Korean coffee franchise Compose Coffee, which has BTS’ Kim Taehyung or V as brand ambassador, adds P500 million to the Jollibee Group’s third quarter earnings in 2024
MANILA, Philippines – It’s no longer just Chicken Joy-loving consumers around the world who are driving Jollibee’s growth. Count the coffee-drinking South Koreans too.
Coffee franchise Compose Coffee, the number two low-cost coffee shop in South Korea, has become a key contributor to Jollibee Foods Corporation’s (JFC) earnings after it was acquired by Tony Tan Caktiong-led JFC last July for 329 billion Korean won or around P13.9 billion (acquisition cost is based on Q3 2024 earnings report).
In a disclosure on Tuesday, November 12, JFC said the addition of Compose Coffee to the JFC family helped drive the company’s sales and income in the third quarter.
In terms of store count, Compose Coffee, nearly all in South Korea, now leads the JFC family with 2,580 as of end of September. It has two stores in city-state Singapore. JFC’s flagship store Jollibee had 1,259 stores in the Philippines and 488 abroad for a total of 1,747.
“During the third quarter, we successfully completed the acquisition of Compose Coffee and the results that we are reporting today include the impact of this value-accretive transaction. Our consolidated system-wide sales (SWS) for the quarter increased by 13.2%, driven by the international business which grew by 20.5%. Compose Coffee contributed 11.5% to the growth of the international business’ SWS and added 2,580 stores to the global store network as at end of the quarter,” said Jollibee Group CEO Ernesto Tanmantiong.
“This quarter’s earnings performance was highlighted by the consistent strong performance of the Philippine business and contributions from Compose Coffee,” added JFC Chief Financial and Risk Officer Richard Shin.
JFC said the “consolidation” of Compose Coffee into the group meant an additional P500 million income during the quarter. “Excluding Compose Coffee, the international business’ operating income for the quarter declined compared to the same quarter last year but remained profitable,” it added.
Compose Coffee added 1.4% to the JFC group’s revenue growth in the third quarter.
Rapid growth of coffee shops
According to a report in South Korea’s English publication, Korea Times, the number of coffee shops in the land of Hallyu has breached 100,000 due to the proliferation of low-cost franchise brands. As of end of 2022, South Korea had 100,729 coffee shops almost double the number of its convenience stores at 55,000.
Korea Times said that among the big three low-cost coffee franchises, Mega MGC Coffee was number one with more than 3,000 stores followed by Compose Coffee with 2,570, and Paik’s Coffee at 1,220. It attributed the rapid growth of coffee shops to the low cost of putting one up, and the relatively easy way of making coffee compared to cooking food.
Korean dramas (K-drama) such as the hit series Coffee Prince, Something In the Rain, Warm and Cozy have also used coffee shops as among the main settings, which in turn help promote coffee places as tourist attractions.
JFC said last July that its acquisition of Compose Coffee was “JFC’s gateway in unlocking the fast-growing international value market in South Korea which ranks 3rd globally in terms of coffee consumption per capita.”
“The business that Compose Coffee has built in the past 10 years is impressive and we are excited to play a major role in its next phase of growth,” said JFC Chairman Tony Tan Caktiong following the acquistion. “We believe that Compose Coffee is a compelling strategic fit for JFC and is on track to becoming the largest, fastest growing and leading value coffee player in South Korea.”
Compose Coffee started in Busan where it has a roasting facility. JFC said Compose Coffee was named South Korea’s favorite coffee shop at the 2023 Korea’s Most Loved Brand Awards organized by Forbes Korea and sponsored by several South Korean ministries.
Compose Coffee has both coffee and non-coffee products on its menu. Its flagship product is the Americano iced coffee which sells for 1,500 Korean won or around P62.
The rise of Compose Coffee is also due to its choice last December of Kim Taehyung or “V” of Korean boy band BTS as its brand ambassador to mark the franchise’s 10th anniversary. Prior to V, popular Korean actor Jung Hae-in was the Compose Coffee endorser.
In his video, V said he was involved in the making of the Compose Coffee ad, “Everyone is a composer,” which talks about composing music being comparable to composing coffee. V said his favorite drink in Compose Coffee is Citron Tea.
According to fashion magazine L’Officiel, the choice of V as endorser led to more than 2 million new users on Compose Coffee’s app.
JFC’s Shin told reporters last July that they had no plans to bring Compose Coffee to the Philippines, unfortunately, choosing instead to focus the franchise’s expansion in South Korea.
Aside from Jollibee and Compose Coffee, other quick-service restaurants of the Jollibee Group are: Greenwich, Chowking, Yong He King, Red Ribbon, Hong Zhuang Yuan, Mang Inasal, Burger King, Highlands Coffee, Smashburger, Tortazo, Tim Ho Wan, The Coffee Bean & Tea Leaf, Panda Express, Yoshinoya, Milksha, and Common Man Coffee Roasters. – Rappler.com
