The stats seem to support the notion that Malaysians are indeed coffee lovers with millennials forming the largest group of coffee addicts, with more than 80% drinking at least one cup a day. — PHOTO: LOW LAY PHON/The Star
THE idiom “too much of a good thing” does not seem to apply to coffee and Malaysians.
One would think we have enough of coffee chains and stores throughout the country but more seem to be making a beeline for a chance to entice Malaysians’ (coffee) taste buds.
The latest is Luckin Coffee, a US-listed Chinese coffeehouse chain, which is reportedly set to open shop here following its success in Singapore, where it already has 30 stores.
The stats seem to support the notion that Malaysians are indeed coffee lovers.
And not surprisingly, millennials form the largest group of coffee addicts, with more than 80% drinking at least one cup a day, according to the Malaysian Coffee Association.
Put this down to “lifestyle” needs, a growing self-reward culture or simply, a basic need for sustenance, but the outlook for the industry appears bright.
China’s Luckin, however, will not have it easy as competition is intense.
It will have to compete with home-grown brands like Zus Coffee and Gigi Coffee which have hundreds of outlets each despite being established barely five years ago.
These brands seem to have gotten their pricing strategy right, which is one of the main reasons why they appear to have become more popular than the Western brands of Starbucks and Coffee Bean.
Then there are also the stores selling the more “Malaysianised” versions such as Oriental Kopi Holdings Bhd, Old Town White Coffee, Nyonya Colors and Hometown Hainan Coffee.
Among the other international brands are Morocco’s Bacha Coffee and China’s Cotti Coffee, which opened their first Malaysian stores last year.
But the pie appears big enough to go around. So big that Oriental Kopi has filed for an initial public offering (IPO) on the ACE Market to raise funds in order to expand.
In its prospectus, the coffee chain said it plans to open 15 new cafes over the next two years in various states. Currently, it has 14 at shopping malls, shoplots and an airport, nationwide.
Industry observers reckon that the steady inflow of coffee chains into Malaysia is an indication of a healthy consumption pattern in the country.
“Despite the rising cost of living, people cannot live without their morning and afternoon boost,” quips one observer.
He believes that coffee companies will need to be innovative to attract customers and as a result, customers will get to enjoy a greater variety of promotions and so on.
Cost of coffee
Nevertheless, along with the increase of coffee varieties to choose from is a likely increase in the cost of one’s cup of joe, over time.
In a recent Hackett Money Flow Commodities global report, commodity expert Shawn Hackett said the coffee market “has a set-up for all-time highs to be seen over the next crop cycle.”
“The price of coffee is continuing to rise and the latest forecast claims we could see the cost of the drink increase even more this year,” says InvestorPlace, a US independent financial research firm.
Quoting Citi analyst Aakash Doshi, it said arabica coffee prices may increase in both the short and long terms, with Citi giving a coffee price forecast of US$1.88 (RM8.87) per pound to US$2.15 per pound for 2024.
Some of the reasons cited for this increase are higher demand and unpredictable weather in coffee-growing countries like Vietnam, Brazil, Indonesia and some parts of Africa.
Prices will no doubt fall intermittently as they did this week. However, the general believe is that they will remain high over the longer term.
Interestingly, it is not only coffee prices that have been seeing a rally of late. Cocoa prices have also hit fresh records this year, with prices more than tripling over the last year on supply concerns.
Major candy and chocolate makers like Hershey and Cadbury have reportedly been shielded from this as they had locked in prices earlier. However, they are expected to bear the brunt of higher cocoa prices next year.
In Malaysia, cocoa manufacturer Guan Chong Bhd
is one of the companies whose performance is correlated with the price of this commodity.
This article first appeared in Star Biz7 weekly edition.
