Jollibee notes shift, more customers in barong
Francisco Alcuaz Jr. and Frank Longid
Manila Standard
JOLLIBEE Foods Corp. chairman Tony Tan Caktiong said the fastest inflation in 14 years is making more higher-income customers try the country’s biggest fast-food chain even as lower-wage clients cut back on visits.
“Our field people joke that the clientele now are all in barong,” Tan said in an interview.
“I’ve started to get comments from my friends: This product is good, this needs improvement. You don’t hear these comments during good times. The higher segment is coming down.”
Jollibee, which outsells McDonald’s Corp. in the Philippines, will expand its new lower-priced restaurant unit that appeals to Filipinos made poorer as oil and rice costs boosted inflation to 11.4 percent in June. The Philippines imports almost all its oil and is the world’s biggest importer of rice.
“Inflation affects Jollibee more on the cost side than the demand side,” Jojo Gonzales, head of research at Philippine Equity Partners Inc. in Manila, said in a telephone interview.
“Some people are slipping into their market. Some are falling down-market but they hope not to lose those by offering more value meals and Manong Pepe,” the lower-priced chain Jollibee started last year.
The company’s seven brands, including Jollibee, Chowking and Red Ribbon, had 1,639 outlets as of March, 179 of them in the US, the United Arab Emirates, China and other overseas locations. Tan led the purchase of restaurant chains, including Shanghai-based Yonghe King. The acquisition of Beijing-based Hongzhuangyuan will add another 33 stores to the company’s network.
Tan yesterday became a board director of the Philippine Long Distance Telephone Co., joining other business giants such as Manuel Pangilinan, Napoleon Nazareno, Oscar Reyes, Alfred Ty, Albert del Rosario and Pedro Roxas.
Jollibee shares rose 1.5 percent, matching the gains of the benchmark Philippine Stock Exchange Index, to close at P34. Yesterday’s climb trimmed the food retailer’s loss this year to 35 percent.
Quickening inflation prompted the government to cut its economic growth estimate half a percentage point in May to a range of 5.7 percent to 6.5 percent.
The economy expanded 7.2 percent last year, the fastest in 30 years. But price increases would accelerate further in the third quarter, central bank Gov. Amando Tetangco said July 4.
Jollibee’s sales growth would slow from last year’s 13 percent because of oil and rice prices, chief financial officer Ysmael Baysa said June 27.
He said the company was raising prices as much as 2 percent every two months, which would not “shock consumers,” and cutting costs by using electric fans and energy-saving devices.
The company would probably scale back its plan to almost triple capital spending to P6 billion this year from P2.06 billion last year, Tan said. It would probably delay its plan to expand three commissaries.
“2007 was a very good economic recovery,” Baysa said.
“Based on that recovery, we would run out of production capacity sooner than we expected, so we tried to accelerate expansion. Now volume is not as strong again, so in a way we’re going back to the original plan.”
Bloomberg and Roderick T. dela Cruz
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