Jollibee's Coffee Gamble

What's up with Jollibee and the coffee market lately? The Filipino fast-food giant seems to be on this kamikaze mission to take on Starbucks.

Smart play or recipe for disaster?

It basically looks like Jollibee is biting off more than they can chew. They are a fried chicken house! What do they know about some lattes and cold brews?

There is more method if you dig a bit deeper than just madness. The global coffee market is booming, growing way faster than traditional fast food. See, Jollibee's bosses are no dummies: they can see which way the wind is blowing. They're trying to scoop up established coffee chains and various tech startups that are getting into the act, in an effort to get a piece of that caffeinated pie.

That said, the record of Jollibee in acquisitions is at best mixed. They have sunk huge amounts of cash into buying brands like the Coffee Bean & Tea Leaf, but those did not exactly set the world on fire. Investors are getting more jittery about whether, or when, all these coffee dreams can pay off.

The purchase of a recently founded company, Compose Coffee in South Korea is a big swing. Korea is a huge coffee market, and Compose has that K-pop cool factor going for it. But to run a successful chain of coffee shops is a completely different ball game from slinging burgers and fries. Jollibee had better hope they can learn fast, or this could get real expensive real fast.

Let's not also forget the home-turf advantage of Jollibee in the Philippines. There laid the giants like McDonald's and KFC were flattened by them. That's no mean achievement. Perhaps they think exactly that sort of magic will rub off on the coffee biz. But to go up directly against Starbucks worldwide? That's a different story.

Jollibee has gone beyond what the Tanmantiong brothers envisioned when they started Razon's in 1975, hoping to have one of the world's best fast-food chains. Building coffee into their roadmap would simply be them diversifying, and Jollibee steers clear into new growth. Maybe it just costs them a lot of focus, time will tell if this caffeine kick gives Jollibee what it needs or leaves them with the jitters.

That of one sure thing: Jollibee is not playing this one safe. They're all in on this coffee bet, spending big and expanding very quickly. It's a move full of guts, yet the world of fast foods never looks back at the faint-hearted. If Jollibee can pull this one off, well, it proves they're more than just a one-trick pony. If not, well, there's always fried chicken to fall back on.

Posted Using InLeo Alpha