Malaysian bank advises investors to sell Starbucks shares as consumers put coffee chain on freeze

A major Malaysian bank has advised investors to sell their holdings in the local licence-holder of American coffee chain Starbucks, which has been one of the main targets of boycotts against allegedly pro-Israeli businesses since the start of the conflict in Gaza in October.

Malaysia’s fourth-largest bank, RHB Bank, on Wednesday issued a research note advising investors that its outlook for Berjaya Food Berhad had turned cautious due to the ongoing Starbucks boycott, saying it could last longer than initial expectation as the bank did not foresee a near-term resolution to the conflict.

“The post-boycott recovery may not be straightforward and it may take Berjaya Food much effort to regain its market share, [given] the intense competition,” the bank’s research division said in its report, adding that market share loss might not be temporary.

A Starbucks outlet in Kuala Lumpur. Photo: Azneal Ishak

The conflict, now into its 62nd day, has seen more than 15,000 Palestinians killed in Israel’s retaliation to a Hamas attack on its territories on October 7, which left over 1,200 people dead.

Nazari Ismail, chairman of the BDS (Boycott, Divestment, Sanctions) movement in Malaysia, said the bank’s report was proof that the movement was working and would strengthen the public’s resolve to push through with their boycott strategy, which has entered its second month.

“This resolve will likely strengthen due to the increasing brutality of the Israeli army towards Palestinians,” Nazari told This Week in Asia. “Corporations will likely see their presence in Israel as a real business risk and a liability.”

Inspired by the South African anti-apartheid movement, the BDS movement is a global effort to put non-violent pressure on Israel to comply with international law by boycotting, divesting and sanctioning the country and entities that support it.

Starbucks has said it does not financially support Israel in any way. However, in October, the company criticised its workers’ union in the United States for posting a message expressing “Solidarity with Palestine” on social media.

A woman in Kuala Lumpur holds up a placard during a rally on November 16 outside Egypt’s embassy in Malaysia to show solidarity with Gaza’s doctors. Photo: EPA-EFE

The Starbucks boycott extends far beyond Malaysia and appears to have had a significant impact on the company’s bottom line. Starbucks’ parent company in the US saw its stock price slide for 12 consecutive days recently, wiping out 9.4 per cent of its market value, a decline of nearly US$12 billion.

Many in Malaysia – which has strongly advocated for the Palestinian cause – celebrated the news of Starbucks’ declining fortunes, saying it was time to support local brands instead.

“Let’s support local coffee chains and small local shops that also employ our local workers,” said Facebook user Nisha Ismail. “Collectively, we can show these companies that we do not support genocide.”

Efforts to rehabilitate the brand have fallen flat, such as a recent holiday promotion advertised on X that was widely panned by users.

Depicting hijab-wearing Malaysian women holding Starbucks cups, the apparent pandering was not appreciated by the public, with some calling it an act of desperation.

“No thanks. I don’t want to be associated with a company that supports genocide,” said hijab-wearing X user Khadeeja Hawa.

Others pointed out that Starbucks had previously ignored that demographic in its campaign messaging and was only trying to appeal to them now after feeling the brunt of the boycott.

Across Malaysia, including its cosmopolitan capital city Kuala Lumpur, Starbucks Coffee outlets seem to have lost their position as a default meeting space and are instead routinely seen to be empty with only a handful of customers patronising them.

This includes its latest outlet in Kuala Lumpur’s newest high-end shopping centre, The Exchange TRX, which appeared quiet during a recent visit, despite heavy foot traffic from people doing their Christmas shopping.

Nearby, a kiosk for popular Thai milk tea franchise ChaTraMue, which recently entered the Malaysian market, had people queuing and waiting up to an hour for their drink.

Although Starbucks was one of the pioneers in popularising espresso-based coffee culture in Malaysia, alongside The Coffee Bean & Tea Leaf and Dome, such international franchises no longer have a commanding hold on the Malaysian public when it comes to coffee, with home-grown brands such as Zus Coffee and Gigi Coffee gaining favour rapidly in recent years.

The existence of these local coffee brands alleviates concerns about Malaysian workers losing their jobs due to the boycotts, a key counterargument put forward by sceptics.

“I hope the existing Starbucks cafes can be converted into a local brand eventually,” said Mardhiah Yusoff on Facebook. “It’s sad to see the cafes being empty, but it’s even sadder for the Palestinians if we don’t do anything.”