Inclusive growth? Jollibee cites 'chickenjoy' supply chain

MANILA, Philippines – Homegrown food giant Jollibee Foods Corp. is doing its part in addressing poverty in the Philippines through its massive supply chain program, a top official of the company said.

Jollibee chief finance officer Ysmael Baysa highlighted at an Asian Development Bank forum on Monday, November 26, that the food service company's P6 billion annual purchase of chicken from farmers in various parts of the country creates sources of income.  

"Our contract [growing program] helps the poultry industry and helps to build livelihood in the area often where the most impoverished sectors in the country are,” Baysa said. 

"We make poultry farmers grow chicken for the company. They also dress and cut the chicken for us which increases the value of their corporation," he added.

“We provide them with a sure demand of their produce, access to financing, access to management training. Some have been able to pay off their debts, send their children to college and buy farming equipment," Baysa said.

Under its own "Inclusive Business Program," the country's biggest buyer of chicken deals and buys 80% of chicken supplies directly from local poultry farmers. It is only during the Christmas that Jollibee imports from the US.

This business strategy involves 250 local poultry farms and around 2000 farmers located throughout the country.

Jollibee's "chickenjoy" products are among the food retailer's bestsellers. Chicken accounts for the largest portion of its raw material supplies. 

Entrepreneurship program

Jollibee also has a Farmer Entrepreneurship Program for raw materials other than chicken.

"Practically all of our raw materials, outside of packaging materials, are agricultural base," Baysa said. Majority of Jollibee's agricultural needs for its burgers, soup, french fries, and other food offerings are now bought from rural producers.

Since 2005, farmer cooperatives have been supplying Jollibee with green and red bell pepper, lettuce, tomato and potato.

For enterprise training and organizational needs of farmers, the company works with US relief services. To develop financing for famers through a network of micro financing institutions, Jollibee works with state-owned National Livelihood Development Corp. 

"We’re also convincing other corporations to buy from our farms. We persist in organizing the farmers and helping them in agro enterprise training to help improve their livelihood and help in our own way the development of agriculture in our country,” the executive shared. .

This year, the entrepreneurship program involved 400 farmers in 13 communities some in central Luzon, central provinces and Mindanao.

P39-worth lunch

Bulk of Jollibee’s consumers are middle class, poor and very poor, he added. "That’s the center gravity of our business. They spend on average P39 on lunch."

The company recently posted a 9-month net earning of P2.47 billion up 20.4% from the same period in 2011. According to Baysa, their sales grew at 30% with a return on equity consistently hovering around 17.5% to 18% year-on-year.

“We serve the poor and make money. So it is possible,” said Baysa.

Every year, the group opens at least 100 retaurants in the Philippines. By working with local suppliers and relying on volume for their profits, the business has maintained a strong year-on-year growth.

Jollibee, the Philippine’s largest food service company, operates the largest food service network in the Philippines. As of September 30, 2012, it was operating a total of 2,040 stores in the Philippines: Jollibee 765, Chowking 383, Greenwich 201, Red Ribbon 209, Mang Inasal 457 and Burger King 25.

In foreign operations, the group had 541 stores: In China, Yonghe King 288, Hong Zhuang Yuan 52, San Pin Wang 39; in the US, Jollibee 27, Red Ribbon 32, Chowking 18, Chow Fun 3; in Southeast Asia and the Middle East, Jollibee 60 and Chowking 22 for a total of 2,581 stores worldwide.

Crop insurance

Baysa said furthering their corporate inclusive business program will need another support leg: crop insurance.

“What kind of incentive would we have on our wish list from the government? Two words; crop insurance."

"The crop insurance in the Philippines is very inhibitive and expensive. It’s a function of the low uptake in the Philippines. We have been trying very hard to insure our farmers against crop failures and have been working already with the largest insurance not just in the Philippines but in the world. It is very tough so we have not solved this problem. Our farmers have told us that if they can get a proper crop insurance they can invest more,” said Baysa.

Jollibee was recently mentioned at the ASEAN Business Awards on November 18 as an ‘outstanding Philippines company’ that has contributed to regional economic growth. At the ceremony held in Phnom Penh, the company said sales growth was broad-based and volume driven resulting from better-value-for-money recognition by consumers on its products and services. – Rappler.com