Jollibee still confident of dominating fastfood scene
JOLLIBEE FOODS Corp. (JFC) asserted it was poised to keep its dominance in the fast food industry amid concerns that American hamburger chain McDonald’s has been eating up on its lead in a bid to quell a sell-off that dragged its stock price to an 18-month low.
A Macquarie report indicating that McDonald’s has been “closing in on Jollibee in terms of preference” based on the results of a consumer survey coupled with concerns on the impact of the government’s new labor rules on the company prompted investors to dump JFC shares for four straight days to end at P182.10 apiece on March 27 from P194 each on March 21.
The homegrown fastfood giant, in a disclosure to the stock exchange on Wednesday, said JFC and the Jollibee brand in the Philippines will continue growing at a “strong” pace, backed by a P14-billion capital expenditure program to fund expansion this year and support future growth.
JFC shares sustained their recovery, rising P5.50 or 3.01% to close at P188 per share on Wednesday.
“The Philippines is one of the very few countries in the world where the largest fastfood chain is not a foreign brand but a local brand. JFC intends to sustain this leadership position in the years ahead...,” the company said.
Accelerating sales momentum and store rollout, improving market share, competitive pricing and adjustments to the changing labor rules will allow the food service company to protect its supremacy in its home turf amid intensifying competition from foreign players, JFC said.
“We think JFC will be anticipating a challenging time,” Luis A. Limlingan, business development head at Regina Capital Development Corp., said in a telephone interview, citing several price increases implemented by the company in the face of higher raw material prices to maintain margins.
Golden Arches Development Corp. (GADC), the master franchiser of fastfood chain McDonald’s in the Philippines, has been ramping up its nationwide store expansion as well, capitalizing on the robust consumer spending.
At end 2016, McDonald’s was operating 520 branches in the Philippines, trailing Jollibee’s 978-store footprint. The former is set to open 45 new stores this year — higher than the average of 30-40 outlets launched in recent years.
“The strategy is to grow the number of stores. size, we’re very confident we can compete head on,” Alliance Global Group, Inc. (AGI) President Kingson U. Sian told reporters on Tuesday, noting that an initial public offering may happen once it achieves a certain scale.
The Yang family controls 51% of GADC, while AGI owns the remaining 49%.
JFC pointed out that the Jollibee brand’s domestic system-wide sales are double the “next largest competitor,” with sales that are bigger than the two biggest foreign players combined.
Citing a third-party research, Jollibee also claimed that it gained market share from its key competitor. Brand value, occasion share and penetration likewise increased last year even in the higher income class.
With respect to the new regulations on labor, Jollibee has been taking “proactive steps to adapt to the changing requirements” since the third quarter of 2016. The cost of labor is expected to pick up in the first half of 2017 before normalizing in the second half.
Cost increases will slow down this year compared with rates seen in the past two years as a result of major investments in information technology and network development organization as well as marketing.
JFC has delivered an annual return on equity ranging from 18-20% — one the highest among publicly listed companies — over different economic cycles and the company expects to sustain this. —