Jollibee to Acquire One of Korea’s Top Coffee Chains

Asian food giant and homegrown brand Jollibee is continuing its buying spree with the acquisition of a Korean coffee chain.

Jollibee Foods Corporation (JFC) subsidiary Jollibee Worldwide Pte. Ltd. (JWPL) is acquiring a 70 percent stake in Compose Coffee Co., Ltd. and JMCF Co. Ltd., collectively called Compose Coffee. 

The remaining shareholdings will be held by Titan Dining II LP (Titan Fund II) and Elevation Equity Partners Korea Limited, with effective shareholdings of 5% and 25%, respectively, according to a JFC statement. 

The total consideration for the acquisition is approximately $340 million (KRW 470 billion). The completion of the transaction is subject to closing and financing conditions, and the final purchase price is still to be confirmed. 

JFC said it closed the deal “at a more favorable transaction multiple compared to average EV/EBITDA multiple in the coffee industry.” 

According to the statement, Compose Coffee ranks first in the industry for having the highest growth rate in the number of franchised stores and in terms of brand satisfaction among Korean coffee brands, with 2,470 franchised stores. The stores are supported by Compose Coffee’s largest in-house coffee roasting plant in Korea, enabling the provision and distribution of high-quality, specialty beans at low cost. 

Compose Coffee is on track to be the largest, fastest growing and leading value coffee player in South Korea, with V of BTS as its current brand ambassador, JFC remarked. Compose Coffee and its roasting facility JMCF Co. Ltd. were founded in Busan in 2014. Its menu features a huge variety of coffee and non-coffee options led by its flagship product, the KWR 1,500 Americano. The brand was named South Korea’s favorite coffee shop at the 2023 Korea’s Most Loved Brand Awards.

Further, JFC noted that Compose Coffee has a debt-free balance sheet, superior cash returns and excellent profitability margins, evidenced by its high double-digit Earnings before Interests, Taxes and Depreciation and Amortization (EBITDA) and EBIT margins due to its capital-light, 100% franchised business model. 

Compose Coffee will be JFC’s biggest brand in terms of number of stores, bringing its store network closer to 10,000 stores, more than 66% of which will be outside the Philippines. Compose Coffee will also further strengthen JFC’s balance sheet since it has no existing loans nor non-trade obligations, the company stated.

Aligned with its commitment to the coffee and tea segment as well as franchising initiatives, the investment “serves as JFC’s gateway in unlocking the fast-growing international value coffee market in South Korea,” which ranks third globally in terms of coffee consumption per capita.

JFC Chairman Tony Tan Caktiong said, “The business that Compose Coffee has built in the past 10 years is impressive and we are excited to play a major role in its next phase of growth. We believe that Compose Coffee is a compelling strategic fit for JFC and is on track to becoming the largest, fastest growing and leading value coffee player in South Korea.” 

He added, “Together with Elevation and Titan Fund II, we look forward to working with the Compose Coffee’s accomplished management team to further accelerate the company’s growth in existing and new markets and capture the significant whitespace in South Korea’s value coffee market.” 

Elevation is a private equity firm focusing on mid-market buyouts and growth capital opportunities in the consumer space in Korea and the rest of Asia. Its founding members have over 30 years’ experience investing in Asia and Korea, mainly within the consumer sector. Titan Fund II is focused on strategic investments in food and beverage concepts with the objective to further grow in Asia Pacific food service brands and /or bring strong global food service brands to Asia Pacific. JFC through JWPL has a 90% participating interest in Titan Fund II. 

Elevation Managing Partner Gordon Cho said, “We are delighted to enter this partnership with JFC. We believe that JFC’s resources and expertise in F&B brand development combined with Elevation’s entrepreneurial mindset and local market expertise in value coffee will provide synergies in securing a sustainable future for Compose Coffee that will enable it to grow for many years to come.”