Starbucks Sells Control Of Its China Operations To Boyu For $4 Billion – CoffeeTalk

Starbucks has announced the sale of control over its China operations to Boyu Capital in a deal valued at $4 billion, marking one of the most significant divestments by a global consumer company in China recently. The Seattle-based coffee chain anticipates that Boyu’s investment will facilitate its expansion in the second-largest economy, where it faces fierce competition from local rivals such as Luckin and Cotti, who can offer products at a fraction of Starbucks’ prices.

CEO Brian Niccol emphasized the company’s ambition to enhance its presence in China, aiming to grow from 8,000 to over 20,000 Starbucks locations over time. As part of the arrangement, Boyu will hold up to 60% of a new joint venture, while Starbucks retains a 40% stake and continues to license its brand and intellectual property.

Despite Starbucks’ founding presence in the Chinese coffee market since 1999, the company’s market share has sharply declined, dropping from 34% in 2019 to 14% last year, according to Euromonitor International. Analysts advise that Starbucks should not engage in aggressive price competition with Luckin, which has a successful business model focused on takeaway and delivery, including their recent entry into New York City with two stores.

Although Starbucks has responded to the competitive environment by reducing prices on certain non-coffee beverages and introducing localized products, its comparable-store sales in China only increased by 2% in the latest quarter, compared to stagnant growth in the previous period.

Boyu is expected to aid Starbucks in opening additional outlets in lower-tier cities and increasing the efficiency of existing locations. This strategy parallels that of other global brands, such as McDonald’s, which previously sold the majority of its China and Hong Kong operations to investors in a deal perceived as successful. Unlike McDonald’s partnership with state-owned Citic, Boyu is characterized as a private equity firm likely to provide strategic support and foster digital partnerships for Starbucks. Established in 2010, Boyu has a strong portfolio in tech investments and is expanding into consumer products, notably partnering with brands like Mixue Group and SKP.

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