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Tue, Mar 12, 2002 - Page 19 News List

Forget economic reports. Look to sales at Jollibee

Only two operations in the Philippines have a wider reach than the chain of fast-food restaurants -- the nation's government and the Catholic Church

By William Pesek Jr  /  BLOOMBERG , MANILA

If you're curious about the direction of the Philippine economy, there're myriad figures on production, inflation and spending to digest. Or you could take a far simpler -- and tastier -- route: Buy a hamburger.

For all the arcane data available here, the best economic hints may come from hanging around Jollibee restaurants. They're omnipresent here and serve at least one of every two fast-food meals sold in the Philippines. Why does that matter?

"Only two operations have a wider reach in the Philippines -- the government and the Catholic Church," says Jollibee Chief Financial Officer Miguel Jose Navarrete. "That makes our business as good a barometer as you'll find on consumption trends."

Jollibee's McDonald's-clone chain is indeed on the front lines of consumer sentiment and spending power. If incomes are shaky or households are worried about political stability, Jollibee -- and the company's other fast-food operations -- feels it immediately. That explains why Philippine economic officials sometimes ask for a peek at Jollibee's monthly sales figures.

It's hardly good news, then, that Navarrete says this year has started out slow. "We're coming off of a weak 2001 and that flows into this year," he explains over coffee and quiche at one of his company's Delifrance outlets.

Weak indeed. In the fourth quarter of last year, Jollibee posted its first quarterly loss since the company went public in 1993. While much of the 75.6 million peso (US$1.5 million) loss reflected charges for properties Jollibee closed or never operated, it was an eye-opener for Manila's business community.

The details of Jollibee's late-2001 performance are far more complicated than the headline figures suggest. The company, it turns out, did quite well on a year-over-year sales basis in the fourth quarter. Ironically, that's hardly good news for the Philippine economy.

Consumer spending growth in the Philippines slowed to 1 percent in the October-December period. Sales were up 19 percent at Jollibee because an unfolding economic slump had consumers watching their pesos. Jollibee's success was in offering customers low-cost meal packages, such as its combination sandwich, soft drink and French fries for 35 pesos (US$0.69).

If Jollibee is doing well, while competitors aren't, in the current environment, one has to wonder about the Philippine growth outlook. In fact, even Jollibee is getting more conservative; the company plans to open no more than 80 new outlets this year, down from 123 last year.

The anecdotal data offered by an operation like Jollibee has never been more important. The Philippines, after all, is a tale of two very different economies -- the macro and the micro. The macro-economy is booming along with healthy growth, slowing inflation and national budget trends that are catching the attention of investors.

The micro-economy looks very different. The banking sector remains loaded with bad loans, which are hindering the central bank's efforts to boost the economy with lower interest rates. Manila is still grappling with collecting more of the taxes owed to the government. Foreign investors remain wary of corruption.

This divide means marquee-caliber economic reports are only telling part of the story. Gross domestic product growth may be about 3 percent and stock indexes may be rising, but that doesn't say much about an economy like this -- one that typically has many moving parts going in opposite directions.

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