Malaysia’s Favourite Coffee Brand is in Danger

Estimated reading time: 13 minutes

Did you know that the average Malaysian drinks more than two cups of coffee every day, making coffee a billion-dollar industry in Malaysia? If you’ve noticed, there’s a new coffee chain popping up everywhere, and this brand has already opened more than 600 stores in just five years, thanks to its smart marketing and precise timing, even standing out from the once-dominant Starbucks! So, how did they do it?

In this blog, we’ll dive into  Malaysia’s coffee culture, which has gone through three exciting waves, as well as the story behind Starbucks Malaysia’s local ownership and the dramatic boycotts that affected their revenue in 2024. We’ll also uncover the key strategies driving the rapid rise of ZUS Coffee, and explore the potential challenges it may face from the fast-expanding Chinese coffee giant – Luckin Coffee.

The Coffee Drinking Culture Evolution in Malaysia

The First Wave: The Traditional Kopitiam Era

In the colonial days of the late 1800s, Malaysia was more of a tea-drinking nation. I’m sure you’ve heard of or even visited the BOH Tea Plantation in Cameron Highlands, which was founded by a British man in 1929.

Not long after, the Hainanese Chinese community introduced the ‘kopitiam’ culture in Malaysia by serving rich Nanyang-style coffee along with kaya butter toast and half-boiled eggs. This all began in the late 19th century, marking the beginning of Malaysia’s coffee culture wave.

The Second Wave: Emergence of Coffee Giants

However, everything changed in 1998 with the launch of Malaysia’s first globally popular coffee brand – Starbucks, which marked the beginning of the second wave of coffee culture. Suddenly, coffee wasn’t just a drink anymore, it became an experience.

Starbucks introduced a whole new range of offerings we had never seen before like fancy lattes, caramel macchiatos, frappuccinos, and even a choice of light, medium, or dark roasted beans. Cafes were no longer just places to grab a coffee, but became popular spots for hanging out, remote working, and group study sessions.

The Third Wave: The Generation Shift

In the post-COVID era, coffee culture has experienced yet another wave. We’re now seeing more homegrown brands popping up across Malaysia, such as ZUS, Gigi, and Bask Bear. As a result, more Malaysians are starting to enjoy specialty coffee with local-inspired flavors, and most importantly, the convenience of quick and app-based orders. Everything feels so easy and accessible now!

In fact, this rise in local coffee culture has not only accelerated the growth of Malaysian coffee chains, but also attracted major international players like Kenangan Coffee from Indonesia and Luckin Coffee from China.

Starbucks: Rise and Fall

When this happened, you might have thought that our beloved coffee giant Starbucks would be in serious trouble. But surprisingly, that wasn’t entirely the case. Just walk into any mall, airport, or even your office lobby, you’ll still see people holding Starbucks cups. This shows that the brand still holds a strong position in the hearts of many Malaysians. However, as we know nothing lasts forever. 

For years, Starbucks has been more than just a cup of coffee. It became a brand, a lifestyle, even a flex. But here’s something interesting you might not know. Starbucks Malaysia isn’t actually owned by Starbucks US. It’s operated by Berjaya Food, a subsidiary of Berjaya Corporation Berhad.

Through a licensing model, Berjaya pays to use the Starbucks name and has full control over store openings, pricing, and local menu adaptations. That’s why we get unique drinks like the Pandan Gula Melaka Frappuccino, something you won’t find at Starbucks in the US. For years, this system worked smoothly, and Starbucks remained the king of premium coffee in Malaysia until 2024. 

That year, rising conflicts in the Middle East triggered widespread boycotts of American-linked brands such as McDonald’s and Starbucks. Even though Starbucks Malaysia is technically a local business that hires only Malaysians, many still chose to boycott it due to its perceived links to Israel.

As a result, Berjaya Food suffered a major revenue loss, with earnings declining by 33% in 2024. It was the first time in many years that the company recorded a negative bottom line. To make matters worse, its share price fell by more than 40% year-over-year.

ZUS: Overtaking Starbucks

Fast forward to today, it’s clear that the blue cup seen in many hands, ZUS Coffee, has become the leading coffee brand in Malaysia. It’s unbelievable that within just five years, ZUS has overtaken Starbucks, a brand that has been here for decades. As of now, ZUS has around 610 stores nationwide, which is nearly double that of Starbucks, with around 300 outlets. Even more impressive, ZUS began operations just four months before COVID-19, a time when many businesses were shutting down.

So how did they grow so rapidly despite such challenging conditions? Beyond the impact of the boycott and their “Support Lokal” movement, it’s clear that ZUS succeeded by excelling in several other key areas that fueled their remarkable rise.

Affordability

First and probably the most important factor is pricing. Back then, coffee was considered expensive. You’d have to pay around RM14 for a quality latte from places like Starbucks or The Coffee Bean.

But with ZUS, you can now get a latte for just RM9.90. You might wonder why Starbucks and Coffee Bean are so pricey. Well, it’s understandable because you’re not just paying for the coffee. You’re also paying for the ambience, premium service, and comfy seating they provide.

To be honest, that’s not really necessary, at least for me. That brings us to another key point, ZUS manages to keep its prices lower by adopting a grab-and-go coffee concept.

Grab and Go Concept

Before ZUS entered the scene, there were no major grab-and-go coffee chains in Malaysia. There were only smaller setups, but none matched the scale and structure that ZUS has built across the country.

Now with the ZUS app,customers can easily order coffee from anywhere and pick it up at a nearby location. Previously, the only real option was to order Starbucks through Grab and with the cost of the coffee plus delivery fees, it could easily set you back around RM20. That’s where Starbucks lagged behind, while ZUS stepped up by offering free delivery with a minimum spend. 

When it comes to location, ZUS is everywhere, in universities, office buildings, shopping malls, and more. What’s even more impressive is their product reach, you’ll find ZUS on shelves as canned coffee, instant mixes, and drip bags. With this kind of presence, they’ve transformed coffee from a luxury into an everyday necessity.

The timing couldn’t have been better. During COVID-19, when people couldn’t sit in cafes to enjoy their drinks, a new habit began to form where people started grabbing their coffee or ordering online instead. Today, that habit has become the new norm, and ZUS rode that wave perfectly. 

Low Cost

However, you might wonder if their rapid expansion came at a high cost. But here’s the thing, ZUS has relied solely on its own earnings to fund its growth, unlike many other startups that depend on large investments from venture capitalists. They only began raising external funds in 2023, and that was specifically to support their international expansion.

To keep costs low, ZUS focused on setting up compact kiosk-style stores instead of large cafes. Their rapid expansion was made possible by strong operational efficiency and bulk purchasing power, which allowed them to obtain raw materials at lower prices.

Just so you know, the cost to open a ZUS store is only 20% of what it costs to open a Starbucks outlet. This explains their aggressive expansion across the country.

In addition, ZUS uses forecasting and demand planning to accurately determine how much coffee is needed, which helps them minimize waste and keep costs low.

Tech-Driven Convenience

Here’s how they forecast demand – through the ZUS app. Around 50% of ZUS transactions come from app-based orders. As we know, apps can collect personalised data, so when you order coffee through their app, ZUS can understand your preferences, what you like, when you usually order, and even your favourite drink at specific times. 

That’s why you might notice certain flavours keep returning after their initial trial phase. Most importantly, their menu isn’t just a random list, it’s shaped by actual customer demand, making it a data-driven offering.

Localization

Another reason behind ZUS Coffee’s success is its local adaptation, offering localized flavours like the ZUS Gula Melaka Latte, Teh Tarik Milk Tea, and more.

In addition, ZUS is Halal-certified, which is especially important in a Muslim-majority country like Malaysia. This certification ensures that every step of the coffee-making process, from bean sourcing and roasting to final preparation, all complies with halal standards.

While Starbucks is also halal-certified, Luckin Coffee has yet to receive its certification according to the official Halal Portal. As a result, this may slow down Luckin’s growth in the Malaysian market for now.

Luckin vs ZUS

In the past few months, Luckin Coffee has entered the Malaysian market, posing a new challenge to ZUS Coffee’s dominance. In case you didn’t know, Luckin is a Chinese brand that was launched in 2017. As of now, it has 6 stores in Malaysia, but globally, it has opened around 22,000 stores in just 8 years. When compared to ZUS, Luckin has been opening about 20 times more stores per unit of time, making its growth incredibly aggressive. In China, Luckin outlets are virtually everywhere, showing just how fast and wide their expansion strategy is.

Think of brands like BYD and MIXUE, the same goes for Luckin, which doesn’t just enter a market but floods it. In China, they’ve pulled far ahead of many competitors with extremely competitive pricing and rapid store openings. Now, imagine if they bring that same strategy to Malaysia, ZUS could be in serious trouble.

Even though Luckin Coffee is gaining market share with its super low prices, it’s important to note that ZUS was the first to successfully apply this business model in Malaysia. It’s similar to how Grab outperformed Uber by understanding local needs, or how Shopee and Lazada adapted Amazon’s strategy to suit Southeast Asian markets. ZUS tailored its approach to match Malaysian taste preferences, emphasized convenience, and tapped into the strong “Support Lokal” movement, all of which played a key role in its rise.

Conclusion

Through Malaysia’s evolving coffee culture, we’ve seen how even a well-established brand like Starbucks can be disrupted. In just a few short years, ZUS Coffee, a relatively new local startup, overtook a global icon through smart strategy and solid execution.

This shows that success isn’t about having the longest history. It’s about adapting to the market, understanding consumer needs, and delivering consistent value. ZUS nailed it with competitive pricing, a lean kiosk model, app-driven convenience, local flavour innovation, and halal certification.

In the end, success is built on many pillars, but that alone doesn’t guarantee staying power. The real winning formula lies in the ability to constantly align your business with what consumers want and continue evolving ahead of the market.

Checkout the YouTube video for a visual guide to this blog!

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