Maybank IB noted that the group planned to open 14 more Starbucks stores in 4Q23 to bring the total of stores to 393.
PETALING JAYA: Berjaya Food Bhd
’s (BFood) lower coffee average selling prices (ASPs) in the fourth quarter of the financial year 2023 (4Q23) is expected to offset slower sales momentum in sequential quarters, according to Maybank Investment Bank (Maybank IB).
“Sales momentum is expected to be lacklustre in 4Q23 due to seasonally weaker sales during Ramadan.
“Product demand for Starbucks remains strong, but meaningful earnings improvement will have to be attained through stringent cost management,” Maybank IB said in a report yesterday.
The research house said given that the Ramadan period from March 22 to April 20 saw sales declined about 20% to 30% month-on-month, BFood’s 4Q23 sales volume should be seasonally softer quarter-on-quarter (q-o-q).
“Store footfall has been stable but slight down-trading trends are emerging as the number of smaller-sized beverage orders increase,” Maybank IB said.
The research house noted that the group planned to open 14 more Starbucks stores in 4Q23 to bring the total of stores to 393.
At present, there are two Paris Baguette (PB) stores located in Pavilion Kuala Lumpur and Bukit Jalil.
“With demand remaining stable, the group believes it can open 40 to 45 more Starbucks stores in FY24 along with five PB stores per annum.
“BFood is required to open at least 25 Starbucks stores per annum based on its agreement with Starbucks International,” Maybank IB said.
The group is required to purchase 60% of its raw materials from Starbucks International and raw material ASPs (coffee, flavoured syrups, packaging materials) are adjusted on a quarterly basis in US dollar, according to the research house.
“BFood does not do any foreign exchange hedging. Management has shared that its coffee ASPs have softened in 4Q23 and raw material costs had peaked in 3Q23.
“The group’s largest raw material component is coffee, followed by milk, which is sourced locally.
“Separately, after its RM1/beverage price hike in November 2022, the group does not plan to raise product prices any further for now given subdued consumer sentiment,” Maybank IB said.
While BFood has limited authority in making permanent changes to sustainably sourced product packaging as Starbucks Coffee International has full control over the Starbucks brand image globally, BFood has implemented various in-store policies surrounding its last mile sales, aimed at reducing its environmental impact including the usage of biodegradable plastic bags.
“Its main environmental concerns revolve around the usage of single-use paper and plastic packaging and, to a lesser extent, its carbon footprint through electricity consumption.
“Overall, it is exposed to manageable environmental, social and governance (ESG) risks. Its ESG measures are consistent with its retail industry peers but it also has similar gaps with regard to concrete sustainability targets that the group hopes to achieve in the long run,” Maybank IB said.
