Along with all the burgers, fries and shakes that Jollibee sells daily to Filipino fastfood junkies are Shanghai Rolls. A nice piece of localisation by the Philippines’ leading junk food chain. Now Jollibee is planning to see if it can sell its Shanghai Rolls in Shanghai. But is China ready for Jollibee? Paul French reports.


The Jollibee chain, created by Chinese-Filipino entrepreneur Tony Tan Caktiong, has tried to crack China once before. In 1998 the chain, symbolised by its big bee logo beloved of Filipino children, entered Xiamen but pulled out in 2001 admitting that it could not successfully localise.


Jollibee has expanded elsewhere overseas with branches in Hong Kong and other places where there are sizeable Filipino populations who want a taste of home. Certainly Jollibee has been successful in the Philippines –a country saturated with fastfood outlets with just about every major chain operating in Manila (a city that has apparently not heard of the Atkins Diet). Still, it has been a tough and competitive market with Jollibee still beating McDonald’s while international chains such as Burger King and Wendy’s have been effectively marginalised.


Now Jollibee is heading back to China. This time it has bought a major local player – Yonghe King – or at least 85% of Yonghe’s holding company Belmont Enterprises Ventures for US$22.5m with a $11.5m down payment. This is a potentially cheap acquisition for Jollibee.


SARS put paid to earlier expansion plans


Yonghe King was established in Shanghai and has a network of 77 outlets. Jollibee has 988 outlets (33 overseas) and outsells McDonald’s in the Philippines by a ratio of 2:1. As well as relaunching Jollibee in China, the group hopes to help build the Yonghe chain into a major domestic fastfood enterprise. The whole deal was rumoured last year but was nixed by SARS.


Jollibee can afford the deal. Sales to September 2003 were $372m. Yonghe has sales of $24m annually. Clearly China is growing faster than the economically challenged Philippines where Jollibee may have reached saturation anyway. China is a challenge but a major market for the group despite many reservations by Filipino analysts about whether the chain can break out of the Philippines.


To date the group’s overseas expansion has relied on the existence of Filipino communities in the markets targeted such as the west coast of the US, the Middle East or Hong Kong, where large numbers of Filipinos work overseas as construction workers and maids. So far Jollibee has yet to capture market share in a country without a sizeable overseas Filipino community. China does not have a significant Filipino community. At the same time Jollibee still has its developing sub-brands to think about.


Needs to focus on sub-brands too


As well as the Jollibee burger chain, the group runs Chowking Chinese fastfood restaurants (245 outlets) and the Greenwich pizza chain (213 outlets). The company also operates the franchises for the French café style Delifrance chain (30 outlets) in the Philippines and has bought the TOMI ’s Teriyaki Japanese food chain in the US.


With these sub-brands and franchises to develop further, China may still yet again prove a market too far for Jollibee. While McDonald’s and KFC have performed well in China other international chains such as Burger King and Wendy’s have not entered the market and some limited entry strategies have not gone according to plan for other burger joints such as Japan’s MOS Burger .


Yonghe runs the Yonghe King brand of fastfood restaurants concentrated in Shanghai (26 outlets), Beijing (also 26), Shenzen (11), Wuhan (8) and Hangzhou (6). Yonghe is successful but would benefit from better store management, refurbishments and a more lively menu, though it is well known to Chinese consumers where it exists and should be able to expand both in the markets it works in and other Chinese cities it may target in the future.


As yet we don’t know exactly what Jollibee has planned in China. It would seem sensible to concentrate on boosting sales at Yonghe before relaunching Jollibee. Despite the phenomenal success of Jollibee in the Philippines, China is something different. It may still be the case that Shanghai is not ready for Jollibee’s Shanghai Rolls.


Paul French is the Shanghai-based Publishing & Marketing Director of research publisher and business information supplier Access Asia .


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