How the boycott is reshaping the coffee industry in Malaysia

Starbucks Malaysia has been hit by a consumer boycott tied to the Israeli-Palestinian conflict. Franchise operator Berjaya Food reported a loss of 87.34 million ringgit, about 143 million RMB, in the first half of this year. Store traffic fell sharply, and the franchisee has repeatedly stated that the Malaysian business is locally owned and staffed mostly by local Muslims.

The boycott began after the conflict escalated and the US government backed Israel's military operations in Gaza. Former Starbucks CEO Laxman Narasimhan acknowledged a severe sales blow in the Middle East, with US traffic also declining from mid-November. In Malaysia, traffic dropped about 40 percent and Berjaya Food shares fell more than 20 percent, as consumers shifted toward local coffee brands.

Since the outbreak of the Israeli-Palestinian conflict, American chain brands have faced a wave of boycotts in Muslim-majority regions, with Starbucks bearing the brunt. In Malaysia, a Muslim-majority country, local consumers' boycott of Starbucks has caused customer traffic to plummet. The latest financial report from franchise operator Berjaya Food shows that in the first half of this year, its Starbucks business suffered a massive loss of 87.34 million ringgit (approximately 143 million RMB). To reverse the decline, Berjaya Food has repeatedly stated that Starbucks Malaysia is wholly owned by a local publicly listed company, with employees being almost entirely locals and mostly Muslims, attempting to sever its association with the US headquarters. However, the boycott continues, even affecting employees' livelihoods and stock performance. How this situation will evolve and whether Starbucks can regain local consumers' trust is worth watching.

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Since the escalation of the Israeli-Palestinian conflict, some American chain brands have faced joint boycotts from consumers in the Middle East and Muslim-populated regions due to the US government's support for Israel's military operations in Gaza, and Starbucks is one of them.

Former Starbucks CEO Laxman Narasimhan once admitted that due to the Israeli-Palestinian conflict, Starbucks sales in the Middle East market suffered a severe blow, and even US domestic stores were not spared, with customer traffic showing a noticeable decline since mid-November last year.

In Malaysia, which has a large Muslim population, the situation is equally grim. According to a report by Sin Chew Daily last year, after the outbreak of the Israeli-Palestinian conflict, Starbucks became a boycott target for local consumers, especially the Muslim community, with store traffic plummeting by 40%, and the stock price of its franchise operator Berjaya Food also dropping by more than 20% in response.

To mitigate the impact of the boycott wave, Starbucks Malaysia issued a statement emphasizing that the brand has never supported Israel and is not involved in any political agenda. However, this clarification failed to reverse local consumers' boycott sentiment, with many still refusing to step into Starbucks stores and instead supporting local coffee brands.

(Screenshot of Starbucks Malaysia's announcement)

Berjaya Food pointed out that local consumers' boycott of American brands has dealt a severe blow to Starbucks Malaysia's revenue. According to the company's latest quarterly financial report, in the first half of this year, its Starbucks business recorded a massive loss of 87.34 million ringgit (approximately 143 million RMB).

Facing this unfavorable situation, Berjaya Food had to speak out again, explaining that Starbucks Malaysia is entirely owned by a Malaysian publicly listed company, operating 400 stores within Malaysia and employing more than 5,000 staff, all of whom are local Malaysians, including persons with disabilities.

The founder of Berjaya Group also emphasized that Starbucks Malaysia is merely a franchised company, and its employees are not only all locals but 85% of them are Muslim. He stated that if local consumers continue to hold prejudices against Starbucks and blindly boycott it, in the long run, it will benefit no one.

Some analysts pointed out that local consumers' spontaneous boycott has led to a sharp decline in Starbucks store sales, severely impacting corporate revenue, and operators may have to take measures such as layoffs to keep stores running normally. Some employees also said in media interviews that the public's boycott of Starbucks has brought pressure to their lives and work.

The founder of Berjaya Group stated that local people should realize that Starbucks has been a genuine local chain store since it was introduced to Malaysia, with no foreign investment from the US or elsewhere, and it is not owned by the American chain coffee brand Starbucks. He believes that as time goes by, more and more people will realize that the boycott they participated in is unnecessary and may only bring negative effects to society.

Image source: Internet

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