo, Jollibee opened last year its first store in Daly City, California. Unexpectedly, it was an instant hit, prompting the chain to put up six more this year in California and other states.
To Jollibee, its foray in the U.S., home to such giants as McDonald's and Kentucky Fried Chicken, is like braving a lion's den. But this will not stop its American dream. It is banking on its years of experience gained from marketing its products abroad.
Jollibee boasts 29 stores on foreign shores where competing with the world's fast food chains comes naturally. They include those in Guam, Hong Kong, Middle East, Malaysia, Indonesia, Vietnam, southern China and Papua New Guinea.
"Eventually, we hope Jollibee can be the Philippines' most popular export to the world," said Jollibee Foods Corp (JFC) president Tony Tan Caktiong. He wants the offshore stores to replicate the local success and account for 20 percent of the company's turnover in the long term.
Mr. Tan, an ethnic Chinese, launched Jollibee as an ice cream parlor in 1978 with money borrowed from his father. Then, he added sandwiches, French fries, chicken and hotdogs. Soon, he was selling more burgers and dogs than ice cream in an industry ruled by Big Macs and a colonel with a white beard.
Chicken was marinated, the fat trimmed off, the skin fried crispy, the meat left juicy and sold under the slogan "Flavour Inside and Flavour Outside." Customers crave Jollibee's tasty pies embedded with peaches from Australia and home-grown mangoes.
So phenomenal was Jollibee's market success that sales boomed from only two million pesos in its first year of operation to 24 million pesos in 1980. In the following year, turnover shot up 51 percent to 36 million pesos, enabling Jollibee to join the Philippines' elite 1000 corporations.
Since then, there was no stopping Jollibee's march to fast food market dominance, despite the continuing influx of new foreign players such as Wendy's, Pizza Hut, Burger King, and others. In 1989, the 100 percent Filipino-owned Jollibee hit its first one billion pesos mark in sales.
Mr Tan, a Management Association of the Philippines awardee, was himself amazed at how Jollibee has been racking up sales over the past years. Latest figures showed that in 1998, total system wide sales swelled 30 percent to 14.5 billion pesos. After-tax profit jumped 32 percent to 853 million pesos.
"The very satisfactory financial result we achieved in the weaker economic climate of 1998 is a reflection of the resiliency of the fast-food sector as well as the strong business focus that we have endeavored to maintain in the company," said Mr. Tan. He added, "We are also fortunate to have a very healthy balance sheet with a strong net cash position during these challenging times."
It's no wonder why Jollibee rates a "buy" among foreign and local stock brokers on the Philippines Stock Exchange. Like food and beverage conglomerate San Miguel Corp (SMC), Jollibee is blue chip, an index-linked issue. Jollibee's current market capitalization stands at 14.8 billion pesos representing 954 million common shares. On its corporate structure, Jollibee has also grown big over the past years. From a single company selling burgers, it has transformed itself into a conglomerate with 15 subsidiaries and affiliates due to its diversification to pizzas, donuts and French bread, in tandem with Delifrance of France.
In 1997, a foreign publication adjudged Jollibee as Asia's second most admired company in the retail and food sector. First was SMC. McDonald's was a far third.
What's Jollibee's recipe for success? First, the company's high-profile, aggressive expansion binge coupled with big-budgeted advertising thrusts. It now runs 302 stores nationwide compared with McDonald's less than 200. In key urban cities, one can find Jollibee in almost every corner. Franchising played a crucial role in broadening the company's branch network.
Second, market adaptability. Simply, Jollibee cashed in on the Filipinos' irrepressible taste for western foods such as hamburger, a legacy of American colonial rule. Call it a colonial mentality, but it's a cultural reality worth a fortune.
In the Philippines, Jollibee controls 57 percent of the hamburger market compared with major rival McDonald's 36 percent. Taking other products such as french fries, pies, fried chicken and pastas, Jollibee's overall fast food market share is a commanding 70 percent, industry analysts say.
Jollibee, now ranked one of Asia's top corporations, applied the same product marketing formula in its offshore branches. It gave its burgers and fried chicken an Asian flavor. This is because each country likes a little of its own flavor in fast foods.
In Malaysia, the Indian subcontinent, Vietnam and Indonesia, the burgers and friend chicken are cooked with curry and lots of exotic spices. "Then, we added mushrooms and gravies," says Jay Visco, Jollibee's marketing director for international operations. The result: an army of loyal customers.
In 1996, Jollibee acquired Greenwich, an obscure and struggling pizza parlor to compete with Shakey's. It immediately expanded its branch network to 169 stores, 48 of them last year. In 1998, Greenwich contributed about two billion pesos to the group's system-wide sales, 85 percent higher than in the previous year.
Given such figures, Mr Tan believes that Greenwich has now gained the leadership in the pizza-pasta market segment. "Jollibee has grown so fast it'll keep going or go bust.
It's one of those legendary Asian success stories that you always expect to come unhinged but it doesn't," an industry analyst says.
| Home | FlashNews | In-Depth |
| Fact-O-Rama | Bulletin Boards | Viewer Poll