Sector Trend Analysis – Food service in Malaysia

Market overview and consumption trends

The current population of Malaysia is 35.7 million as of December 16, 2024, based on Worldometer's elaboration of the latest United Nations data. According to the IMF, Malaysia's GDP in 2024 is expected to be $439.75 billion in current prices, which is 0.17% of the world economy.

Consumer foodservice

The outlook for the Malaysian consumer foodservice market remains conservative but positive, with many players having engaged in aggressive expansion in their outlet networks in 2023. The further development of the overall consumer foodservice network is set to be facilitated by an increasing number of new shopping malls that are expected to open in 2024 and beyond. One ongoing constraint on the market's expansion, however, is the rising cost of living, with many consumers remaining highly budget conscious at the beginning of the forecast period (Euromonitor 2024).

Compared with the consumer foodservice spending US$10,317.6 million in 2019, consumer spending declined to US$8,116.8 million in 2020, US$8,340.4 million in 2021 and US$9,361.8 million in 2022. In 2023, it gradually recovered to US$10,155.9 million but not recovered to the 2019 level.

In 2023, the chained consumer spending US$5,049.6 million surpassed the 2019 level: US$4,014.1 million, 2020 level: US$3,594.9 million and 2021 level: US$3,913.2 million and 2022 level: US$4,544.0 million.

However independent consumer spending US$5,106.3 million in 2023 was lower than 2019 level: US$6,303.5 million but higher than that in 2020, 2021 and 2022.

Consumer spending is forecast to increase at a CAGR of 7.1% between 2023 and 2028. Among which chained consumer foodservice will grow 7.9% and independent consumer foodservice will grow 6.4% between 2023 and 2028.

Company shares

Top three companies are Yum! Brands Inc, representing 11.9% market share in 2023, McDonald's Corp representing 9.3% market share and Secret Recipe Cakes & Café Sdn Bhd representing 2.9% market share. Zensho Holdings Co Ltd recorded the fastest growth among top 10 companies at the CAGR of 18.9% from 2019 to 2023.

Full-service restaurants

Malaysia is a Muslim-majority society, which has historically exerted a strong influence on the character of demand in the local consumer foodservice market. However, Muslim consumers are now being more open to savouring a more diverse range of food options from Asian culture as well as from Western culinary traditions. Various foodservice operators are working to be more inclusive in serving Halal or pork-free options to the large community of Muslim consumers in Malaysia. (Euromonitor 2024).

Asian full-service restaurants is one of the major categories with a large number of independent operators in Malaysia. This category includes options ranging from full-service dining concepts offering Chinese stir-fried dishes and Mamak stalls serving Halal food like roti paratha - paratha bread and stir-fry. Mamak stalls can operate either indoors or outside and serve a type of Indian/Malaysian/Chinese cuisine that is unique to the region and community (Euromonitor 2024).

Compared with pre-pandemic year 2019, US$1,174.0 million, consumer spending on the chained full-service restaurants declined to US$952.7 million in 2020, US$998.3 million in 2021 and US$1,112.5 million in 2022 respectively, but rebounded to US$1,197.4 million in 2023. Independent full-service restaurants declined to US$1,325.3 million in 2020, US$1,351.6 million in 2021, US$1,445.8 million in 2022 and US$1,500.3 million in 2023 respectively from US$2,103.3 million in 2019. Same situation falls on Asian full-service restaurants (chained and independent) and Pizza full-service restaurants (chained and independent).

It is forecast that the foodservice sales will grow at a CAGR of 6.0% between 2023 and 2028 as the Covid-19 dies down and customer choose to enjoy the full service restaurants more often. Chained full-service restaurants will grow at a CAGR of 6.8% and Independent full-service restaurants will grow at CAGR of 5.3% from 2023 to 2028. All the other types of full-service restaurants will be on the same positive trends from 2023 to 2028. Chained North American Full-Service Restaurants will enjoy the fastest growth at a CAGR of 9.5% from 2023 to 2028.

Company shares

Top three companies are Yum! Brands Inc, representing 6.0% market share, Texchem Resources Bhd representing 3.2% market share, Zensho Holdings Co Ltd representing 2.8% market share in 2023. Hai Di Lao Malaysia Sdn Bhd enjoyed the fastest CAGR growth of 62.7% from 2019 to 2023.

Limited-service restaurants

The limited-service restaurants category has seen a surge in drive-through outlets, especially since the COVID-19 crisis. The format appeals to consumers who value a time-saving food ordering system, as it enables them to purchase their food items without having to step into the actual physical stores (Euromonitor 2024).

Both domestic and international players are expected to fight for share in Malaysia's limited-service restaurants category during the forecast period, with both local and international companies looking to develop significant expansion plans. In ice cream limited-service restaurants, for example, there are many local players emerging in Malaysia, such as The Inside Scoop, which doubled its outlet network to 40 over the course of the review period, and Piccoli Lotti, which serves artisanal gelato. At the same time, international players such as Cold Stone Creamery continue with plans for rapid expansion by opening new outlets. In addition, Italy's renowned confectionery store, Venchi, opened its first outlet in Malaysia at Pavilion Kuala Lumpur in November 2023 (Euromonitor 2024).

Consumer spending on the limited-service restaurants continued to increase from 2019 to 2023, at a CAGR of 6.6%, reaching US$2,951.7 million in 2023, surpassing 2019 level: US$2,288.2 million. Same is true with the chained limited-service restaurants at a CAGR of 8.0%, reaching US$2,751.0 million in 2023, surpassing its 2019 level. However independent limited-service restaurants had a negative CAGR of −6.9% from 2019 to 2023. The retail sales in 2023 valued at US$200.7 million which did not surpass 2019 level valued at US$266.6 million.

Chained chicken limited-service restaurants recorded the biggest growth at a CAGR of 10.7% from 2019 to 2023, reaching US$1,190.2 million in 2023, followed by Chained Burger Limited-Service restaurants at a CAGR of 8.4%, reaching US$987.3 million.

Over the forecast period, limited-service restaurants are projected to increase at a CAGR of 7.5% from 2023 to 2028, reaching US$4,245.9 million in 2028. All the subcategories grow between a CAGR of 4.2% (Chained Pizza Limited-Service Restaurants) and 10.7% (Independent Middle Eastern Limited-Service Restaurants) from 2023 to 2028.

Company shares

Top three companies are Yum! Brands Inc representing 35.3% market share in 2023, McDonald's Corp, representing 29.8% market share and Doctor's Associates Inc representing 3.0% market share. A Great American Brand, LLC enjoyed the fastest CAGR growth of 17.2% from 2019 to 2023 among top 10 companies.

Cafés and Bars

With Malaysians becoming more coffee-savvy, there are notable generational shifts in demand for different types of coffee. The older generation largely opts for local kopi (coffee), while younger generations such as Gen Z, are being influenced by the availability of a diverse range of coffee chains. (Euromonitor 2024).

Chained cafés/bars players are also expected to focus on improving the customer experience by introducing innovative technology. Central to this will be the development of mobile apps that simplify the online ordering and payment processes. (Euromonitor 2024).

Sales of café/bars plummeted in 2020 at US$1,791.2 million, 2021 at US$1,642.5 million, 2022 at US$1,857.8 million and 2023 at US$2,072.5 million compared with US$2,482.1 million in 2019. The CAGR growth for cafés/bars was −4.4% between 2019 and 2023, in which chained cafes/bars was 7.3% and independent cafes/bars was −10.0%. Chained specialist coffee and tea shops has a positive CAGR of 14.3% and chained juice/smoothie bars has a positive CAGR of 9.7% from 2019 to 2023.

Over the forecast period, cafés/bars are projected to increase at a 9.0%, reaching US$3.2 billion in 2028. Although the recovery of cafés/bars is expected to be slower than other consumer foodservice channels, sales of the most categories and subcategories are expected to return to pre-COVID levels in 2024. All the categories and subcategories will have positive CAGR from 2023 to 2028.

Company shares

Top three companies are Secret Recipe Cakes & Café Sdn Bhd, representing 14.1% market share, Starbucks Corp, representing 10.4% market share, McDonald's Corp, representing 3.0% market share. Zuspresso (M) Sdn Bhd enjoyed the fastest CAGR growth of 111.5% from 2019 to 2023 followed by Retail Zoo Pty Ltd at a CAGR of 23.6% and Starbucks Corp at a CAGR of 21.3%.

Self-service cafeteria

Self-service cafeterias lacking in popularity in Malaysia, with Ikea Restaurants dominating share. Chained self-service cafeterias continued to see low levels of popularity in Malaysia at the end of the review period. The Ikea Restaurant brand maintained its dominant position in the market. Indeed, there are no other players with a significant presence in the chained self-service cafeterias segment. There is also a lack of both chained and independent self-service cafeterias such as food courts in major shopping malls. (Euromonitor 2024).

The remote working trend continued to have an impact on self-service cafeterias, which are largely visited by staff at nearby offices and other workplaces, at the end of the review period. While much of the workforce returned to their physical offices on a full-time basis following the ending of the Movement Control Order, many continued to work remotely or in a hybrid capacity (Euromonitor 2024).

Sales of self-cafeteria rebounded but still not surpassed in 2023 at US$199.6 million, compared with US$220.6 million in 2019 after decreasing in 2020, 2021 and 2022. The CAGR growth for self-service cafeterias was −2.5% between 2019 and 2023, in which chained self-service cafeterias was 2.0% and independent self-service cafeterias was −3.6%.

Over the forecast period, self-service cafeterias are projected to increase at a 6.7%, reaching US$276.2 million in 2028. Although the recovery of self-service cafeterias is expected to be slower than other consumer foodservice channels, sales of the most categories and subcategories returned to pre-COVID levels in 2024 and are expected to increase from 2023 to 2028.

Company shares

Top company is Inter IKEA Systems BV representing 23.1% market share in 2023 with a CAGR of 4.6%. Others represent 76.9% market share in 2023.

Street stalls / kiosks

Convenient fulfillment innovation created by leading street stalls/kiosks players to attract time-conscious consumers. With consumers seeking time-saving convenience having returned to hectic lifestyles in the wake of the COVID-19 crisis, street stalls/kiosks operators are implementing strong innovation in consumer foodservice fulfilment. Many street stalls/kiosks players are inventing new fulfilment formats in response to shifting demand trends after the pandemic. For example, Tealive opened its first drive-through outlet in East Malaysia at Northbank in 2023 after the successful launch of drive-through outlets across various locations in West Malaysia (Euromonitor 2024).

While Malaysian consumers will become more cautious about their spending, thanks to ongoing economic uncertainty, outlets such as street stalls/kiosks are generally characterised by low unit prices and will therefore be more resilient to any inflationary pressures that lie ahead. Sales through these outlets will also be boosted by international tourists visiting the country, who will be keen to seek out new, authentic taste sensations (Euromonitor 2024).

The channel remained highly fragmented being dominated by independent street stalls/kiosks, which increased to US$2,063.7 million in 2023 compared with US$1,941.1 million in 2019. Chained street stalls/kiosks represented US$170.6 million in 2023 increased from US$108.3 million in 2019. CAGR growth for chained street stalls was 12.0% and CAGR growth for independent street stalls was 1.5% from 2019 to 2023.

Over the forecast period, street stalls/kiosks are projected to see a steady CAGR increase of 6.2% from 2023 to 2028, reaching US$3,013.2 million in 2028.

Online vs offline ordering

The online consumer service became very popular after the pandemic started. It increased from US$283.7 million in 2019 to US$2.4 billion in 2023 with the CAGR growth of 70.7% from 2019 to 2023. The takeaway online ordering increased from US$80.9 million in 2019 to US$135.5 million in 2023 with the CAGR growth of 13.8% from 2019 to 2023. Delivery online ordering increased from US$202.8 million in 2019 to US$2.3 billion in 2023 with the CAGR growth of 83.0% from 2019 to 2023.

For consumer foodservice offline ordering, takeaway offline ordering increased from US$1.1 billion in 2019 to US$1.6 billion in 2023. Drive-through offline ordering increased from US$278.6 million in 2019 to US$475.3 million in 2023 with a CAGR growth of 14.3% from 2019 to 2023. Eat-in offline declined at the −6.6% from 2019 to 2023.

It is predicted that all consumer foodservice by ordering platform will grow at a CAGR of 6.7% from 2023 to 2028. The biggest growth among all types is eat-in offline ordering at a CAGR of 9.2% from 2023 to 2028.

Consumer foodservice by location

All CAGR growths were negative from 2019 to 2023 except consumer foodservice through standalone. Consumer foodservice through standalone increased to US$6,492.5 million in 2023, with a CAGR of 0.9% from 2019 to 2023. Consumer Foodservice through leisure decreased to US$104.1 million in 2023, with a CAGR of −4.6% from 2019 to 2023. Consumer service through retail decreased to US$2,467.6 million in 2023, with a CAGR of −1.4% from 2019 to 2023. Consume foodservice through lodging decreased to US$750.6 million in 2023, with a CAGR of −4.6% from 2019 to 2023. Consumer food service through travel decreased to US$341.2 million in 2023, with a CAGR of −4.6% from 2019 to 2023.

All categories' CAGR growths are positive varying from 6.2% (through standalone) to 9.8% (through travel) from 2019 to 2023.

Consumer foodservice through travel is expected to see dynamic growth for the rest of the forecast period and its CAGR will be same 9.8% from 2023 to 2028.

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Sector Trend Analysis – Food service in Malaysia
Global Analysis Report

Prepared by: Hongli Wang, Senior Market Analyst

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