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Code of honor guides expansion of Fruitas

From the start, food and beverage conglomerate Fruitas Holdings Inc. has observed a code of honor—a tradition that instills integrity in the workplace and keeps deals honest with customers and suppliers.

Fruitas Holdings Inc. founder and CEO Lester Yu
This code of honor was patterned after the Philippine Military Academy’s decorum of refraining from cheating, thieving and lying.

This was the mindset when banker and entrepreneur Lester Yu established Fruitas as a simple cart business in 2002.  After more than a decade, Fruitas has matured into one of the most outstanding foods and beverage firms in the Philippines with 18 brands to its label and almost 900 stores across all brands.

Acquisition of more brands is Yu’s current addiction.  Yu, who studied at De La Salle University and University of the Philippines, serves as the chief executive of the company.

“My addiction is accumulation of business, to become bigger and bigger. You gain power and you used that power to help other people. There is a higher purpose than this,” he said, adding that becoming a bigger business also has a social cost.

“Honesty, integrity and hard work are the most fundamental foundation of any business.  I believe this is the reason why we have managed to grow and expand. We do not cheat, lie, steal or tolerate among us those who do so. That has been our guidance in our expansion and acquisition program. We want to acquire more brands to be at the top of the game,” said Yu, quoting the adage borrowed from the PMA.

Its flagship brand Fruitas remains the company’s top business with over 200 stores nationwide.

In an effort to understand the nuances of the market and better respond to market demand, the company classified the brands into three categories—the leading brands, challenger brands and the niche brands.

Fruitas, Buco Loco, Buko ni Fruitas, John Lemon and The Original Jamaican Patty Shop are considered leader brands on their own, while challenger brands such as Black Pearl and Friends Fries provide other brands of similar products a run for their money.

Catering to small, select markets are homegrown brands Magnifico Pizzeria and Shou La Mien, among many other brands.

The company also ventured into food parks and now manages three in Quezon City. Expansion to the south is being considered.

Yu said the incessant growth is key to surviving competition.

“We want to be the number one company in the Philippines for some of our brands. We’re not in a hurry to get there, but we certainly do what it takes to get our brands to the top of the competition,” he said.

Yu’s previous business ventures did not become as successful.  What little he saved from working in a bank, he put it a cart called Fruitas.

The secret, he said, is not a secret at all, as many businessmen and investors knew this all along.

“One only needs to believe in their products and the virtue of working hands on. In growing the business, most of the time I lose sleep. There was no time for nightlife. My social circle is limited to my family and co-workers,” Yu said.

The growth of Fruitas Holdings is not something that happened overnight. A number of influences left an indelible mark on Fruitas. Success stories of small businesses continue to inspire Fruitas.

Of the most successful business models Yu looked up to, the Jollibee Group and Mercury Drug topped the list.

He cited how Jollibee created a huge network of successful stores and how it managed to acquire companies that were even bigger than it was years ago.

For Yu, the story of how Mercury Drug was able to succeed without resorting to franchising had the biggest impact on him as an entrepreneur.

This path, he said, is where Fruitas would like to position itself as a growing small food and fresh beverage conglomerate.

Yu said he is a not big fan of franchising, although he respects and acknowledges the concept as an effective tool to expand a brand with less capital within a short period.

In fact, a handful of brands within the Fruitas Group of Companies experimented on franchising, but the bigger chunk or about 80 percent to 85 percent of the store network still company-owned.

Yu said he wants all his brands and stores to be all company-owned. From carts or kiosks, the company expanded to having in-line stores inside the malls.

Over the past 16 years, the local market has been kind to homegrown SMEs like Fruitas Holdings such that revenues in 2016 hit half a billion pesos. It doubled in 2017 to P1.2 billion, with a net income of P142 million after tax.

“Among the food and beverage companies, we have, if not one of the healthiest, the healthiest financial statements. Payback is guaranteed within three years. We can even do that in 18 months. We have the presence in all the regions except Marawi, but we’re building there,” Yu said.

Fruitas is hoping that the uphill trend of high double-digit growth will continue as the store network expands.

To sustain this growth, the company plans to raise as much as P2 billion by going public, given the healthier, more robust market outlook in the first quarter of 2019.

“We want to offer a good price, maybe less than P5 apiece. Our underwriters—First Metro Investment and BDO Capital are working out the fine prints,” Yu said.

Proceeds from the offering, he said, will be used to modernize all four commissaries, expand the store network and acquire more brands. Beyond the commissaries, a research and development facility will be added to the capital assets.

A small portion will be allocated for debt payment, which is very minimal, he said.

“With the new funding, we’re looking at opening 150 to 200 stores yearly. If not the only one, we are the most active among small companies when it comes to acquiring brands. Because of the strength of our store network and the sheer number of brands we have,  we consider ourselves not small anymore. We’re an SME, but still an underdog. We’re a small company who likes to think big,” said Yu.

Topics: Fruitas Holdings Inc. , Philippine Military Academy , Lester Yu
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