Jollibee drinks up Taiwan bubble tea chain Milkshop to expand global reach

The name sign of the first Jollibee restaurant in the UK is seen, in London on Oct 20, 2018.
PHOTO: Reuters

Jollibee Foods Corporation (JFC), operator of the eponymous fast food chain famous for its crispy fried chicken, is buying a majority stake in Taiwanese company Milkshop International Co Ltd in the Philippine company's first foray into the bubble tea sector that could bring it closer to its goal of being one of the world's largest restaurant businesses.

JFC said its unit Jollibee Worldwide Pte Ltd is set to pay US$12.8 million (S$17.4 million) for 51 per cent of Milkshop, which runs the popular tea brand Milksha.

The remaining 49 per cent of the business will be retained by one of Milkshop's founders, JFC said, with the selling price to be confirmed after the deal is closed, subject to "certain closing conditions."

The acquisition "gives JFC the opportunity to participate in this fast-growing beverage category and together with Milkshop's founder, grow the Milksha brand globally," according to the company's disclosure filed to the Philippine stock exchange on Nov 4.

"Bubble tea has been gaining popularity across markets. First introduced in Taiwan in 1987, the bubble tea has since grown into a multibillion-dollar industry worldwide."

JFC did not respond to a request from the South China Morning Post for further comments.

Customers place their orders at a Milksha outlet in Causeway Bay, Hong Kong.
PHOTO: Winson Wong

Milkshop has more than 250 outlets, with 231 of them in Taiwan and the rest located across Hong Kong, Singapore, Melbourne in Australia, and Vancouver in Canada. Despite the Covid-19 pandemic, sales of the company grew 12 per cent to US$74.7 million between 2019 and 2020.

Milkshop is "generating modest net income and positive earnings before interest, taxes and depreciation," according to JFC.

As part of the deal, Milksha products will be made available in the Philippines through Chowking, a Chinese restaurant chain under JFC with 608 stores worldwide as of the third quarter.

The global street kiosks segment, which includes bubble tea, shrunk by 28 per cent to US$113.5 billion last year amid the pandemic, according to market research firm Euromonitor. The industry is likely to recover in 2022, when it is expected to generate revenues of US$151.7 billion, and grow to US$175 billion by 2025.

In mainland China, the fresh tea category is forecast to recover to its pre-pandemic size of 54.8 billion yuan (S$11.6 billion) this year, or about a 10 per cent growth from last year, according to research firm Mintel. The industry was worth 54.5 billion yuan in China in 2019.

"JFC's long-term goal is to be one of the top five publicly listed restaurant businesses in the world, and one way it could attain that is to expand its international brand portfolio," said Daphne Sze, research analyst at brokerage Maybank Kim Eng Capital Inc.

"The recent Milksha buy-in, which not only enhances JFC's brand portfolio but also its product diversity, is a step towards realising its long-term goal."

JFC has been aggressively acquiring brands around the world recently.

This month, the Manila-based company partnered with Yoshinoya's local operator to expand the Japanese restaurant chain, known for its beef rice bowls, in the Philippines. In August, JFC acquired Hong Kong-based Michelin-starred dim sum chain Tim Ho Wan.

JFC also manages a stable of brands including The Coffee Bean & Tea Leaf headquartered in the US, Highlands Coffee in Vietnam, as well as noodle chain Yonghe King, congee chain Hong Zhuang Yuan and the Dunkin' Donuts franchise in China.

As of the end of the third quarter, JFC operated 5,853 stores belonging to 17 brands across 17 countries, with 3,202 stores located in the Philippines.

Meanwhile, JFC had divested some of its earlier acquisitions, including a 70 per cent stake in Taiwan's Lao Dong restaurant that was sold in 2009 — the same year it was bought — and the China-based teahouse Chun Shui Tang, which was bought in 2006 and sold three years later.

Adding more brands to its portfolio can help JFC meet the increasingly varied needs of consumers, who have widened their taste buds during the pandemic by trying different foods through online delivery platforms, according to a spokesman of BDO Securities.

"Overall we believe that JFC's acquisition of various brands should support the diversification and growth of its revenue streams," he said.

This article was first published in South China Morning Post.