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Starbucks agreed to sell a 60 per cent stake in its Chinese operations to a private-equity firm, ending months of speculation about whether the US coffee chain would divest itself of its mainland operations amid dimmer business prospects and the ascent of local rivals. The Seattle-based company said on Monday that it signed an agreement with Boyu Capital to set up a joint venture for its mainland business. Starbucks would hold a 40 per cent interest in the unit and remain the owner and licenser of the namesake global brand, it said. Starbucks valued its Chinese business at more than US$13 billion and did not disclose the value of the stake it sold to Boyu Capital. The transaction was for US$4 billion, according to Bloomberg News. Local rivals including Luckin Coffee and Cotti Coffee have overtaken the American company in mainland market share in recent years, as Chinese consumers tightened their purse strings amid a deteriorating labour market. The local coffee brands, as well as many vendors of tea-based drinks, sell beverages for a fraction of the price of a Starbucks coffee. Boyu Capital won the deal by outbidding more than 20 competitors including Carlyle, Hillhouse Investment and Primavera Capital. Most of the bidders valued Starbucks’ China business at around 10 times its expected US$400 million to US$500 million in earnings before interest, taxes, depreciation and amortisation for 2025, Reuters reported earlier. Founded in 2011, Boyu Capital is incorporated in the Cayman Islands. The firm has businesses including private equity, real assets and infrastructure, venture capital and a renewable-energy platform, according to its website. Starbucks’ shares rose 0.1 per cent to US$80.96 on the Nasdaq on Monday, paring its decline to 11 per cent this year. The coffee retailer was capitalised at US$92 billion, according to Bloomberg data. The US company has been facing the biggest challenge to its China business since opening its first mainland store in 1999. Same-store sales in China remained stagnant in the second quarter after consecutive declines for the four preceding three-month periods. Revenue increased 5 per cent year on year, trailing 8 per cent global growth. Its market share has been eroded by Xiamen-based Luckin, which sells coffee for about a third of Starbucks’ price, and Cotti, which initiated a price war by offering beverages for 9.90 yuan (US$1.39). Luckin surpassed Starbucks in market share in 2023, and Cotti put Starbucks in third place last year. Starbucks had a market share of 4.2 per cent in China last year, compared with 11 per cent for Luckin and 4.4 per cent for Cotti, according to Caixin magazine. It had more than 7,700 stores in China, while Luckin had a network of over 22,000. The company has already undertaken a slew of measures to turn around its China fortunes. It unveiled the first-ever price cut in June, lowering prices of iced drinks like Frappuccinos and chai lattes by an average of 5 yuan. It also appointed a chief growth officer last year, charging the person with collaborating more with fashion brands and celebrities to win back younger consumers.
