Following the acquisitions of the Chinese fast-food brand Yonghe King and the Beijing Hongzhuangyuan porridge chain, the expansion of Jollibee, the largest fast-food company in the Philippines, continues. This time, they have set their sights on Sanpinwang, a beef noodle chain brand based in Guangxi.
“We have reached an agreement, but it is currently still at the intent stage, and there is still some time before the acquisition is implemented.” Yesterday (May 5), Du Han, Chairman of Sanpinwang, confirmed the acquisition news to a reporter from the National Business Daily.
Industry expert Cui Yong, Chief Consultant at Li Chuang Catering Management Consulting, believes: “Marked by Yum! Brands' investment in Little Sheep in 2009, foreign catering giants are attempting to seize opportunities in this yet-to-be-fully-developed market through various means.”
Jollibee “Swallows Beef Noodles”
For consumers, Jollibee may be unfamiliar. In fact, as early as 2004, Jollibee acquired 100% of Yonghe King through two capital injections, replacing several venture capital funds as the new owner of this Chinese restaurant chain.
At the same time, Jollibee is also the controlling shareholder of Beijing Hongzhuangyuan, a well-known porridge chain in the Beijing area. Recently, this low-profile fast-food giant made another acquisition move. On May 4, Jollibee announced its plan to acquire a 55% stake in Sanpinwang for 30 million RMB. The latter operates a beef noodle chain in the Guangxi Zhuang Autonomous Region of China, with 34 restaurants under its banner.
It is understood that Jollibee will acquire Sanpinwang through its wholly-owned subsidiary, Jollibee Worldwide Pte. Ltd. Jollibee stated that this subsidiary will acquire the stake in Sanpinwang through a joint venture model with Guangxi Zong Kai Food and Beverage Investment Co. Ltd., which will invest 20 million RMB for the expansion of the joint venture.
Roadmap for Chinese Fast Food Layout
Why would a Philippine fast-food giant travel far to western China to acquire a relatively small company and enter the beef noodle business? A reporter from the National Business Daily discovered that behind these actions lies a roadmap for a foreign fast-food giant to lay out its presence in the Chinese catering industry.
“The Chinese catering market is too large; last year, total catering consumption in China exceeded one trillion,” an industry insider told the National Business Daily reporter. “And within Chinese catering, the part that has not yet been fully developed is the Chinese fast-food sector. Even if Jollibee only captures a small portion, the returns would be very substantial.” This is also the reason why multinational fast-food giants are getting involved in the Chinese fast-food industry.
However, unlike KFC introducing Chinese food or Yum! Brands investing in Little Sheep, Jollibee has chosen a different route to enter the Chinese fast-food market.
When the National Business Daily reporter interviewed Sanpinwang Chairman Du Han, he revealed: “Besides us (Sanpinwang), Jollibee is also acquiring other Chinese catering enterprises.”
“Jollibee's current goal is to seize the market; this is the first step of their roadmap.” Regarding the aforementioned actions, Cui Yong told the National Business Daily reporter, “The companies Jollibee is acquiring all have fixed customers and a certain brand image locally. After the acquisition, they do not need to be transformed to generate cash flow. For Jollibee, this achieves multiple goals: first, it eases financial pressure; second, it completes a national layout; and third, it captures market share.”
“And after all acquisition layouts are completed, Jollibee will begin its second step—integrating all resources.” Cui Yong analyzed, “As a listed company in the fast-food industry that is well-versed in integration, Jollibee's experience is far richer than that of Chinese enterprises. With Hongzhuangyuan's porridge, Sanpinwang's noodles, and perhaps other resources in the future, combined with the prior national layout, Jollibee has more cards to play than its competitors.”
