Starbucks, Pizza Hut, KFC Still In Boycott Crosshairs In Indonesia, Malaysia Over Israel-Gaza War: Report

Starbucks, Pizza Hut, KFC, and other U.S. brands continue to face boycotts in Muslim-majority Indonesia and Malaysia for their perceived links to Israel, two years into the Gaza war, according to a report in Japanese newspaper Nikkei.

Even as those businesses have suffered, their operators are responding by emphasizing their halal credentials, cutting prices, and hiring more local staff.

Pizza Hut is offering pizzas for as low as 5 ringgit ($1.2). McDonald's Malaysia recently quoted a mufti to stress local Muslim ownership and jobs, while Starbucks rolled out the Rahsia Barista campaign featuring drinks by local baristas.

Sales at Berjaya Food, the operator of Starbucks Malaysia, fell 18% and net loss widened in the March quarter. It is yet to report results for the April to June period.

QSR Brands, which runs KFC and Pizza Hut restaurants in Malaysia, swung to a 66.2 million ringgit pre-tax loss last year from a 49.6 million ringgit pre-tax profit in 2023.

Map Boga Adiperkasa, Indonesia's Starbucks licensee, is scaling back its expansion after its net loss widened in the first half of the year.

There are outliers, too. Sarimelati Kencana, which operates Pizza Hut in Indonesia, and local KFC operator Fast Food Indonesia have seen their shares rebound this year.

The rallies are driven by improvement in their bottom lines through menu innovation and stricter control over raw material costs.

The Nikkei report quoted local business owners and advisors as saying that the boycotts could continue, as long as there is no real progress on the situation in Gaza.

To be sure, Starbucks and Yum Brands, the owner of KFC and Pizza Hut brands, draw only a small portion of their overall revenues from the two Southeast Asian nations. 

Starbucks' and Yum's U.S. shares are up 3% and 7.7% year-to-date, respectively, and sentiment for both stocks is 'bearish' on Stocktwits.

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