News, ideas and everything in between (#1)
From coffee wars to fintech trends.
I’m going to change the format of the newsletter with wraps on Mondays and standalone features or interviews emailed on a separate day during the week. The format isn’t set in stone — I might throw an extra wrap on a certain day (like this one) — but things are slowly shaping up for The Malaysianist, so it’s good to have some sort of format or structure, I guess? Fingers crossed: it’s for the better. As always, I’ll keep each and everyone of you updated as I chug along.
You’re reading a paid version of The Malaysianist, the newsletter on money and power, and sometimes on things that make Malaysia tick, by journalist and writer Emmanuel Samarathisa.
I run monthly and annual subscriptions. There’s also the atas or founding member tier where you get all the perks of an annual subscription and more, such as an annual report and how this little corner of the internet fared throughout the year.
Group subscriptions are also on the table, too, if you’re mulling over bulk purchases for your organisation or family members.
A mixed bag of goodies that I’m splitting into two emails. Part 2 out tomorrow.
☕ Malaysian coffee chain ZUS raises pre-IPO round
👑 King Ibrahim’s telco company takes up substantial stake in migrant services frontrunner
💰 What next for Malaysia’s fintech space?
Malaysian coffee chain ZUS is seeking to raise RM250 million, according to The Edge’s latest weekly. Most of the money – RM200 million – will be used to buy out existing shareholders while RM50 million will be fresh capital injection.
The narrative is that the fundraiser is a pre-initial public offering (IPO) round but actual listing may not be so soon. The likeliest destination for a listing may be the Bursa Malaysia.
At the moment ZUS qualifies to debut on the Main Market as it meets the local bourse’s profits test – the coffee chain has been in the black for the last few years.
ZUS is Malaysia’s largest coffee chain by store count, with 500 outlets at the time of writing. The firm also has 30 outlets in the Philippines.
Despite a saturated market where differentiation now boils down to funky-coloured drinks and sugar levels, foreign brands are seeking to penetrate the Malaysian market.
A number of foreign brands are already here, such as Indonesia’s Kenangan Coffee. The most recent entry being South Korean chain Ediya Coffee.
China’s Luckin Coffee also wants in and the firm will be partnering Hextar Retail’s Eddie Ong. The last time I asked him to confirm or deny this, he gave me a no comment. But that’s the buzz right now.
For a background on the raging coffee wars, this is a good primer:
At this stage I’m not sure where this is going. When ZUS broke into the market in 2019 with its first outlet in Binjai, there was pent-up demand for caffeinated beverages just below the RM10 band.
Starbucks, the then dominant chain, weathered the financial crisis of 2008 and came back roaring with deft marketing manoeuvres, from personalising coffee cups to free wifi.
A Starbucks outlet was more than a place to order a caffeinated (and sugary) beverage: it became a social hub where you could do your work or gather with family and friends.
But ZUS, which copied Luckin’s model, was able to disrupt the scene with its cheaper beverages and use of technology to craft drinks according to their customers’ profile. The app itself became an ecosystem.
Since then it has just been a rush to capture this particular middle-class market. Coffee chains also ventured into cities and new townships outside the Klang Valley.
Certain brands, such as Taiwanese chain HWC and Malaysia’s Kenny Hills Coffee Roasters, are placing themselves in the so-called premium end of the mass coffee market.
(The key here being “mass market”, meaning if you’re a self-proclaimed snob, you’ll need to sit this one out.)
Maybe the way forward, aside from having numerous shops dotting Malaysia, is to imitate the Starbucks or Luckin model and wade into upstream operations such as owning roasting facilities or command a sophisticated logistics network, borrowing from either Luckin’s or Starbucks’ playbooks.
Executing these is difficult. For instance, Luckin has certain tailwinds such as China’s trade with Ethiopia which allows for cheaper bean imports and China itself grows its own Yunnan beans. Setting up a roasting plant in Yunnan is also a sensible move given Luckin’s scale.
But ZUS has local support. About RM23 million of its loans are government guaranteed between 70% and 80% through Syarikat Jaminan Pembiayaan Perniagaan Bhd, a financing scheme for small and medium enterprises, according to its 2023 annual report.
This latest raise I gather has gotten the attention of Malaysian institutional investors.