F&B operators grappling with rising costs

The Sun

11-07-2025

PETALING JAYA: Food and beverage (F&B) prices in Malaysia continue to climb as businesses grapple with rising operational costs, policy changes and currency fluctuations.
Speaking to theSun anonymously via WhatsApp, the owner of a restaurant in Shah Alam serving buffet meals admitted to raising some product prices due to higher operating costs.
The restaurant, which has been running since 1982, also supplies products such as Vietnam spring rolls, Sarawakian kek lapis, tepung pelita, cakes and sambal to petrol station shops.
'The increase in operational costs are already being felt. There has also been a decline in customers, perhaps because they have started taking steps to save money.'
She said recent tax changes had worsened their burden, forcing further price hikes.
'We genuinely want to focus on running our operations and increasing sales but instead, we find ourselves caught up with even more tax matters, with inflation worsening the situation.
Industry and academic experts say the pressure is felt hardest by SMEs and startups, many of which are struggling to stay afloat.
Malaysian Food and Beverage Executives Association deputy president Gobinath Selvanayagam said the recent spike in F&B prices is primarily due to surging food inflation, input costs and the expanded Sales and Service Tax (SST).
'Malaysia's Consumer Price Index (CPI) rose 1.4% year-on-year in April 2025, while food prices increased by 2.3%.
'Additionally, the cost of eating out at places such as restaurants, cafes and hawker stalls, went up by 4.4% in May,' said Gobinath, citing CPI report data from the Statistic Department.
The association observed that 30% to 35% of new F&B ventures shut down within 12 to18 months due to limited pricing power in a hyper-competitive market and poor capital planning, with digitalisation and eco-packaging further driving up costs.
Gobinath said the SST revision expanded the tax net to areas such as logistics and rentals, with costs typically passed on to customers.
'To support the sector, the government should consider granting temporary SST relief for first-time entrepreneurs, cap delivery platform fees at 20% and establish shared kitchen hubs to lower entry costs.'
Universiti Kebangsaan Malaysia expert on economy, inflation and entrepreneurship Assoc Prof Dr Noor Azuan Hashim said Malaysia's strong growth momentum is expected to continue in the near term, with GDP projected to grow at 4.7% in 2025.
'Inflation, which eased to 1.8% in 2024, is projected to rise to 2.6% in 2025 due to the anticipated implementation of fuel subsidy reforms.
'A weak ringgit has raised the cost of imported ingredients such as meat, cheese and processed goods. Environmental disruptions such as El Nino are affecting local crop yields as well.'
She said the minimum wage increase to RM1,700 in 2024 has added to operational costs while fixed costs such as rent and licensing fees have continued to put pressure on entrepreneurs.
Universiti Malaysia Kelantan economist Prof Dr Datuk Nik Maheran Nik Muhammad said prices have also been driven up by disrupted supply chains, high fuel prices, SST on rentals as well as halal certification compliance costs.
'Startups cannot absorb price shocks like large corporations, which force them to either raise menu prices or shrink portions.'
Nik Maheran said consumer behaviour is also changing due to price sensitivity, with many opting to cook at home or shift to cheaper alternatives.
She added that climate-related disruptions have worsened supply consistency.
'Businesses are also under pressure to adopt eco-friendly packaging, which drives up costs further.'
She advised startups to digitalise operations, join cooperatives for bulk purchasing and seek training support from government agencies.