A slow climb after the boycott shock
Starbucks stores in Malaysia are seeing a cautious return of customers after nearly two years of boycott pressure tied to the war in Gaza. Berjaya Food, which holds the Starbucks licence in Malaysia, reported that the first quarter ended September 30 showed early improvement. Revenue rose 3.3 percent while net loss more than halved to 14.8 million ringgit. That follows a bruising period, including a record 292 million ringgit loss in the financial year that ended in June, and the closure of dozens of outlets.
The company trimmed its network from about 400 stores to roughly 320 as footfall fell and costs needed to be cut. Management says the boycott intensity has eased in recent months as more Malaysians understand that Starbucks in the country is locally operated by Berjaya Food, not a unit of the United States parent, and most employees are Muslims. The clarification helped reduce confusion that had spread on social media when the conflict first escalated in late 2023.
Sydney Lawrance Quays, the chief executive of Berjaya Food, has emphasized that the recovery is visible but still fragile. He pointed to better store traffic and a more stable trading environment compared with the worst months of 2024.
Quays said in an interview that momentum is building, while stressing that it will take time to reach pre-boycott performance. He also pointed to opportunities with tourists and a growing middle class, which traditionally support specialty coffee sales.
The recovery is slow, but we do see that there is a positive sign moving forward.
Even with the upturn, Starbucks has ceded ground to new competitors. Home grown chain ZUS Coffee, operated by Zuspresso Sdn Bhd, has overtaken Starbucks in store count after an aggressive expansion. Berjaya Food’s shares rose about 2 percent on the day the quarterly figures were released, but the stock remains roughly 25 percent lower this year. The market is waiting to see if the improvement can hold.
What changed for Starbucks in Malaysia?
Unlike in some markets where international brands directly run their stores, Starbucks Malaysia operates under a licence held by Berjaya Food Bhd. That means hiring, supply chains, and local compliance are managed by a Malaysian company. The chain is halal compliant and the workforce is predominantly Muslim. Management has tried to communicate this structure more clearly after the boycott wave began so that consumers can distinguish between local operations and global politics.
Boycotts in Malaysia have often focused on perceived links with Israel. In practice, licensees like Berjaya Food are locally owned businesses that pay a royalty to a global brand while running daily operations on their own. Executives say this difference has sunk in for some consumers over time. That message coincided with a modest return of footfall and a reduction in online calls to avoid the brand.
The company still faces a delicate task. It needs to keep explaining the local ownership set up without appearing defensive, while also rebuilding loyalty through service, value, and product innovation. The fact that many store partners are Muslims has also been highlighted by management as part of its message to the public.
Franchise math: revenue, losses, and store count
Berjaya Food’s latest quarterly performance shows early signs of stabilization. Revenue was slightly higher than a year earlier while losses narrowed. The store base has been reset to a smaller footprint after closures in 2024 and early 2025. Management calls this a more sustainable network. Starbucks still provides the vast majority of group revenue, roughly 80 percent, so the pace of any recovery at the coffee chain will largely decide the parent’s earnings path.
The swing from a record loss in the last financial year to a smaller quarterly deficit suggests that cost cuts and a gradual return of customers are gaining traction. That said, large base effects from last year’s downturn and one off items make the trend hard to read in isolation. A few more quarters will give a clearer view of earnings capacity.
Are the early numbers durable?
Analysts have mixed views. Some expect a seasonal lift from the year end festive period and temporary cash aid to households to support discretionary spending. Others point out that the brand still faces lingering sentiment risks tied to geopolitics. Several research houses also warn that competition from fast growing local players and China based chains is intensifying, which could limit gains even as the boycott cools.
One brokerage sees the worst of the boycott impact mostly behind the company. CGS International wrote that the pressure on Berjaya Food had likely reached a trough during 2024 and sees consumption gradually improving over the next few years. Its estimates imply Starbucks Malaysia could be around two thirds of its 2023 consumption level in the current financial year, with gradual gains in the next two years.
CGS added that the company has dialed back some weekly promotions for app members and Starbucks card users as volumes stabilize. That move suggests management is seeking a better balance between traffic and margin after months of heavy discounting.
A crowded coffee market
Malaysia’s coffee scene has changed quickly. Local names such as ZUS Coffee have built dense networks and strong delivery channels. China based entrants have also pushed into cities with sharp price points and streamlined menus. These brands appeal to cost conscious consumers and offer quick service. Starbucks, by contrast, positions itself on experience, store ambience, and richer beverage customization, which usually comes with a higher ticket.
Pricing and promotions
The affordability gap is now a defining feature of the competition. Local and China based chains often promote value drinks below the price of a typical Starbucks latte. Heavy discounting by many players in 2024 pulled customers across brands. As volumes at Starbucks began to stabilize, Berjaya Food reduced frequent app promotions to protect margin. That approach can help profitability if traffic holds, but it also means the company needs to win customers with service, speed, and product rather than deep discounts.
Management is betting that Malaysia’s growing middle class and steady tourist arrivals will support premium coffee demand. Locations in travel hubs and malls can capture these groups, while digital ordering and loyalty programs can help retain regulars. The store base, now at about 320, is smaller yet more concentrated in higher traffic areas after closures. That should improve unit economics if spending continues to recover.
Regional picture beyond Malaysia
The boycott effect was not confined to Starbucks or Malaysia. Across Malaysia and Indonesia, major United States fast food and coffee brands endured steep revenue drops through 2024 as calls to boycott firms seen as linked to Israel spread. QSR Brands, the operator of KFC and Pizza Hut in Malaysia, swung from a before tax profit in 2023 to a loss in 2024. Management leaned on price cuts, halal messaging, and local hiring to try to steady sales.
In Indonesia, Pizza Hut operator Sarimelati Kencana moved back to profit in early 2025 after losses, helped by new menu items and digital marketing. KFC’s Indonesian operator cut losses but sold a stake in a poultry supplier to support its finances. Starbucks licensee Map Boga Adiperkasa slowed expansion after reporting a significant loss in early 2025.
Activism around consumer choices has also lifted local alternatives in some markets, from beverages to snack brands. The trend shows how reputational pressure can travel across borders quickly in a social media era. International names have had to recalibrate strategy, increase local engagement, and in some cases reshape their portfolios to win back customers.
Strategy shift, fewer stores at home, selective growth abroad
Berjaya Food has combined cost control with network optimization. Cutting the Starbucks network to about 320 outlets removed underperforming stores and reduced overheads. The intention is to run a leaner base while focusing on high traffic, high margin sites. The company also operates Kenny Rogers Roasters and produces baked goods for Paris Baguette in Malaysia and the Philippines, which adds diversification, yet the Starbucks brand remains the main profit driver.
At the same time, Berjaya Food is pursuing growth outside Malaysia. The company holds rights to develop Starbucks in parts of the Nordic region and is planning a third outlet in Iceland after launching there in 2025. Overseas openings bring long term revenue potential, but they also carry start up costs that have weighed on recent results. Analysts tracking the company say these costs, while temporary, need to be matched with stable cash flow at home.
Industry consultants point to the unique pressure facing foreign brands in Muslim majority markets during this period. Roshan Raj, a partner at Redseer Strategy Consultants, described the twin challenges he is seeing across parts of Southeast Asia.
Foreign brands are confronting two challenges at once, government restrictions and unhappy consumers.
What investors are watching next
The share price reaction to the latest quarter was mildly positive, but the stock remains down sharply this year. Research houses are divided on the outlook. Some expect narrower losses in coming quarters, partly due to seasonal demand and a firming of consumption. Others maintain cautious calls, citing brand sentiment risk and fierce competition. Several analysts have pointed to rising operating expenses if the company chooses heavier marketing to defend share.
RHB Bank took a skeptical stance in a research note earlier in the boycott period, warning that the turnaround would be hard to achieve while the conflict persisted. That call echoed worries across the investor community about whether customers would return in sufficient numbers to restore earnings.
The post-boycott recovery may not be straightforward and it may take Berjaya Food much effort to regain its market share.
For now, the key markers are clear. Watch footfall and ticket size as promotions are normalized. Track the pace of store optimization in Malaysia and the rollout in the Nordics. Monitor competition from local and China based chains and any shift in price gaps. Any durable ceasefire or easing of tensions in the Middle East could also help sentiment. If those pieces fall into place, Berjaya Food can aim to rebuild margins off a smaller but more efficient base.
The Bottom Line
- Berjaya Food says Starbucks Malaysia is seeing a slow but visible recovery, with first quarter revenue up 3.3 percent and net loss narrowing to 14.8 million ringgit.
- The company took a record 292 million ringgit loss in the last financial year and cut its store network from about 400 to roughly 320.
- Management attributes easing boycott pressure to better public understanding that Starbucks Malaysia is locally operated and halal compliant.
- Competition is intense from ZUS Coffee and China based chains that undercut on price, pushing Starbucks to compete on experience and service.
- Analysts are split: some cite seasonal boosts and stabilization, others keep cautious calls on brand sentiment and cost pressures.
- CGS International sees consumption near two thirds of 2023 levels in the current year, with gradual gains in the next two years.
- RHB Bank warns that regaining market share will be challenging while geopolitical tensions linger.
- Berjaya Food is adding selective overseas growth in the Nordics, though start up costs have weighed on near term results.
