Jollibee Set to Acquire Majority Stake in Korea's Compose Coffee

Jollibee Set to Acquire Majority Stake in Korea's Compose Coffee

Jollibee continues its goal of world domination. This time, the country’s largest food companies, and one of the largest in Asia, has announced that it will purchase a majority interest in South Korean coffee chain Compose Coffee.

In a disclosure to the Philippine Stock Exchange, Jollibee Foods Corp (JFC)’s wholly owned subsidiary Jollibee Worldwide Pte. Ltd. (JWPL) will acquire 70 percent of Compose Coffee. The remaining 30 percent is split between Titan Dining Partners II Ltd. (Titan Fund II) and Elevation Equity Partners Korea Limited (Elevation) with effective shareholdings of five percent and 25 percent, respectively.

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According to the company, the total consideration for the acquisition is approximately $340 million.

According to JFC, Compose Coffee has a debt-free balance sheet, superior cash returns and excellent profitability margins, evidenced by its high double-digit Earnings before Interests, Taxes and Depreciation and Amortization (EBITDA) and EBIT margins due to its capital-light, 100 percent franchised business model.

"Compose Coffee will be consolidated into JFC’s financial statements immediately upon completion of the acquisition, with an estimated uplift of plus two percent in Revenues bringing the international business’ contribution to 41 percent of Global Revenues, plus 12 percent in EBIT in 2024 and plus 34 percent in store count (2,600+ stores)," JFC said. "Compose Coffee will be JFC’s biggest brand in terms of number of stores. It will bring JFC’s store network closer to 10,000 stores, more than 66 percent of which will be outside the Philippines. Compose Coffee will also further strengthen JFC’s Balance Sheet since it has no existing loans nor non-trade obligations."

As of the end of 2023, Compose Coffee is South Korea’s third-largest coffee chain, with around 2,500 stores as of March 2024. The top two players are Ediya with around 3,000 outlets, and Mega with 2,709.

Founded in Busan in 2014, Compose Coffee and its roasting facility JMCF Co. Ltd. is one of South Korea’s leading coffee franchise in the fast-growing value coffee segment. It offers a variety of coffee and non-coffee options as well as food items.

Compose Coffee was named South Korea’s favorite coffee shop at the 2023 Korea’s Most Loved Brand Awards, an event organized by Forbes Korea and sponsored by South Korea’s Ministry of Science and ICT and Ministry of Trade, Industry, and Energy. On its 10th anniversary, Compose Coffee announced V (Kim Taehyung) of BTS as its new brand ambassador.

"This acquisition is aligned with JFC’s commitment to Coffee and Tea Segment and franchising initiatives," the company said.  This strategic, rapid growth, financially lucrative investment serves as JFC’s gateway in unlocking the fast-growing international value coffee 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. "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.

"Together with Elevation and Titan Fund II, we look forward to working with the Compose Coffee’s accomplished management team to further accelerate the company’s growth in existing and new markets and capture the significant whitespace in South Korea’s value coffee market," he added.

JFC already owns 100 percent of American coffee chain Coffee Bean & Tea Leaf, which it purchased in 2019. JFC also owns Highlands Coffee and Coffee Man Coffee Roasters, among many other brands.

The completion of this latest transaction is subject to standard legal agreements, funding requirements and regulatory authority approval.