The boycott of international brands associated with Israel has ignited a debate about its effects on Malaysia’s local coffee sector, revealing both potential opportunities and challenges.
On October 7, 2023, global attention was drawn to the longstanding oppression of Palestinians, sparking a worldwide movement transcending race and religion in support of their cause. This led to a surge in actions such as the boycott of Israel-related brands, including Starbucks.
In Malaysia, where backing for Palestine has traditionally been strong, the boycott gained momentum rapidly.
A year later, the effects on the coffee industry are evident. Many consumers are turning away from international chains in favor of local businesses, leaving some establishments impacted by the boycott nearly empty or even forced to shut their doors.
Local Entrepreneurs Weigh In
Hamizah Hamzah, founder of the home concept café Let’s Coopi Roasters, noted a marked shift in consumer support toward local brands. “People have been sharing on social media about Malaysian coffee shops and cafes, recommending alternatives to the boycotted brands,” she stated.
Hamizah reported a significant uptick in business since the boycott began, with many customers becoming regulars and friends. “Although we may not be as large as the major corporations, the support we receive is overwhelming,” she said.
She acknowledged the challenges facing some coffee shops, which have seen their customer bases dwindle or close down entirely, but she views this as a growth opportunity for local businesses. “To be a successful entrepreneur, you must recognize the right moments to seize opportunities,” she added.
While uncertain about the complete removal of international brands from the coffee scene, Hamizah pointed out that local coffee shops can significantly influence the market. “Local cafes vastly outnumber the big brands, showcasing the preference for homegrown businesses,” she concluded.
Shift in Market Dynamics
Muhammad Zakir Mohd Zamil, lead trainer at Barista Guild Asia, echoed Hamizah’s sentiments, stating that the boycott of major brands has shifted Malaysia’s coffee market dynamics, driving consumers to local alternatives like Gigi Coffee. “This reflects a growing trend among Malaysians seeking local options,” he remarked.
Zakir emphasized that while it is still early to gauge the long-term impacts, the boycott has opened up valuable opportunities for local businesses to expand their presence. He noted that foot traffic in malls has shifted, with local brands experiencing a noticeable uptick as international chains struggle to maintain their previous customer levels.
However, he cautioned that with increased demand comes the challenge of maintaining quality and service. “If local businesses cannot meet the high expectations of former customers of large brands, they risk losing their new clientele,” Zakir warned.
He also highlighted a significant rise in coffee consumption in Malaysia, which has surged by 50 to 70 percent since 2020, growing from approximately 300,000 kg to over 600,000 kg annually. “The Malaysian coffee market is expanding rapidly, presenting immense opportunities for local chains and independent cafés to capitalize on the growing demand,” he added.
Economic Perspectives
Professor Dr. Sufian Jusoh, director of the Institute of Malaysian and International Studies at Universiti Kebangsaan Malaysia, provided an economic analysis of the situation. He explained that international brands initially entered the Malaysian market to tap into its burgeoning consumer base, which views coffee from these establishments as a symbol of status and sophistication.
“While the boycott has negatively impacted franchise owners of international brands—who still need to pay franchise fees amidst dwindling customers—it has simultaneously created opportunities for local innovation,” he said.
Sufian noted that this shift is driving growth for Malaysian brands, leading to increased product diversity and the emergence of small businesses. He highlighted the recent announcement by Zus Coffee, which secured RM250 million in investments for global expansion, showcasing the potential of local brands to thrive amidst challenges.
When asked about the potential for local brands to replace international giants, Sufian expressed optimism, provided they maintain high production standards and focus on quality. “Local brands can not only expand domestically but also seize opportunities in international markets, especially within the ASEAN region,” he suggested.
While the boycott has presented opportunities for local businesses, challenges remain. Sufian noted that enhancing customer service could be a crucial area for improvement, as many retailers lack the engaging approaches seen in other ASEAN countries.
“If local brands adopt a more customer-friendly service style, it would significantly improve the overall experience,” he stated.
Concerns about the boycott’s effects on Malaysia’s international image were addressed by both Sufian and Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid. They noted that while well-known international brands offer minimal technological contributions, the focus should be on promoting local brands to enhance Malaysia’s economic landscape.
Afzanizam reported a noticeable decline in customer foot traffic at major international brands since the boycott began, which has been documented by publicly listed companies disclosing financial figures. “When consumers collectively choose to boycott, it has an immediate effect on sales,” he emphasized.
A Call for Reflection
The ongoing boycott of international brands, particularly Starbucks, has led to significant ramifications for Malaysia’s coffee industry. On March 4, Malaysian businessman Tan Sri Vincent Tan called for an end to the boycott, warning of its adverse effects on the local economy and job opportunities, particularly for the predominantly Muslim workforce at Starbucks Malaysia.
Despite his call for reflection, the financial implications for Berjaya Food Bhd (BFood), which manages Starbucks Malaysia, have been stark. The company reported a net loss of RM91.5 million for the fiscal year ending June 30, a drastic downturn from the previous year’s profit of RM103.4 million, attributing this loss to the boycott.
As the debate over the boycott continues, the future of international coffee brands in Malaysia hangs in the balance, influenced by local sentiments and economic realities. The situation presents both challenges and opportunities for local entrepreneurs looking to establish a stronger foothold in the ever-evolving coffee landscape.
Related Topics:
Farewell to Habit: Limavady Café Closes After Five Flavorful Years
From Empty Cups to Full Hearts: The Impact of Free Coffee Tuesdays
Fairfield University Unveils Alumni-Crafted Coffee and Beer