Starbucks is reportedly exploring the sale of a stake in its China operations, a move that could reshape its strategy in its second-largest market. The company has initiated discussions with private equity firms, technology companies, and other potential investors to assess future steps for its operations in China .
Why Starbucks Is Considering a Stake Sale in China
Starbucks’ China business has faced challenges due to intensified competition from local brands like Luckin Coffee and Cotti Coffee, which offer more affordable options and have rapidly expanded their presence. Despite operating over 7,750 stores in China, Starbucks generated approximately $740 million in net revenue in the quarter through March, while Luckin Coffee reported $1.2 billion in the same period .
The company is seeking to onboard local market expertise and revitalize its China business amid fierce competition and sluggish sales growth . By selling a stake, Starbucks aims to bring in strategic partners who can help navigate the complex Chinese market and drive growth.
Potential Investors and Deal Structure
Several firms have shown interest in acquiring a stake in Starbucks’ China business. Notably, private equity firms KKR & Co, Fountainvest Partners, and PAG are among the potential investors . Chinese companies, such as China Resources Holdings and food delivery giant Meituan, have also been approached.
The stake size to be sold is still undecided and open to negotiation. However, a transaction could value the assets at several billion dollars . Starbucks prefers a franchisee deal with a strategic partner, potentially allowing for better adaptation to local market demands.Reuters
Strategic Implications and Market Context
Selling a stake in its China operations could provide Starbucks with the necessary resources and local expertise to compete more effectively. The company has faced declining same-store sales in China for four consecutive quarters, highlighting the need for a strategic shift .
This move aligns with strategies employed by other major food chains. For instance, McDonald’s and Yum! Brands have previously sold stakes in their China operations to enhance local market adaptation .
Starbucks CEO Brian Niccol has emphasized the company’s commitment to China, stating, “We remain committed to China for the long term” . The potential stake sale is part of a broader effort to rejuvenate growth and address challenges in the Chinese market.
