Starbucks has agreed to transfer controlling interest in its China-based operations to Boyu Capital, with the deal pegging the unit’s value at $4 billion.
This transaction stands out as one of the most substantial pullbacks from China by a major international consumer brand in recent times.
The partnership with the investment group is expected to inject fresh momentum into Starbucks’ expansion efforts in the globe’s second-biggest economy.
There, homegrown competitors such as Luckin and Cotti are drawing customers with budget-friendly options, including lattes priced at just 9.9 yuan (about $1.40)—a fraction of what Starbucks typically charges.
“We’re committed to expanding the unique Starbucks atmosphere to even more patrons across additional Chinese cities,” said CEO Brian Niccol.
“Our vision includes scaling up from the current 8,000 locations to exceed 20,000 in the coming years.”
Declining Dominance in the Market
As part of the arrangement, Boyu—co-founded by a descendant of ex-Chinese leader Jiang Zemin—will secure up to a 60% ownership in the newly formed joint venture.
Starbucks will maintain a 40% position and retain rights to license its branding and proprietary assets.
The American company estimates the overall worth of its mainland China retail segment—factoring in sale proceeds, its ongoing equity, and projected royalties for at least a decade—to surpass $13 billion.
Following the announcement, Starbucks’ stock saw a slight uptick in early trading.
Since launching in China back in 1999, Starbucks is widely recognized for sparking the nation’s coffee culture. However, figures from Euromonitor International reveal a steep decline in its market presence, slipping from 34% in 2019 to only 14% the previous year.
Experts anticipate Starbucks will lean into its core appeal as a social hub for gatherings and relaxation, rather than engaging in cutthroat pricing battles against rivals like Luckin.
The latter emphasizes quick pickup and delivery services, boasting over 20,000 outlets nationwide and recently establishing a presence in Starbucks’ U.S. backyard with outlets in New York.
Despite challenges, Starbucks has responded by lowering costs on certain non-coffee items and rolling out more regionally tailored offerings.
This strategy contributed to a 2% rise in same-store sales for the period ending June 29, improving from flat performance in the prior quarter.
Potential Lift from Boyu Partnership
Insights from an insider familiar with Boyu’s strategy indicate the firm intends to drive store openings in smaller urban areas and enhance operational efficiencies at current sites.
This model echoes steps taken by other multinationals in China. For instance, McDonald’s divested 80% of its China and Hong Kong businesses in 2017 to a consortium featuring Citic for $2.1 billion—a collaboration generally viewed as effective.
Unlike Citic, a government-backed entity with robust advantages in property and logistics, Boyu operates as a private equity player, likely offering Starbucks enhanced strategic guidance, networking opportunities, and tech collaborations, according to Jason Yu of CTR Market Research.
Established in Hong Kong in 2010, Boyu initially built its reputation through stakes in prominent Chinese technology companies. Lately, it has shifted focus toward consumer sectors, supporting entities like the popular bubble tea chain Mixue Group and acquiring a significant portion of high-end retailer SKP.
