A woman walks past a McDonald’s in Jakarta on Feb. 29: The fast food chain’s growth has slackened amid a boycott of Western brands amid the Israel-Gaza conflict.
JAKARTA/KUALA LUMPUR — Big-name Western brands from Unilever and McDonald’s to Starbucks and Danone are being hit by a consumer boycott in Muslim-majority Indonesia and Malaysia, part of the fallout over the Israel-Hamas conflict.
Unilever, whose well-known products include Dove soap and Ben & Jerry’s ice cream, and global fast food chain McDonald’s are among the companies saying their businesses are suffering.
“In Indonesia, we saw [a] double-digit sales decline in the fourth quarter, as sales of several multinational companies were impacted by geopolitically focused, consumer-facing campaigns,” Unilever’s Chief Financial Officer Fernando Fernandez said in an earnings call on Feb. 8.
“I try to avoid using or consuming products from Unilever, Danone, and basically Western products that had openly supported Israel,” Raisa Pinadia, a 28-year-old office worker in Tangerang on the outskirts of Jakarta, told Nikkei Asia. She said doesn’t feel like spending money on such brands “due to my concern for Palestinians.”
Multinationals, for their part, have attempted to dispel the perception that they favor one side or the other in the conflict.
“We are sad and concerned” over the conflict in the Middle East, Unilever Indonesia said in November, stressing its contribution to “serving consumers in Indonesia for 90 years. Our products are made, distributed and sold by the people of Indonesia.”
A woman holds a sign in support of Palestinians at a protest outside the U.S. Embassy in Jakarta on Oct. 11, 2023. (Photo by Nana Shibata) McDonald’s on Feb. 5 posted weak sales growth in the fourth quarter of 2023 in its international business division, partly due to the conflict. International markets where it grants franchise rights to partners, rose 0.7% during the quarter, year on year, down from a 16.5% expansion in the same period the year before, “reflecting the impact of the war in the Middle East,” the company’s earnings statement said.
“The most pronounced impact that we’re seeing is in the Middle East, and in Muslim countries like Indonesia and Malaysia,” CEO Chris Kempczinski said during an earnings call. “So long as this conflict, this war is going on … we’re not expecting to see any significant improvement in [these markets].”
Palestinian militant group Hamas attacked Israel on Oct. 7 and killed about 1,200 people, according to the country’s Foreign Ministry. Hamas also took over 200 people to the Gaza Strip as hostages, some of whom have been freed. The Gaza health ministry says more than 30,000 people have been killed in the territory since Israel retaliated with airstrikes and a ground invasion.
Indonesian President Joko “Jokowi” Widodo has repeatedly condemned Israel’s actions in Gaza, which receive wide media attention in the Southeast Asian country. Malaysian Prime Minister Anwar Ibrahim, meanwhile, in an interview with Nikkei Asia in December, criticized what he termed international “hypocrisy” over the Gaza crisis.
And though the governments, neither of which recognizes Israel diplomatically, are not participating in the consumer actions, some officials have shown sympathy for them. “We are not prohibiting [boycotts] against any products as long as it’s in accordance with the law,” Indonesian Trade Minister Zulkifli Hasan said in late November, according to local media outlet Tempo.
In neighboring Malaysia, Berjaya Food, coffee chain Starbucks’ main franchise owner in the country, reported a 38.2% drop in revenue to 182.55 million ringgit ($38.7 million) in its second quarter ended in December. The revenue drop was primarily “attributed to an ongoing boycott” linked to the fighting, it said.
Malaysia-based CGS-CIMB Securities said in a report, “This boycott would affect Berjaya Food’s near-term sales … and weigh on its share price until the call for boycotts dissipates.” It also estimates a 30% decline in the company’s net profit for fiscal year 2024.
“We can live without Starbucks, McD [McDonald’s] and those in line [with Israel],” a boycott supporter wrote on X, formerly Twitter.
Starbucks Malaysia, in an effort to dispel such views, on Feb. 28 reiterated that the local franchise is “wholly owned by a public[ly] listed Malaysian company,” referring to Berjaya Food, and that it has “consistently demonstrated [its] commitment” to Malaysians over 25 years in the country. The chain said it employs more than 5,000 people at 400 stores.
“We condemn violence, the loss of innocent life and all hate and weaponized speech,” Starbucks Malaysia said. “Despite false statements spread through social media, we have no political agenda. We do not use our profits to fund any government or military operations anywhere — and never have.”
Tycoon Vincent Tan, Berjaya’s founder, called for an end to the boycott, stressing local ownership and staffing of Starbucks Malaysia. “In the stores, 80-85% of employees are Muslims,” he said on Monday during a business trip to Japan, the New Straits Times newspaper reported. “This boycott doesn’t benefit anyone.”
It’s not just large corporations that are being affected. Small and medium size businesses have also felt the impact of consumer anger.
Neneng Suria, a grocery store owner based in Bogor on the outskirts of Jakarta, said the hardest hit product on her shelves is popular Aqua bottled water from French beverage giant Danone, with demand having declined about 80% in December. “Our storage is overwhelmed with unsold products,” she said.
Nevertheless, she and her family support the boycott. “My concern back then was the stock in my store, but after watching the impact … we don’t care anymore.”
Local media, quoting a company representative in November, reported that Danone does not operate in Israel and has no factories there. In Indonesia, “Danone has 25 factories with 13,000 employees, and serves more than 1 million traders throughout the country,” the representative said.
Nikkei has requested comment from Danone.
source : nikkei asia