Starbucks swings from Berjaya Food's crown jewel to its biggest drag

KUALA LUMPUR: In just two years, Starbucks Malaysia has swung from being Berjaya Food Bhd’s (BFood) crown jewel to its biggest liability, after a boycott-driven slump turned record profits into heavy losses.

In the financial year ended June 30, 2023 (FY23), BFood’s wholly-owned Berjaya Starbucks Coffee Company Sdn Bhd delivered its best-ever results with revenue of RM1 billion and pre-tax profit of RM165.6 million.

“It was another record year for Starbucks Malaysia, achieving its highest ever revenue,” BFood said in its FY23 annual report.

The American coffee chain contributed nearly 86 per cent of BFood’s consolidated revenue and about 89 per cent of its profits, making it the dominant driver of both BFood and its parent, Berjaya Corp Bhd (BCorp).

BCorp, controlled by tycoon Tan Sri Vincent Tan, holds a 63.23 per cent equity interest in the Main Market-listed BFood.

At group level, BCorp’s food and beverage (F&B) division contributed RM1.16 billion in revenue and a pre-tax profit of RM186.1 million in FY23.

This represented about 12 per cent of BCorp’s RM9.72 billion revenue, but a much larger 28 per cent of pre-tax profit, making F&B one of the conglomerate’s most lucrative segments.

Those gains, however, soon came under pressure.

BOYCOTT FALLOUT HITS HARD

On Oct 7, 2023, the outbreak of the Israel-Palestine conflict triggered consumer boycotts against certain international brands, including Starbucks, hitting BFood hard.

In FY24, Starbucks Malaysia’s revenue plunged to RM676 million, while the brand swung into a pre-tax loss of RM45.1 million from a pre-tax profit of RM165.6 million the year before.

“The decline in revenue was mainly due to the unfavourable market sentiment towards the brand arising from the Middle East conflict,” the group said in its FY24 annual report.

Tan, who founded Berjaya Group, also weighed in, calling on Malaysians to reconsider the boycott, which he said “does not benefit anyone.”

“Starbucks Malaysia is owned by BFood, a Malaysian company, and 85 per cent of its staff are Muslims,” he said.

BFood, whose portfolio also includes Kenny Rogers Roasters, Paris Baguette and smaller niche brands, slipped into the red in FY24 with a net loss of RM90.52 million after revenue fell to RM730.3 million.

Starbucks, once its cash cow, had turned into a drag, a trend that deepened further in FY25.

RECORD LOSS IN FY25

BFood’s fourth-quarter report released last week showed full-year revenue shrinking to RM476.77 million, while the group booked a record net loss of RM291.99 million.

The downturn was driven almost entirely by Starbucks Malaysia, which continued to struggle with boycott-linked weak sentiment despite expanding its store network to more than 410 outlets nationwide.

“The group will continue to rationalise its operations and focus on cost optimisation while navigating through this challenging operating environment,” BFood said in the filing.

“Starbucks Malaysia continues to champion inclusivity and sustainability with initiatives such as the Signing Store, eco-friendly merchandise and a RM1 million contribution to Tabung Amanah Kemanusiaan Rakyat Palestine,” it added.

On a quarterly basis, BFood began FY25 with revenue of RM124.19 million and a net loss of RM33.68 million. In the second quarter, revenue eased to RM123.1 million while losses widened slightly to RM35.33 million.

The slide deepened in the third quarter as revenue dropped to RM113.58 million and net loss expanded to RM37.19 million. The year closed with revenue of RM115.89 million but a much steeper net loss of RM185.79 million, hit by impairments and restructuring costs.

EQUITY WIPED OUT

The sustained downturn battered BFood’s balance sheet. Net assets per share plunged from 22.45 sen in FY24 to 5.71 sen in FY25, while shareholders’ funds shrank from RM392.5 million to RM102.8 million, wiping out nearly 74 per cent of its equity.

Its market value also took a beating. BFood shares have more than halved to 29 sen apiece, down 58.9 per cent since Oct 7, 2023, when Hamas launched a surprise attack on Israel, sparking the Gaza war that continues today.

A month later, in November 2023, United States-headquartered Starbucks Corporation drew global condemnation after suing its workers’ union over a pro-Palestine solidarity post.

The move intensified calls for boycotts worldwide, leaving BFood caught in the crossfire despite being locally owned.

RIPPLE EFFECT ON BCORP

At the group level, the reversal was equally stark for BCorp.

In FY23, F&B contributed 12 per cent of group revenue and 28 per cent of pre-tax profit. By FY25, the segment still made up about 13 per cent of revenue, but its profit contribution had dwindled to negligible levels.

Earlier this year, Tan tried to strike a hopeful note, saying sales were beginning to recover as consumers became “more realistic” about the brand.

“Starbucks is a place for all Malaysians. The boycott sentiment is easing, and we are seeing recovery in footfall,” he said in January.

Last Friday, BCorp reported its net loss widened 35.9 per cent to RM207.20 million in the fourth quarter ended June 30, 2025, from RM152.49 million a year earlier.

The group blamed hefty non-cash impairments on non-performing assets. The quarter also reflected weaker performances in retail, services and property, partly offset by stronger hospitality operations.

Group revenue eased 3.8 per cent to RM2.37 billion from RM2.46 billion, dragged by lower contributions from HR Owen, fewer Starbucks cafes in operation and Cosway’s store rationalisation.

© New Straits Times Press (M) Bhd

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