Why Is McDonald’s Struggling In The Philippines? Jollibee

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Why Is McDonald’s Struggling In The Philippines? Jollibee

McDonald’s is an American fast food behemoth
With more than 37,000 restaurants in 120 countries, the chain dominates pretty much every market it chooses to enter
It has a reputation for taking over, fast
But in the Philippines, where McDonald’s has been trying, and failing, for nearly 40 years to be number one
there’s a local chain giving McDonald’s a run for its money
Jollibee
Jollibee, you know, came way back in 1978, really established its presence and, you know, captured the market, a lot
So then subsequently when these brands like McDonald’s and KFC came in
you know, it was hard for them to take away the value acquisition that Jollibee offered
Filipinos love Jollibee and it’s not just because it was their first or that it undercut its competition on prices
They nailed their recipes
And of course I think they positioned themselves a bit cheaper than McDonald’s
So when McDonald’s came in, the difference was maybe 50 cents to a dollar for every value meal
So that’s how they had to position themselves
Filipinos love American food but there’s also a twist in it because we like it sweet
For example, we serve spaghetti and they try to make the sauce a bit sweet
The menu covers a lot of ground, fried chicken, french fries, sweet burger steaks
chicken sandwiches, and a spaghetti with a sweet banana ketchup sauce and hotdog chunks
Culture also plays into it
They have a tagline, it’s called “Langhap-Sarap” meaning it smells really good
So it’s really inviting to smell
And I think they they know where they should be targeting the market so it’s really
Its really the middle class market for Filipinos because they initially presented it as a fast food
But now I think since the mass market is developing, I think they positioned it as a QSR so a Quick Serve Restaurant
Its mascot is a human sized, red and yellow bumblebee wearing a blazer and chef’s hat
It’s meant to epitomize the Filipino spirit of an always busy but cheerful people
Jollibee is the biggest fast food chain in the Philippines itself
So it is hugely popular and a lot, lot part of this is because of its branding itself
So it has become to be known as a very household and a family oriented brand
That, you know, that really connects and resonates and strikes a cord among Filipinos
Jollibee has also pushed out TV commercials and ads that are big on family values
And the numbers show that so far, Jollibee indisputably trumps McDonald’s in the Philippines
McDonald’s has roughly half as many locations as Jollibee there
And while neither company isolates its revenues in the Philippines, Euro Monitor estimates
show that Jollibee pulled in nearly twice as much as McDonald’s in 2017
Jollibee captured nearly 36% of the fast food market in 2017 and McDonald’s took roughly half that
And Jollibee’s hold on the market doesn’t end with its own chain
Jollibee Foods Corp. also owns chains in the Philippines like Chinese fast food chain ChowKing
Greenwich pizza, Red Ribbon which sells pastries and even U.S. based Burger King
Almost all of which rank in the top five list of chain fast food restaurants in the Philippines
So the company literally owns its competition but Jollibee is now at a crossroads
The domestic market is oversaturated, so it’s instead setting its sights on the Filipino diaspora
If you look at the international expansion, I think year to date, at least
they’ve gone around 25% so it’s already starting to overtake the domestic front
The same store sales growth, meaning it compares stores that they’re already operations from the previous year
So it’s only been growing 8% and it is a publicly listed company, 8%
isn’t enough if you’re just going to grow organically so they have to expand
So far Jollibee has more than 200 international locations in countries ranging from Saudi Arabia and Kuwait to Italy and Canada
The Filipino chain is also taking on rival McDonald’s on its home turf
Since 1998, Jollibee has opened 37 locations in the U.S. all in cities with big Filipino communities
Just take New York City
There are more than 250,000 Filipinos living in the New York metropolitan area
In the fall of 2018, Jollibee opened its second location in the city, this one in the heart of Times Square
Jollibee has a very distinct Filipino taste
So most, most of the dishes here have a sweet taste to it
I always loved Jollibee since birth because back in the Philippines we always do, we always eat there
CNBC decided to fact check
Our team of producers put Jollibee’s sweet and savory menu to the test
Oh, that’s good
I think it’s good, it’s not that spicy, yet
Our producers approved for the most part
Yeah, I don’t like that at all
Jollibee may be striking a nerve with Filipino Americans, but the company appears to be thinking much bigger when it comes to dominance
With only 37 Jollibees and roughly 4 million Filipinos living in the United States
Jollibee’s reach in the country is far from the command it had in the Philippines
And targeting Filipinos in the U.S. isn’t enough for the company to skyrocket to success
That’s why Jollibee Foods Corp. decided to take a majority stake in a popular American burger joint called Smash Burger
We, we wanted to replicate the success of the Philippines in the U.S.
Which is to have a multiple number of brands that they’re successfully American and that’s why we have the Smash Burger
We have Tortas Frontera and we’re continually exploring other possible acquisitions
Smash Burger only has 323 restaurants in the United States, a far cry from McDonald’s more than 14,000 stores
But it gives Jollibee the opportunity to increase its presence in the U.S. and allows it to target American consumers as well
That’s kind- that’s more of their foray, one into the overseas market and second into QSRs
In September 2018, Jollibee said it was also looking to get in on America’s $41 billion Mexican food market
by purchasing a stake in Tortas Frontera, a small Mexican sandwich chain in the U.S.
But the United States isn’t the only country where Jollibee has set its sights
They’ve also been expanding in China for example
So I think the experiment and I think that’s been more successful
The owners have roots from China so I think that has proven to be more successful
And of course, logistically it’s more accessible to, to I guess like expand, I guess in the area that’s closer to home
Jollibee has also made a few strategic acquisitions in China and in Vietnam, where it’s leaned into coffee and pho
Though Jollibee has expanded its reach to other countries, McDonald’s still squashes the company when it comes to revenues
McDonald’s made nearly $23 billion in 2017, while Jollibee Foods Corp. brought in only 10% of that
Jollibee has a long way to go until it can replicate the success McDonald’s has seen around the world
But until then, it comfortably holds its number one spot back home in the Philippines

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