In a startling development, the ongoing boycott of Starbucks in Malaysia has triggered a series of cascading effects, leading financial institutions to issue warnings and investors to reconsider their positions. RHB Bank, in particular, has advised shareholders to sell their stakes in Berjaya Food, the franchise owner of Starbucks in Malaysia, citing a 24% plunge in stock prices.
The heart of the matter lies in the Starbucks Coffee boycott, fueled by Malaysian outrage over perceived links to or support for Israel and its military campaign in Gaza. The boycott has gained significant traction, prompting RHB Bank to express concern that it may persist longer than initially anticipated, especially if a resolution to the Israel-Hamas conflict remains elusive.
The research note from RHB Bank revealed a grim outlook for Berjaya Food, pointing to a stock price plummeting from 73 sen to 46 sen per share. The bank conducted on-site assessments, noting a substantial 30% to 40% decline in foot traffic at Starbucks outlets, even amidst busy shopping malls. This unexpected downturn is considered worse than anticipated, with the bank emphasizing the inopportune timing, coinciding with the seasonal peak period at the year-end.
Starbucks, known for its “cosy” experience, is facing challenges as competitors seek to capitalize on the boycott, attempting to replicate the popular coffee chain’s ambiance. RHB Bank warned that the post-boycott recovery might be far from straightforward, requiring substantial effort from Berjaya Food to regain its market share amid intense competition.
The repercussions extend beyond immediate financial losses. RHB Bank anticipates a potential impact on Berjaya Food’s expansion plans, which included 40 to 50 new store openings in the upcoming financial year. The bank further predicted a steady erosion of net profits for Berjaya Food, projecting a decline from 21% in 2024 to 7% in 2026.
This downturn aligns with global concerns over Starbucks Corp, which recently experienced a record run of losses in its shares. Sales trends at the coffee giant have cooled, leading to an 11-session decline, erasing 9.4% of Starbucks’s market value, equivalent to nearly US$12 billion.
As Malaysians continue to rally behind the Starbucks boycott, Berjaya Food finds itself navigating turbulent waters. The true extent of the impact on both the franchise owner and the global coffee giant remains to be seen, with questions lingering about the potential long-term consequences and the resilience of Starbucks in the face of socio-political controversies.
(Source: FMT | SCMP)
