When a boycott brings self-inflicted pain

The employees, with a vast majority likely to be in the B40 income group here in Malaysia, will be collateral damage.

Ashwin Chockalingam, FMT

Popular Western franchises in Malaysia are grappling with the boycotts linked to the Israel-Palestine conflict, but are people aware of the wider impact?

Several US food and beverage franchises such as Starbucks Coffee and McDonalds have been hit with a wave of boycotts by Malaysian consumers, seemingly due to their perceived support of Israel in its conflict with Hamas in Gaza.

This has directly resulted in notable declines in customer turnout and revenue for these franchises.

Berjaya Food owns and operates the Starbucks Coffee franchise in Malaysia.

There has been a drop of up to 40% in footfalls in Starbucks Coffee outlets in Malaysia, according to a research note issued by RHB Bank.

“This situation is worse than expected, the timing of this boycott is inopportune, since the year end normally constitutes a seasonal peak period,” as mentioned in the RHB note.

The Berjaya Food share price has fallen by over 20% since the onset of the latest conflict in Gaza.

Those driving the boycott, including former prime minister Dr Mahathir Mohamad, have seen their words directly inflicting financial pain on franchises such as Starbucks Coffee.

“As we can’t send our military, apart from providing aid, we should continue to boycott products like Coca-Cola, Starbucks, and other ‘products of Israel’. We have about 1.7 billion Muslims around the world. If just a quarter of us were to boycott products (made by firms believed linked to) Israel, I’m sure they would then understand the power of Islam,“ Mahathir said during an Aid4Palestine event in November 2023.

However, we need to think about the unintended consequences of these boycotts on Malaysia.

According to Asia Pacific Enterprise Awards, Berjaya Foods owned and operated over 340 Starbucks Coffee outlets in Malaysia as of 2022. They would need to have hired thousands of frontline employees for the standard operations of these locations.

With a sudden drop of over 40% in footfall and effectively revenue, despite no public announcements, Berjaya Foods would realistically need to trigger a round of redundancies for its Starbucks Coffee operations.

This is with the view that the post-boycott recovery, if and when that comes, may not be straightforward and that Berjaya Foods will need to ensure the business remains afloat up until this point.

Other Starbucks Coffee franchisees, particularly those based in the Middle East, have already commenced redundancies, so it is realistic to expect that the same will happen in Malaysia.

An employee of Starbucks Coffee Egypt told The New Arab, that “the company had informed several employees and workers they would be discharged due to a substantial decline in sales attributed to the ongoing boycott campaign”.

As such the employees, with a vast majority likely to be in the B40 income group here in Malaysia, will be collateral damage.

For perspective, this is effectively self-inflicted, as the Malaysian public are of their own free will executing these boycotts, not realising that this will have an impact on them down the road.

The Malaysian politicians and influential figures have a big role to play here in educating the Malaysian public about the impact of their actions on Malaysia as a whole, rather than pouring fuel on the fire with the view of advancing their own agendas.