How long can Berjaya Food's Starbucks Malaysia sustain?

After almost a year of boycotts, Berjaya Food Bhd or BFood continues to make losses.

Muslims all over the world including in Malaysia continue to stay away from the once popular Starbucks coffee chain. 

BFood extended its net loss to RM91.5 million in financial year ended June 30 compared with a net profit of RM103.4 million in 2023.

Revenue meanwhile fell 34.2 percent to RM730.3 million from RM1.11 billion previously, it said in a filing with Bursa Malaysia last week.

But how long can BFood which is the master franchisor of Starbucks Malaysia sustain its business in an unfavourable business environment such as this.

Should BFood be privatised?

It is common for companies which are making extended losses or are undervalued to be taken private whenever it hits a rough patch.

In the past, many companies were delisted and relisted again once the business environment improves.

So, it would not be surprising if Berjaya Group founder Tan Sri Vincent Tan decides to privatise BFood. The option is possible.

BFood also has other food brands under its stable such as Kenny Rogers Roasters Chicken and Jollibean. But can these brands support the company the way Starbucks has all this time?

Tan is an astute businessman

There is no telling what Vincent Tan would do. But one thing for sure he is an astute businessman.

"He bought Caring Pharmacy at a time when nobody expected him to buy and by a stroke of good luck, COVID-19 broke out right after.

Caring Pharmacy's business boomed during that time and the company made good profits.

So there is no telling on what Tan would do to turn Starbucks around. He would hold the cards close to his chest," a source told DagangNews.

Bear in mind that Tan was once owner of fast-food brand Wendy's and McDonald's before they were sold off said the source. 

So rejuvenating or revamping businesses is nothing new to him.

Start a new coffee brand?

It is also common for companies which are associated with negativity or any bad vibes to rebrand.

AirAsia co-founder rebranded or renamed the company into Capital A to decouple itself from the pandemic when its business dived.

Similarly, BFood could start a new coffee brand to cut any affiliation with the genocide.

As for Starbucks Malaysia, only time will tell on the future direction of the global firm as well as what will happen to Starbucks Malaysia.

Analysts not optimistic on BFood

Local research houses meanwhile are not so optimistic on BFood's outlook. 

Maybank IB Research and Hong Leong Investment Bank Research have retained their “sell” call on BFood with a target price of 30 cents and 20 cents respectively.

“BFood’s operating challenges are likely to continue as long as geopolitical tension remains,” Maybank IB Research analyst Jade Tam said in a research note.

“Also, with strong competition from domestic retail coffee chain players, BFood’s Starbucks’ brand equity may have eroded over a prolonged period.

Meanwhile, Hong LeongResearch said Starbucks still made up a big chunk BFood’s revenue in the fourth quarter of 2024 contributing 89 percent of revenue while another 8 percent came from Kenny Rogers Roasters.

With the tough business condition, BFood has decided to take a pause on business expansion which resulted in no new stores being opened for the quarter.

All in all, to date BFood still operates 408 Starbucks stores with three stores permanently closed in the quarter due to the end of tenancy agreements.

Additionally, the group has also decided to temporarily close 25 inactive stores.

“Despite strong brand equity and active promotions, we opine the boycott headwinds will stay at least for the near term which will greatly drag earnings,” said Hong Leong investment analyst Syifaa’ Mahsuri Ismail.

BFood has been bleeding financially ever since the boycott started last October.

What will the company's next course of action be? The investors are anticipating on the company's next move. - DagangNews.com