Starbucks has announced its decision to sell a 60% stake of its business in China as part of a $4 billion agreement with Boyu Capital, an investment firm. Following this deal, Starbucks will retain a 40% stake in its Chinese retail operations and maintain ownership of the Starbucks brand within the country.
Entering the Chinese market in 1999, Starbucks has grown to become the company’s second-largest market after the United States. However, the chain has faced challenges in recent years due to increased competition from local brands such as Luckin Coffee. The business will continue to operate from its headquarters in Shanghai and currently manages around 8,000 outlets, with plans to expand to as many as 20,000 locations.
Starbucks has characterized the partnership with Boyu Capital as a pivotal move to bolster its long-term growth in China, assigning a $13 billion valuation to its operations there. The collaboration aims to merge Starbucks’ globally recognized brand and coffee expertise with Boyu’s deep understanding of Chinese consumer preferences. The chain intends to introduce new beverage offerings and digital services in the Chinese market, with the completion of the deal anticipated next year.
Boyu Capital specializes in private equity investments in various sectors, including retail and technology, and has a notable presence in multiple Asian cities. Starbucks’ future prospects in China had been uncertain for several months, particularly after previous leadership indicated a need for strategic partnerships to enhance competitive standing in the country.
This agreement represents one of the largest transactions involving a global consumer brand’s operations in China in recent years. Other Western brands, including KFC and Pizza Hut, have experienced difficulties in the Chinese market, with similar divestitures occurring. Notably, Starbucks has seen a downturn in sales in China due to the COVID-19 pandemic and rising competition, which has led to a reevaluation of its pricing strategies.
Source: https://www.bbc.com/news/articles/cn0g90376j5o?at_medium=RSS&at_campaign=rss