Starbucks has agreed to sell a 60 percent stake in its China retail operations to private equity firm Boyu Capital in a deal valued at about $4 billion. The transaction represents a major shift for the United States based coffee chain in its second largest market.
Under the agreement announced on Monday, Starbucks will retain a 40 percent share in the business and will continue to own and license the Starbucks brand in China. The China unit will remain headquartered in Shanghai and will continue to operate more than 8,000 stores across the country, with long term plans to expand to as many as 20,000 locations.
Starbucks first entered China in 1999 and grew rapidly as coffee culture expanded among younger consumers. In recent years the company has faced slowing demand, tighter competition and the rise of fast expanding domestic rivals such as Luckin Coffee, which now has more stores in China than Starbucks and draws customers with lower prices and aggressive promotions.
The company said the partnership with Boyu Capital represents a new phase of its strategy in China aimed at reviving growth and adapting more closely to local market conditions. Starbucks plans to roll out new menu offerings and invest in digital ordering platforms under the new ownership structure. The deal is expected to be completed next year subject to regulatory approvals.
Boyu Capital is a private equity investor with stakes across consumer, finance and technology sectors in Asia and has offices in Shanghai, Hong Kong and Singapore.
Starbucks’ performance in China has been affected by pandemic disruptions, weaker consumer spending and ongoing pricing competition. The company has recently cut some prices in the market in an effort to retain customers, which has put pressure on profit margins.
The move follows a broader pattern of global brands recalibrating their strategies in China. Kentucky Fried Chicken (KFC) and Pizza Hut’s China operations were spun off in 2016 while other firms have scaled back or restructured their presence amid market challenges.
Chief executive officer Brian Niccol (CEO) who took over last year has been leading changes across Starbucks’ international business, including menu updates and leadership adjustments. Globally Starbucks operates more than 40,000 stores.
