Berjaya Food facing sustained challenges for Malaysia Starbucks franchise

Starbucks Reserve store in Malaysia | Photo credit: Starbucks

Malaysia’s Berjaya Food has reported a third consecutive fall in quarterly sales and profits amid ongoing customer boycotts of Starbucks stores over the conflict in Gaza. 
 

The restaurant group, which operates 411 licensed Starbucks stores and five Paris Baguette outlets across Malaysia and Brunei, saw revenues fall 48% year-on-year to RM 138.6m ($29.4m). Berjaya Food also reported a RM 30.3m ($6.4m) loss for the three months ending 31 March 2024 compared to a RM 15.2m ($3.2) profit during the same period last year. 

Berjaya Food ‘paused’ store expansion during the quarter across its brand portfolio, which also includes the Kenny Rogers Roasters fast-food chain. 

In a commentary accompanying its accounts filing, Berjaya Food said ‘consumer perceptions’ about Starbucks and current sentiment in relation to the conflict were key factors in its widening losses. The group also cited the Muslim fasting month of Ramadan and higher raw material costs as contributing to declining sales. 
 

However, Berjaya Food’s directors anticipate its operating performance to ‘gradually improve’ in the fourth quarter. 

In April 2024, Starbucks reported higher second quarter revenues in Asia Pacific despite ongoing customer boycotts in Indonesia and Malaysia. However, the ongoing ‘economic volatility in the Middle East’, as well as weaker sales in its key US and China markets, contributed to a 2% year-on-year fall in global sales to $8.6bn. 

In January 2024, Starbucks CEO Laxman Narasimhan said on an earnings call that heightened tensions in the Middle East were having ‘significant impact on traffic and sales’ for its stores in the region, as well as a ‘softening’ of US traffic.   

The Starbucks Foundation and Starbucks Middle East licensee Alshaya Group jointly donated $3m in April 2024 to World Central Kitchen for food and humanitarian aid in Gaza. The foundation donated a further IDR 5bn ($314,000) in May 2024 in partnership with licensee PT Sari Coffee Indonesia.