Recently, a major event in the coffee franchise industry made headlines: Compose Coffee was sold for a staggering $4.7 billion. This sale has solidified Compose Coffee's position as a leading low-cost coffee franchise. Let's dive into this fascinating story.
The Beginning and Growth of Compose Coffee
JM Coffee Group's Chairman, Yang Jae-seok, started in 1999 in Busan with JM Trading, selling and supplying coffee machines. He later expanded into coffee bean manufacturing and distribution. In 2014, he launched Compose Coffee at Gyeongseong University in Busan. Offering affordable and delicious coffee, Compose Coffee rapidly expanded, reaching 2,612 franchise locations within a decade.
The Influence of BTS V
A significant factor in Compose Coffee's success is the influence of BTS member V. His role as a model for Compose Coffee dramatically increased the brand's awareness and popularity, contributing significantly to its growth. In an era of high prices, Compose Coffee's affordable yet high-quality coffee attracted many consumers.
The Sale Process and Success Factors
In 2022, Yang Jae-seok put Compose Coffee up for sale, but due to franchisees' concerns and negotiation issues, the sale was retracted. Early this year, facing intensified competition in the low-cost coffee market, he restarted the sale process. This time, Filipino food giant Jollibee Foods and private equity firm Elevation Equity Partners Korea emerged as buyers. Jollibee Foods, with a market cap of about $6 billion, is one of the largest food companies in the Philippines.
Compose Coffee opened its first overseas store in Singapore last year, receiving an enthusiastic response from the Southeast Asian coffee market. Jollibee, aiming to expand in this market, found Compose Coffee to be the perfect partner. Jollibee was particularly impressed with Compose Coffee's systematic franchise management and distribution channels, contributing to the successful sale.
Sale Outcome and Future Prospects
Yang Jae-seok signed a share purchase agreement (SPA) to sell 100% of Compose Coffee's shares for approximately $4.7 billion. Jollibee Foods will acquire 70% of the shares, Elevation PE 25%, and Jollibee Foods' Titan Fund 5%. This valuation is about 3.5 times higher than Mega Coffee's $1.4 billion sale in 2021.
Foreign media predict that Jollibee's acquisition will increase Compose Coffee's revenue by 2% and expand the number of stores by 34% this year. The brand's overseas expansion is also expected to accelerate.
Conclusion
The successful sale of Compose Coffee is attributed to BTS V's strong influence, the brand's systematic franchise management, and attractive distribution channels. This sale is expected to further boost Compose Coffee's growth and solidify its global market presence. Compose Coffee's story stands as a remarkable success in the low-cost coffee market, and its future looks promising.
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