Starbucks Malaysia's Fragile Rebound: Assessing the Sustainability of a Franchise in a Shifting Geopolitical and Competitive Landscape

The story of Starbucks Malaysia in 2025 is one of crisis, adaptation, and uncertain recovery. For much of the year, the brand's operations in the country were battered by a boycott driven by public sentiment against Western firms perceived to align with Israel's actions in Gaza. According to a report by Bloomberg, the franchise operator, Berjaya Food Berhad, posted a record net loss of 292 million ringgit ($69 million) for the fiscal year ending June 2025, with revenue plummeting 36% year-on-year to 477 million ringgit. This collapse was not merely financial but operational: the number of Starbucks outlets in Malaysia contracted from 408 in June 2024 to 320 by August 2025, with 88 stores shuttered. The human cost was equally stark, as over 1,000 front-line jobs were lost, and local suppliers and landlords felt the ripple effects.

Yet, amid this turmoil, there are glimmers of strategic recalibration. Berjaya Food has pivoted toward diversification, securing franchises in Denmark, Finland, and Iceland as part of a broader Nordic expansion. This move, while ambitious, raises questions about whether it can offset the losses in Malaysia or if it merely shifts risk to new markets with unproven demand. Meanwhile, Starbucks' global "Back to Starbucks" strategy-aimed at revitalizing brand engagement and operational efficiency-has shown mixed results. While the international segment reported a 3% increase in comparable store sales in Q4 2025, operating income for the region fell to $223.2 million from $282.9 million the prior year, with margins contracting to 10.8%. This suggests that even as Starbucks expands, profitability remains elusive.

The geopolitical boycott, though still a shadow, appears to be receding. By late 2025, the intensity of protests had eased, and some analysts speculated that consumer sentiment might normalize as the conflict in Gaza entered its third year. However, the damage to Starbucks' brand in Malaysia was profound. The company's decision to sue union workers who supported Palestine and its perceived silence on the conflict fueled the boycott. While Starbucks has since taken steps to address labor relations, the trust deficit lingers.

In Southeast Asia, the competitive landscape has grown more treacherous. Manner Coffee, a Chinese rival, is aggressively expanding into Indonesia, planning to open 400 stores and eyeing a $3–$4.5 billion IPO in Hong Kong. This challenger, with its minimalist design and affordability, is directly targeting Starbucks' traditional customer base. Starbucks' response-selling up to 60% of its China business to local private equity firm Boyu Capital-signals a retreat to local expertise. Yet, it remains unclear how this strategy will translate to Malaysia or other parts of Southeast Asia, where Manner's expansion is now encroaching.

The Nordic expansion, meanwhile, offers a potential lifeline. While specific financial contributions from these markets are not disclosed, the broader international segment's 9% revenue growth in Q4 2025-driven by store openings and foreign currency gains-suggests that Starbucks' global footprint is still a source of resilience. For Berjaya Food, this diversification could mitigate the risks of overreliance on a single market. However, the success of the Nordic venture hinges on cultural adaptation and execution, areas where Starbucks has faced challenges in the past.

So, is Starbucks Malaysia a compelling investment? The answer lies in balancing short-term pain with long-term potential. The company's global strategy and regional diversification efforts are commendable, but they cannot erase the structural weaknesses exposed in 2025. The boycott's geopolitical roots remain volatile, and the rise of Manner Coffee underscores the need for innovation and agility in Southeast Asia. For investors, the key question is whether Starbucks can transform its crisis into a sustainable turnaround-or if the franchise remains a casualty of a shifting world.