Zus Coffee overtakes Starbucks in Malaysia amid rapid Southeast Asia expansion

[MALAYSIA] Zuspresso, the operator behind the Zus Coffee brand, is set to expand aggressively in Southeast Asia this year, planning to open nearly 200 new stores. This expansion follows the company's remarkable achievement of surpassing Starbucks as Malaysia's largest coffee chain in just five years.

According to chief operating officer Venon Tian, the company plans to launch at least 107 new stores in Malaysia, around 80 in the Philippines, and six more in Singapore. In addition, Zus will make its debut in Thailand and Indonesia in 2025.

This rapid expansion is fueled by the continued growth of the Southeast Asian coffee market, with café culture gaining popularity, particularly among younger consumers. A 2023 report from market research firm Euromonitor predicts the region's specialty coffee segment will grow at an annual rate of 8% over the next five years, driven by increased disposable incomes and urbanization. Zus's strategy of offering affordable yet high-quality coffee positions the brand well against both international giants and local competitors.

Zuspresso overtook Starbucks to become Malaysia’s largest coffee chain in early 2024, boasting 743 outlets compared to Starbucks’s 320 stores in the country. The US coffee giant has seen its presence in Malaysia diminish recently, partly due to boycotts linked to its perceived association with Israel amid the Gaza conflict, which has impacted the earnings of its Malaysian franchise.

Industry analysts attribute Zus’s success to its localized approach, which tailors its menu to regional tastes. Unlike global chains that rely on standardized offerings, Zus adapts its flavors to local preferences, resonating strongly with consumers. “Malaysia’s coffee market is highly competitive, but Zus’s ability to blend affordability with local flavors gives it an edge,” said Rachel Lim, a food and beverage analyst at Maybank Investment Bank. “Their ability to quickly respond to changing consumer tastes sets them apart.”

With approximately 120 stores in the Philippines, backed by Filipino billionaire Frank Lao, and four outlets in Singapore, Zus also operates in Brunei under a franchise model. Tian explained that Zus’s success is built on offering tailor-made flavors in each market, such as palm sugar-flavored beverages in Malaysia and purple yam-infused coffee in the Philippines.

The company’s rapid growth is reflected in its financial performance, with net income tripling to RM37 million (S$11 million) in 2024.

Zuspresso’s impressive performance has caught the attention of international investors, and there are rumors of potential funding rounds to fuel further expansion in the region. While Tian did not comment on specific investment opportunities, he acknowledged that the company is “exploring strategic partnerships” to strengthen its Southeast Asian presence. These could involve collaborations with local food brands or tech platforms to enhance its delivery capabilities.

This surge in profitability comes as investor interest in Malaysia’s mass consumer sector grows. Retail chains like 99 Speed Mart Retail Holdings, which had Malaysia's largest initial public offering last year, and discount-store operator Eco-Shop Marketing, which is set to launch its IPO next week, are further fueling investor enthusiasm.

Zuspresso began as a coffee delivery kiosk with its own mobile app in late 2019 and thrived during the Covid-19 pandemic, when lockdowns forced people to rely on online deliveries for daily needs. “Covid accelerated our business model,” said Tian.

Today, approximately 70% of Zus's sales come from online orders, including deliveries and pickups. The company's tech-driven business model, along with cost-effective strategies for building its physical stores, enables it to offer coffee at prices more than 20% lower than Starbucks, boosting its popularity in Malaysia.

Looking to the future, Zus plans to maintain its edge by continuing to leverage technology. The company is testing AI-powered recommendations on its app to personalize customer orders and plans to introduce subscription-based loyalty programs. “The goal is to make every interaction with Zus seamless, whether you’re ordering online or walking into a store,” said Tian. “Technology will remain at the core of our growth.”

“We’re positioned between the convenience store offering coffee for RM5 and the premium mass coffee at RM11 and above,” Tian added. “It’s about making quality coffee accessible to the majority of people.”