Starbucks is closer to finalising a partner for its China business, with strong interest from potential investors as the company evaluates a partial sell-down of its stake in its second-largest market. The coffee chain has been “exploring strategic options” for its China unit as confirmed to Campaign Asia-Pacific in July, but has maintained that it intends to retain a "meaningful share" of the business.
After its fourth-quarter earnings that stood at $133.1 million, and revenue at $9.57 billion, global CEO Brian Niccol told investors the company has received “strong interest from multiple, high-quality partners who see significant value in the Starbucks brand and team” in China. He emphasised that Starbucks aims to remain invested for the long term.
The company did not disclose further details on the deal structure in the call, but in an earlier statement in July, it said, "any deal must make sense for China's business and partners."
Frontrunners for China unit acquisition remain private-equity firm Boyu Capital, ahead of rival bidder Carlyle Group, according to Bloomberg. Media reports suggest a potential transaction could value the business at more than US$4 billion.
The size of the stake under negotiation has not been disclosed. Reuters has reported that a controlling stake is being explored. The Financial Times has suggested Starbucks may retain up to 49%, while local outlet 21st Century Business Herald has speculated a 30% holding—though the figure remains unverified.
Rebound in China, and which investors are queuing up for purchase?
Starbucks might finally be out of its sales rut after a challenging year. In the fourth quarter, China comparable store sales grew 2% year-on-year, marking a second consecutive quarter of positive comps. The coffee chain also surpassed 8,000 stores in mainland China.
Globally, top-performing markets remain Japan, the UK and Mexico.
According to multiple media outlets, four investors are in the final round of discussions for a potential stake in Starbucks China.
Boyu Capital is the leading contender. The Hong Kong–based private equity firm is known for high-profile consumer and retail deals, including Alibaba’s share buyback, China Duty Free, and, more recently, a stake in Beijing’s luxury mall SKP.
EQT, the Swedish buyout firm, is less established in China but has a firm regional presence across Asia, is also in the running.
The Carlyle Group, which co-led the 2017 McDonald’s China deal and expanded quickly to open 1,000 outlets within a year, is another one. Carlyle exited in 2023 and sold its stake back to McDonald’s for $1.8 billion.
A late but important entrant is HongShan Capital (formerly Sequoia China). Earlier this year, the firm entered a deal with UK-based Marshall Group for euro 1.1 billion ($1.2 billion), to gain majority control. It also took control of South Korean fashion label We11done and launched a joint venture with Li-Ning.
Why sell the China unit?
Starbucks' struggles to keep pace with fast-growing, budget-friendly local competitors like Luckin are not new.
In July, the coffee major announced price cuts, menu localisation, and marketing refreshes in its China stores, including tie-ins with pop culture brands. But the discounting move, a rare deviation from Starbucks’ premium playbook, sparked backlash on Chinese social media, with netizens criticising the cuts as too shallow to make an impact.
The lowest-priced item on the menu now sits at RMB 23 yuan (US$3.20), still higher than most rivals. Starbucks APAC CMO Samuel Fung stepped down earlier this year in February after a 12-year tenure with the coffee giant. Following this, China CMO Erin Silvoy left the region for a position in Seattle in April.
Starbucks entered China in 1999 and has since expanded to 7,685 stores in the market, according to its Q1 FY2025 results. Globally, the chain operates 40,576 outlets. But its largest local rival, Luckin Coffee, is outpacing the American brand at breakneck speed.
As of Q1, Luckin reported 24,032 stores across China and 65 globally, including new outlets in Singapore, Malaysia and most recently the US, where it opened two stores in New York City over the summer. Luckin's high-volume, low-price strategy has proven effective in luring younger, value-conscious Chinese consumers.
Starbucks APAC CMO Samuel Fung stepped down earlier this year in February after a 12-year tenure with the coffee giant. Following this, China CMO Erin Silvoy left the region for a position in Seattle in April.
