Monday, April 3, 2017

Jollibee to enter Italy, European market

MANILA - Jollibee is forming a joint venture with a Singaporean partner BlackBird to own and operate the first Jollibee store in Italy, its first in Europe.

The Jollibee group will own 75% of the joint venture, while BlackBird will own the remaining 25%. Both have committed to invest up to 1-million euros for the joint venture. The strategy is to tap a territorial franchisee for Italy, which can develop and expand the brand in the market.

BlackBird is a Singaporean company engaged in food and beverages and human resource activities. It was incorporated in 2014.

"Expansion to Italy is in line with diversification efforts. They are present outside Philippines, they are in China, the Middle East and the US. I guess, eventually, growth in the Philippines will slow down because they have so many stores here already," says COL Financial's April Lee Tan.

Tan adds, the important questions about this venture are: (1) Are they going to inject just the Jollibee brand? (2) Are they going to target the Filipino market or the European Market? (3) Are they going to do what they did in the US or China where they bought existing brands and used their expertise to build brands?

Tan admits, valuation is still a big concern for Jollibee investors.

"When you are priced at a premium, nothing can go wrong, at this stage, Jollibee will encounter challenges, rise in commodity prices, cost of labor. With that -- it's difficult to justify its share price."

But Tan says, these problems are temporary, and should be overcome in 1-2 years time.

JFC shares are down 0.4% in morning trade to P196.70. It's down 1.3% year to date.