Is BFood running out of steam?

Berjaya Food Bhd (BFood) is at an existential crossroads.

The reality behind its recent decision to exit the loss-making Paris Baguette Malaysia business after barely three and a half years is more nuanced than that of a failed investment.

It is the clearest sign yet that the group is struggling to find its next engine of growth.

Notably, the sale of Paris Baguette Malaysia for just RM1 came about a year after another subsidiary, Berjaya Jollibean (M) Sdn Bhd, ceased operations.

The latter, under the Joybean brand, offered soy-based beverages and local snacks. The business also ended in losses.

For years, Starbucks Malaysia was the crown jewel of BFood and it still is.

It generated the bulk of the group’s earnings and justified investors’ confidence in the stock.

Today, however, that narrative has unravelled.

Consumer sentiment towards the global coffee giant has deteriorated, hurting sales through no fault of BFood itself.

Yet external factors are only part of the story. The Malaysian coffee market has become far more crowded and competitive.

Homegrown champion Zus Coffee has expanded at breakneck speed, while a wave of specialty cafes and value-driven chains has fundamentally reshaped where consumers choose to spend their coffee money.

The consequences are becoming increasingly difficult to ignore.

Store closures have replaced aggressive expansion, and Starbucks is no longer the earnings powerhouse it once was.

The number of Starbucks stores has shrunk from 408 as at end-June 2024 to about 320 currently across Malaysia.

Despite these challenges, Starbucks is slowly turning a corner, which is positive for BFood.

Customers, according to the management, are gradually returning.

In a May 24 report, CIMB Research said the “worst has likely passed” for BFood, given narrowing losses, improved sales, and Starbucks’ resilient brand equity.

Regardless, the bigger question now is whether Starbucks Malaysia can ever reclaim its former glory.

The obvious solution is to build another pillar alongside Starbucks. This was precisely the role Paris Baguette Malaysia was meant to play.

The South Korean bakery chain entered Malaysia in January 2023, backed by one of Asia’s strongest bakery brands.

Expectations were high. Instead, the business failed to gain meaningful traction, remaining in the red from its first year of operations before BFood finally decided to cut its losses and walk away.

To put it into context, BFood has disposed of its entire 50% equity interest in the operator of Paris Baguette Malaysia – Berjaya Paris Baguette Sdn Bhd (BPB) – to Paris Baguette Singapore Pte Ltd for a nominal cash consideration of RM1.

But, BFood did not just exit for RM1. It also settled RM3.91mil of the joint venture’s liabilities as part of the transaction.

For perspective, BFood’s original cost of investment in the business, incurred since July 21, 2022, was RM20mil – all of which has been fully impaired.

“The disposal will eliminate the group’s further exposure to BPB’s ongoing losses, enabling BFood to better allocate its resources and management focus towards its core businesses and other growth opportunities,” BFood said in a bourse filing.

So, what’s next? Beyond its crown jewel Starbucks, BFood owns another notable food brand – Kenny Rogers Roasters (KRR).

KRR has posted a streak of losses, with a loss before tax of RM14.7mil in the financial year ended June 30, 2025, amid declining footfalls and store closures, among other factors.

The fact is, none of BFood’s non-Starbucks food ventures comes remotely close to replacing the earnings power that Starbucks once delivered.

The group’s dependence on a single flagship brand remains largely intact.

This is why the disposal of Paris Baguette Malaysia matters. It is not about one bakery chain. It is about whether BFood still has the ability to identify, build and scale the next blockbuster consumer brand.

Without a credible second growth engine, the investment case becomes increasingly difficult to defend.

That also brings another question into sharper focus: would privatisation now make strategic sense?

Operating outside the glare of public markets could give management the breathing room to reshape the portfolio, pursue bold acquisitions, or rebuild the business without the relentless pressure of quarterly earnings.

Public-listed companies are ultimately judged quarter after quarter. Investors demand earnings growth, while weak performance is quickly reflected in the share price.

For BFood, that pressure has only intensified as Starbucks Malaysia grapples with weaker sales and the group searches for its next growth driver.

A private ownership structure could provide management with something that is increasingly scarce in public markets: time.

Without the constant scrutiny of quarterly results, the group could undertake a more fundamental restructuring of its brand portfolio, rationalise underperforming outlets, invest in new concepts, or pursue acquisitions that may take years to generate meaningful returns.

The timing may also be worth considering.

At last look, BFood’s market capitalisation had shrunk to just over RM372mil, a far cry from its five-year peak of nearly RM2bil in mid-February 2023.

It is worth noting that Berjaya Group-linked entities hold a controlling stake in BFood.

BFood now stands at a defining moment.

Investors are now waiting for management to answer the only question that matters: what is the next chapter for BFood?