Buzzing cafe scene across the Causeway
Video by cottonbro
EVERY weekday morning, Charlene Teoh faithfully queues for her caffeine fix at a cafe near her office in Bukit Jalil, Kuala Lumpur.
That, in itself, is not unusual. What’s eyebrow-raising is that her daily cup of joe costs RM15 (S$4.20) or more – an amount that she and many other millennial Malaysians are increasingly willing to cough up as consumer tastes get more sophisticated.
Teoh spends around a quarter of her salary on coffee every month, and this includes the regular two cups a day, which cost her around RM30. On weekends, she is willing to pay even more for coffee made from single-origin beans, which are generally regarded by connoisseurs to be of better quality.
“A speciality coffee like this costs around RM30 to RM60 a cup, for rare beans like Geisha,” she says. “It’s expensive, but I deserve to enjoy a good cup of coffee after a long week of work.”
Millennials are the key driver of Malaysia’s speciality coffee consumption, with 85 per cent drinking at least one cup a day, according to a report by the Malaysia Coffee Association.
Price appears to be no object for young wage earners in the country, despite a rising inflationary environment and a household median income of just above RM6,000.
With demand for such “affordable luxury” on the rise, speciality coffee chains are taking off and taking on bigger international players.
Growing coffee consumption in Malaysia
Coffee consumption (million kg)
2022
2021
2020
48.0
35.9
20.7
Source: International Coffee Organization
From kopi ‘o’ to espresso
Malaysians’ love for coffee started a few decades ago, even before Starbucks opened its first store there in 1998. In the early days, most consumers enjoyed their daily fixes at Hainanese kopitiams with their favourite local food, such as kaya toast and nasi lemak.
Cafe culture has evolved drastically since then, with operators innovating to keep customers interested, observes Kelvin Ngow, president of the Malaysia Specialty Coffee Association (MSCA).
Cafe owners are now the driving force behind consumers’ appreciation of fine coffee.
Kelvin Ngow
President of the Malaysia Specialty Coffee Association
For instance, local Nanyang-style cafes, such as Oriental Kopi and Nanyang Kopitiam, have entered shopping malls with modern-retro interior design, offering local delicacies and traditional brews that bring older consumers down memory lane while also appealing to millennials.
Ngow adds that, in the post-Covid era, the number of international brands and home-grown chains offering speciality coffee has boomed. In the speciality coffee segment, cafes offer lifestyle dining-in experiences and fine coffee that attracts younger consumers.
This new movement in Malaysia’s coffee industry is also known as the “third wave”, where artisanal coffee is taking the lead, with increased appreciation of everything from the types of beans going into each cup and where those beans are grown, to how they are roasted and ground.
In the Malaysian context, the first wave would be the old-style Hainanese coffee shops, which emphasise the strong and bitter taste of local coffee.
International brands such as Starbucks and The Coffee Bean & Tea Leaf kicked in the second wave with their fancy frothy coffees, and people began to appreciate a different way of enjoying their coffee in a more comfortable environment with free Wi-Fi.
But whichever type of coffee that Malaysians prefer, what is clear is that they want more.
A competitive business
The mushrooming of speciality coffee cafes in Malaysia has played an important role in place-making for the retail landscape, says Paul Khong, managing director of Savills Malaysia.
Lifestyle cafes with thematic experiences have rejuvenated older commercial areas in Klang Valley, attracting young consumers to these neighbourhoods, he adds.
He observes that stylish cafes have become one of the elements in major business hubs and shopping malls to attract more footfall as well as bring a “hipster” vibe to commercial precincts.
Speciality coffee cafes are growing strong, supported by the change of consumer preferences and working habits.
Paul Khong Savills Malaysia managing director
However, he acknowledges that the cafe business is a competitive one, with numerous small independent cafes popping up and disappearing.
Data from World Coffee Portal shows Malaysia has over 3,330 local coffee outlets, and it is expected to grow by 4 to 5 per cent this year.
The global coffee industry research platform expects the total number of speciality coffee cafes in Malaysia to exceed 6,000 stores by 2028.
Overseas coffee chains venturing into the country include Indonesia-based Kopi Kenangan, China-based Cotti Coffee and Thai coffee chain Cafe Amazon.
In September last year, Singapore-owned heritage Moroccan brand Bacha Coffee made its debut in Malaysia, with the first outlet at the Suria KLCC, the retail mall at the iconic Petronas Twin Towers.
The Bacha Coffee outlet in Suria KLCC has drawn long queues.
The premium coffee outlet has attracted long queues of people curious about its offerings. One influencer even ordered an ultra-premium coffee, priced at a whopping RM1,226, for a review
Zenda Ng, chief executive officer of Malaysia-based Palaterium, says the third wave in the coffee industry may have started late in Malaysia compared with other markets such as Taiwan. But she is confident about demand.
Palaterium is the partner of Taiwan’s HWC Coffee, operating 53 coffee outlets in Malaysia. The company also took HWC into Brunei last year, and is aiming for another outlet there in 2024.
The wave of artisanal coffee is growing strong in Malaysia.
Zenda Ng
Palaterium CEO
The company is also in talks with potential partners in Singapore and Indonesia, with plans to explore new markets this year.
Additionally, it owns a coffee academy in Malaysia, offering professional and short courses to consumers who are interested in speciality coffee.
“With the rising consumption of coffee, consumers are becoming more demanding on the quality of the coffee and curious to know more about the beans, tasting notes and the way of brewing a good cup of coffee,” she adds.
Boycott bump for local players
The recent boycott of coffee brands which are seen as supporting Israel in its war against Palestinian militant group Hamas has driven some consumers to switch to home-grown brands.
In Malaysia, a rising number of entrepreneurs have started coffee chains, focusing on offering more affordably priced daily caffeine fixes.
These include Bask Bear Coffee, Zus Coffee, Gigi Coffee and Richiamo Coffee, with coffees priced around 30 to 40 per cent lower than international chains such as Starbucks.
A latte from Starbucks, for instance, costs at least RM15.90, while one could get a similar-sized brew for around RM10 to RM12 from home-grown chains such as Zus Coffee. For the modern-retro Hainanese kopitiams, a cup of hot coffee is priced around RM5.90 to RM7.90, but consumers can still enjoy their daily kopi at food courts for about RM3.50.
With the choices available, consumers benefit as they enjoy better-quality coffee at a more affordable price, says Bryan Loo, founder and CEO of Loob Holding.
The increased competition has led to consumers enjoying better-quality coffee at a more affordable price.
Bryan Loo
CEO of Loob Holding
Loob Holding operates Tealive, the largest bubble tea chain in South-east Asia by stores.
It also runs Bask Bear Coffee, which was established in October 2019. During the Covid-19 pandemic, the coffee chain switched to virtual stores to cater to the rising demand for delivery orders, and tapped Loob’s existing platform to build a strong customer base.
Overseas expansion
Like other regional brands, Malaysian home-grown coffee chains such as Zus Coffee and Richiamo Coffee are also expanding overseas.
Zus Coffee, which started as a small grab-and-go kiosk in Kuala Lumpur in late 2019, is now operating 330 outlets in Malaysia and is eyeing to add another 250 outlets this year.
The tech-driven coffee chain also ventured into the Philippines last September, and aims to open 100 stores there this year. The expansion happened after Philippines-based F&B group Choi Garden Restaurant acquired a 35 per cent stake in Zus Coffee last March.
Choi Garden Restaurant is led by Filipino billionaire Frank Lao, and comprises the Choi Garden, Gloria Maris, Icho, Beard Papa, Milk Tea Boba Girl and Perrochiko restaurant chains.
Meanwhile, another Malaysian coffee brand, Richiamo Coffee, opened its first overseas outlet in Siem Reap, Cambodia, in May last year.
Its founder, Muhd Zamry Abu Samah, who started the coffee business in 2015, plans to increase the number of outlets in Malaysia to 222 this year, from the current 177 stores.
Gone in a flash?
Like in Singapore, Malaysia is seeing robust growth of coffee chains riding on resilient consumer spending. Nevertheless, the fall of coffee chains such as Flash Coffee in the Lion City is a warning for Malaysia’s industry players.
Even experienced entrepreneurs such as Loo note that current focus will be on local expansion and capacity.
“The overseas expansion is on the drawing board, but it will not be realised until the company reaches an economic scale, or when we open our 300th Bask Bear Coffee outlet in Malaysia,” he adds.
MSCA’s Ngow believes there is still room to grow in the speciality coffee segment in Malaysia, as there is growing interest from consumers who want to know how to appreciate fine coffee.
He notes that speciality cafes owners have become the driving force that elevates consumers’ appreciation of fine coffee.
Industry players concur with Ngow that Malaysia’s speciality coffee industry has yet to reach saturation level, and there is still room to explore in the country, which has a population of over 33 million.
HWC’s Ng notes that young consumers who are already being influenced by coffee culture will be the next growth catalyst.
But despite the present buzz in the cafe scene, only time will tell whether this caffeine high is here to stay, or if it will end up as a passing fad like the bubble tea craze several years ago.
Coffee market in Malaysia
2024
2024 - 2028
US$221.2M
3.9%
Estimated revenue of the coffee market in Malaysia
Estimated CAGR of coffee market in Malaysia
Zus Coffee is among the home-grown coffee chains in Malaysia that expanded overseas last year.
Popular coffee brands which have emerged in Malaysia
China
Indonesia
Japan
Malaysia
Singapore
Taiwan
Thailand
UK
US
Vietnam
Cotti Coffee
Luckin Coffee
Kopi Kenangan
Cafe Kitsune
103 Coffee
Bask Bear Coffee
Brew and Bread Coffee Roasters
Gigi Coffee
JWC Roastery
My Liberica Coffee
Bacha Coffee
PULP by PPP Coffee
HWC Coffee
Cafe Amazon
EL & N
Ralph's Coffee
Kee Nguyen
BTVisual: Chaytanya Bandishte, Gareth Chung
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Photo: TAN AI LENG, BT
Source: Statista
Photo: SAVILLS MALAYSIA
Photo: MALAYSIA SPECIALTY COFFEE ASSOCIATION
Photo: WONG KIM FUAT
Photo: HWC COFFEE MALAYSIA
Photo: HWC COFFEE MALAYSIA
Photo: BASK BEAR COFFEE
Photo: BASK BEAR COFFEE
Photo: TAN AI LENG, BT
Millennials are the key driver of the country’s speciality coffee consumption.
Post-pandemic, Bask Bear Coffee’s attention shifted back to physical commerce to capture new customers. It currently has 125 outlets in Malaysia and plans to add another 80 to 100 stores by end-2024.
“We are seeing delivery demand subsiding as the economic activities resumed after lockdown restrictions eased. (This is why) expanding physical presence becomes crucial,” says Loo.
Buzzing cafe scene across the Causeway, but beware overdose