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Philippine Prosperity through Filipino Chinese Entrepreneurship The 10th World Chinese Entrepreneurs Convention November 19-22, 2009, SMX Convention Center Thank you for your kind introduction and good morning to all. To the officers, members and organizers of the 10th World Chinese Entrepreneurs Convention, distinguished guests, ladies and gentlemen, it is my honor to share my experiences as a Filipino Chinese businessman with such an impressive group of entrepreneurs in this prestigious gathering. I would also like to extend my gratitude to the entrepreneurs present in this forum, who continue to make good business possible in spite of the many challenges our world is facing today. Despite living in the most challenging times, I remain optimistic. The world has taught me that there will be challenges, but there will be great opportunities as well. This forum is very timely. As we brace for more uncertain times, we draw strength and inspiration from the experiences of our fellow entrepreneurs. It is good to hear and share insights and perspectives and to learn about different paths taken during turbulent times - stories of successes, but also stories of failures, from which we learn. With your kind indulgence, let me begin to share with you the story of Jollibee amidst the many challenges we faced in the last 31 years. Like many businesses, when we started, our goal was modest, mainly to provide for the needs of our young and starting family. At that time, little did I know that the same business that provided for my family would one day also provide for many other families. More than 31 years ago, after I graduated from college, the pressure of starting a family motivated me to pursue an ice cream parlor franchise business instead of finding full time employment. 1 With my limited means, I had to pool our families’ resources to start our first ice cream parlor. Our business became an instant hit due to the popularity of the ice cream parlors then. And soon our customers were asking us for more than just ice cream. We listened to our customers then, and launched our first series of sandwiches to complement our ice cream line. This led to our eventual discovery of our burger recipe, which became the product behind what is now Jollibee Foods Corporation. Early on, we learned the important lesson of listening to the customer and meeting their needs. While we were gaining ground and found our niche in the Philippine fast food industry, we were faced with what we thought was one of the biggest challenges in our history. The biggest international burger chain was entering our country. Many of my well- intentioned friends advised us to sell out while we still could. After all, how could a small local Filipino company take on the leading multinational in a business they had invented – fast food hamburgers! This surely was a moment of truth, a moment that directly tested my resolve. If I did not believe in my vision, I would have sold out the business right then…and I would not be standing here in front of you today! But we believed in our good tasting products that fit the Filipino taste, and we were convinced that the challenge was for us to make the GOOD tasting products into EXCELLENT tasting products and that our customers would reward us if we did. Today we hold over 50% of the total fast food market, several times more than our closest competitor in the same market segment. Lesson number two - knowing and understanding your customers well. Our business continued to grow, until the Philippine political crisis of the 80’s, when foreign companies shied away from further investing in the Philippines. With the people power in the streets, many foreign investors felt unsure about doing business in the Philippines. The foreign investors had other options, but for us, the Philippines is our country and it is not going anywhere, this is home. 2 Contrary to what others were doing, we felt that it was a good time to invest and grow, we plowed back every single centavo of our profits into new Jollibee stores thus expanded our business and network in the country. A decision that would make us the fast food leader in the years that followed. In 1997, during the Asian Financial Crisis, we managed to open 85 new stores, a record number for us. In 2000, when the peso stock market declined and the economy was hardly growing, we acquired Chowking, a Chinese fast food chain in the Philippines, and decided to start constructing what became the largest company-owned commissary in Asia. In 2008, despite the soaring prices of basic commodities and the onset of the global financial crisis, we opened 174 new stores worldwide while acquiring new businesses in Taiwan and China. Through it all, we saw that during times of crisis, we are all in the same boat as our competitors; therefore with no one having any distinct advantage, continued prudent investment pays off in the future. These early lessons we have learned became the basis for more deliberate plans for the company. It is a given that there will always be external factors that will challenge the way we operate and do our business. To turn these challenges into opportunities, to defeat and to emerge triumphantly against these outside forces, I believe the best way is to attack them from within. This is our winning strategy. By winning – we don’t refer it narrowly against competition. It is building something that lasts and beneficial. It benefits our customers by offering them quality products and services of excellent value. In financial terms, winning, translates to sustainable and profitable growth, higher employment, more businesses to our suppliers and partners, and higher tax revenues for the government. Winning, helps build a strong community. I will discuss three things about the Jollibee Group that are not known to many people outside of our company but are critical to our achievements. These are in the areas of Corporate Strategy, Financial Management and Organization. I hope that these will provide some contributions to our theme “World Prosperity through Chinese Entrepreneurship.” 3 On Corporate Strategy, I would like to talk briefly about our Long Term Perspective. While the short-term issues are certainly pressing, it is very important to balance our horizon with the long-term perspective. With history of our Chinese heritage, long-term thinking is something that comes naturally to us. In the Jollibee Group, just like everyone – we can only guess what the future will bring. But we must work on some assumptions. We believe that there are still enormous opportunities for our business to grow in the medium and long-term future. There are so much unmet consumer needs when they eat outside of their homes, both in emerging and developed markets. We believe that we can serve better tasting, better quality food at more affordable prices than what are available out there today. Because of this belief, we continue to invest for the long term, even in the worst of times. In the recent years, when the entire world was reeling from very high commodity prices, specially food, which affected us directly; when oil prices were hitting record high levels; stock markets were plunging; financial giants were falling and economic growth in most countries were slowing down, we were very busy investing for the future. In 2008, we opened 174 new stores worldwide, about as many as in the previous year and one of the highest store openings we made in our 31-year history. As importantly, we acquired new businesses. We acquired a restaurant chain in Beijing in the People’s Republic of China. We also bought shares in a restaurant chain in the United States serving Asian Cuisine. Because of our store expansion, we created in 2008 jobs for no less than 7,000 people. This number does not include additional jobs among our suppliers due to higher volume from our business. This year, 2009, we continue with our expansions creating opportunities for more people and revenues for our country. What we are presently doing is not so different from our actions in the past. In the early 80s, when our business was still quite small and we had not established a solid financial with the creditors, we kept on investing in new stores and on building the organization. 4 In the course of the past 31 years, we acquired several businesses. We bought businesses and entered new countries in good times as well as in very challenging times. The more important factor for us has been that we were working at the long-term potential of these businesses. As a result of our long term investment perspective, our system wide sales – a measure of all sales to consumers both from company-owned and franchised stores had been growing consistently over the years. For example, in 1998 at the height of the Asian Financial Crisis, our sales grew by 50%. In 2001, partly due to our acquisition of Chowking, our sales rose by 19%, and in 2008, our sales increased by about 13%. Today, the Jollibee Group consists of 8 brands operating in 11 countries with more than 1,800 stores. This growth took place in three crises-ridden decades. This was possible because we took the long-term view over concerns on the short term economic and business outlook. With our drive for investments even in difficult times, some observers may raise that we have been aggressive and taking too much risks. This brings me to my second point: Jollibee’s Financial Conservatism at its Core.

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