Are Foreign Chains a Threat?

 

There has been increasing concern about foreign food and beverage (F&B) brands, particularly Chinese ones, causing uneven competition in the local market. Economists and industry observers are divided, with some calling for action while others see these brands as beneficial for consumers, job creation, and keeping local companies “on their toes”. The Malaysian government is considering stricter rules for foreign-linked F&B companies after complaints that brands like China’s Mixue and Chagee threaten local businesses. Some like Mixue compete on pricing, as their products are often much cheaper than most local drinks and desserts.

 

Source: https://en.wikipedia.org

The Domestic and Cost of Living Ministry (KPDN) is reported to be reviewing guidelines to address loopholes that previously allowed the rapid expansion of foreign brands. This includes examining capital requirement thresholds and outlet size, as currently outlets smaller than 1,000 sq m are not subject to impact assessments. 

Socio-Economic Research Centre executive director Lee Heng Guie notes that foreign chains’ aggressive expansion of new outlets has threatened the sustainability of local small and medium enterprises (SMEs), even as it has created employment, provided local training, and added variety to F&B offerings for domestic consumers. 

Mixue, for example, entered the Malaysian market in 2024 and has since expanded to around 500 outlets. Foreign chain operators have deep capital, centralised supply chains, branding quality and highly optimised pricing models, which enables them to offer competitive prices that local SMEs cannot match. 

Local SMEs are facing rising operational and regulatory costs, such as higher minimum wages, rental, e-invoicing, and raw material prices, making price competition with deep-pocketed foreign chains “difficult”. There is also evidence that aggressive expansion and rental bidding by foreign businesses in F&B are driving up rental rates for prime locations. 

Malaysia has set a strategic goal to establish itself as a regional franchise hub in South-East Asia by 2030 under the National Franchise Development Master Plan 2021 to 2025. This is projected to contribute approximately RM46bil to Malaysia’s gross domestic product by 2025. As of December 2022, there were more than 1,000 registered franchisor companies, comprising 713 local and 428 foreign franchisor companies. 

If a single type of foreign chain grows rapidly without constraint, it could potentially reduce competition in the long run – exactly the opposite of what competitive markets require. This concern must be addressed through competition law enforcement, not trade barriers per se. When the regulatory environment is predictable and enforceable, foreign investment contributes to growth, jobs, innovation, and consumer welfare. 

Locally controlled businesses need incentives to thrive. It cannot be on “cheap” labour – better to support greater automation then importing labour from Bangladesh or Indonesia. So, it is incentives or money into R&D which the government could assist. Less labour, higher productivity can match entrants from China and beyond. 

Reference:

Foreign chains – threat or opportunity? Yvonne Tan, Starbiz 7, The Star, 2 Feb 2026