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Starbucks sells 60% China stake in $4bn deal with Boyu Capital
Starbucks announced on Monday a $4 billion agreement to sell a 60% stake in its Chinese operations to private equity firm Boyu Capital, retaining a 40% share while valuing its retail business in the country at $13 billion. The deal, set to finalize next year, marks a strategic shift for the coffee giant as it seeks to revitalize growth in its second-largest market.
Strategic partnership for long-term expansion
The collaboration with Boyu Capital combines Starbucks' global brand recognition and coffee expertise with the firm's deep understanding of Chinese consumers, the company stated. Starbucks, which entered China in 1999, currently operates 8,000 outlets there and aims to expand to as many as 20,000 locations under the new partnership.
Headquartered in Shanghai, the business will continue to operate under the Starbucks brand, with plans to introduce new beverages and digital platforms tailored to the Chinese market. Boyu Capital, which invests in retail, financial services, and technology, has offices across Asia, including Shanghai, Hong Kong, and Singapore.
Challenges in China's competitive coffee market
Starbucks has faced declining sales in China due to the lingering effects of the COVID-19 pandemic, sluggish consumer spending, and intense competition from homegrown brands like Luckin Coffee. The Beijing-based rival now operates more stores in China than Starbucks and has attracted customers with lower prices and frequent promotions.
In response, Starbucks has reduced prices in China to compete, though this has weighed on its profitability. The company's future in the country had been uncertain since former CEO Laxman Narasimhan hinted at exploring "strategic partnerships" last year to bolster its position in the world's second-largest economy.
Broader trend of US brands adapting in China
The deal follows a pattern of global consumer brands restructuring their Chinese operations to stay competitive. In 2016, Yum! Brands spun off its KFC and Pizza Hut businesses in China after years of struggles. Other US companies, including fashion retailer Gap and ride-hailing platform Uber, have also faced challenges in the market.
Under CEO Brian Niccol, who took the helm last year, Starbucks has been revamping its global strategy, including menu updates, hiring more baristas, and scaling back automation. The chain operates over 40,000 outlets worldwide.
The partnership is a "significant milestone" that underscores Starbucks' commitment to long-term growth in China, the company said in its announcement.
